June 1 , 2002
GHG Compliance Complexities
Greenhouse-gas regulation will impose vastly greater compliance difficulties than did the Acid Rain program.
and verify incremental emission reductions and monitor the offsets.
Land sinks, the CERs available from projects that reduce deforestation or plant new forests, present a range of problems. Britain’s Royal Society issued a report in 2001 denouncing this practice for several reasons:
First, techniques for monitoring, quantifying, and verifying land carbon sinks under the Kyoto Protocol pose significant uncertainties. Some critics argue that in the northern boreal forests, aforestation may accelerate global warming by absorbing more of the sun’s rays rather than reflecting them back into the atmosphere. And more than 50 percent of the timber exported from Brazil, Indonesia and Cameroon is alleged to be illegal, complicating validation of overseas aforestation or reforestation initiatives.
Plus, practical issues can threaten the permanence of land sinks. Even in the United States it’s impossible to prevent major forest fires, which would liberate carbon from planted trees.
For these reasons, environmental advocates in the United States strenuously oppose land sinks and offsets. They argue projects designed to enhance carbon sinks shouldn’t be allowed to divert financial and political resources away from the core issue—restructuring of energy generation and use.
For U.S. utilities there likely will be multiple markets for acquiring CERs with different protocols. Sorting out the strengths and weaknesses of these will be a challenge. Careful documentation will be required, and auditing the CERs over time to ensure their on-going legitimacy will be especially difficult. Caveat emptor will take on new relevance to utilities that purchase CERs, despite assurances from certifying bodies and their auditors.
The relative cheapness of some offsets will provide temptations to overlook the inherent murkiness of their validity and could cause future liabilities. With forestry and agricultural projects, emission reductions are based on models that are extremely hard to confirm by measurement. Reductions in emissions of specific GHGs from industrial processes may be more subject to measurement—as with SO 2—and therefore will be more reliable sources of GHG offset credits.
Compliance challenges for climate change dwarf those previously experienced in Acid Rain. They will require utilities to institute sophisticated protocols for assuring they’re in defensible compliance with applicable regulations.
The World Resources Institute has issued a model protocol that identifies the key features that will be needed for corporations to comply with GHG regulations [See The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition ]. The 116-page document outlines the new world of uncertainties utilities face—including regulatory limits on GHG emissions, availability of allowances and offsets, and unproven new technologies for meeting emission caps.
In addition to expanding their capabilities to play in the carbon markets, utilities will need to develop diverse technical skills to evaluate protocols for GHG reduction efforts and accounting skills to validate and document their choices. These skills will help eliminate errors in meeting caps on GHG emissions.
Many utilities in the near term will opt for currently available new low carbon-emitting generating capacity strategies. Demand for natural gas-fired plants is projected to grow in the short term as a preferred alternative to coal, until new coal technologies are