Avoid the threat behind lower emissions

You might hear that 2009 carbon emissions are down over 2008 and think that means you have more time to get started with your portfolio’s sustainability initiatives.

In reality, you should do just the opposite– because there is a real estate story buried here that isn’t as benign.

The DOE Energy Information Administration (EIA) projects that 2009 U.S. carbon emissions are projected to be 6.5% lower than in 2008, due to

weak economic conditions and declines in the consumption of most fossil fuels.

The EIA also projects 2010 emissions growth at +0.9% over 2009. For reference, the EIA’s 2009 Annual Energy Outlook, projects U.S. emissions growth of 0.3% p.a. through 2030.

We became curious about the level of economic activity accompanying these projected changes in emissions, looking particularly at economic indicators most closely tied to real estate fundamentals.

So we dug in to the EIA’s super handy table of of macroeconomic indicators, where you can derive a snapshot of the “economy-buildings-sustainability-finance” trends that shape green finance:

2009 vs 2010 Macroeconomic Snippets

According to EIA projections, in 2010:

• real GDP growth will be be +1.07%
• real personal income, non-farm and commercial employment will shrink 0.31%-0.6%
• the number of housing units will remain flat with nearly no new construction
• vehicle miles traveled will increase .4%
• the change in the producer price index for petroleum reflects 20% year-over-year growth (ouch!).

Essentially, the 2010 picture picture is one of continued high unemployment and shrinking incomes, even as the economy begins to recover. And at the same time, petroleum prices are projected to grow at nearly 19 times the rate of GDP growth.

This basically lays out the risk of a continuing deterioration of real estate market fundamentals and investment portfolios even while the official news may be reporting an economic recovery.

Moreover, these projections highlight the immediate value of energy efficiency retrofit programs on property portfolios, as a real defense against escalating petroleum-driven operating expenses. It also highlights the benefits of  sustainable district-level and regional strategies for communities.

The threat of increased petroleum prices against shrinking incomes also supports the need for green finance programs, since these enable powerful, immediate responses to portfolio-wide and regional sustainability problems.

So don’t let stories of low carbon emissions slow down your firm’s energy efficiency and sustainability initiatives. Your efforts will help you to avoid some the other risks buried in the same story.

How are you moving sustainability forward in a weak economy?

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• Photo credit: U.S. Department of Energy, Energy Information Agency

Carbon March Tempo Quickens: California Cap-N-Trade Plans Announced

The photo by Mick Montara is not a sci-fi special effect. Its the sun seen through the thick wildfire haze in mid-daytime here in NoCal yesterday. No kidding! The haze blanketing many cities comes from over 100 wildfires that we are having here in California.

And a day of severely reduced air quality is also an ominous backdrop for yesterday’s announcement of a proposed carbon cap-and-trade program by the California Air Resources Board (CARB). It’s not a done deal yet, but for the first time, we are all getting a peek at California’s announced implementation plans for the famed AB 32 greenhouse gas reduction legislation.

The Plan
Over multiple coffees, I’ve perused several stories plus an in depth legal analysis of the plan (only received via email; will send subscribers a copy if you email me). The basic gist for commercial property owners is this:

• Excessive emissions will cost you: Businesses which exceed their emissions allowances will have to buy those emissions on the open carbon market. Over the years as the caps are reduced to achieve compliance with set targets, businesses purchasing emissions credits may have to pay more. That’s the state’s vision.

• Property is high on the state’s hit list: Buildings and appliances combined rank #2, behind auto fuel efficiency, in targeted emissions reductions. Total reductions of 26 million metric tons of CO₂, or 15% of total 169 million metric tons of targeted reductions are expected by 2020. All of that is to be achieved by property owners increasing the energy efficiency of their buildings and appliances as well as a new vehicle miles traveled-angle: new housing developments being located so that driving commute times are reduced. Wow. Oh, and more efficient use of water will reduce  emissions by 5 million metric tons CO₂per year.

• But there’s a financial opportunity for emissions outperformers: Businesses which successfully reduce their CO₂ emissions below what is required will be able to sell credits back to the open market. Of course, it’ll be awhile before we all know what that’s really worth.

• And cap and trade strengthens renewable energy: These measures also push expansion of renewable energy markets as a source of clean energy. If you’ve been following the latest kidney punch to the solar industry by the Bureau of Land Management, you’ll agree that this plan starts to position clean energy well during a time when they are not getting any respect from the federal government.

Don’t like it? Well, here’s CARB’s “we mean business” quip:

“If the combination of existing rules and new cap-and-trade regulation fall short of the goal, the state could impose a carbon tax.” said Mary Nichols, chairwoman of the California Air Resources Board. “We look at this (carbon tax) as a back stop”.

Fossil-fuel Spinial
Of course, Big Oil is not relaxed about this at all. CARB has tagged them to reduce, by their own estimates, 60 million metric tons of emissions, or 35% of total targeted reductions. Predictably, they’ve gone on the spinial (spin and denial) offensive with a transparent barrage of FUD (fear, uncertainty and doubt):

“What the air resources board is finding out is that this is extremely complicated. I’m not surprised that we only have a road map, with the details to be filled in later, said Cathy Reis-Boyd, COO of the Western States Petroleum Association…She also said that fuel prices could rise even higher if the plan is not implemented in a way that ensures that refineries can buy credits when they need them.”

Anywho, the cap and trade plan is still subject to public comment and has many features which remain to be worked out. So prepare for more updates here down the road.

It is significant for the Green Journey because it provides a compelling backdrop for green building. In California, it is no longer just the right thing to do; regulators are now in the midst of restructuring away a percentage of your profits if you don’t start now.

Last note: If you want a copy of the legal analysis I received for your own review — and you’re a subscriber — please email me and request a copy.

Help! Need to Lose Two Tons Fast

So I just learned that I have a carbon score of 415 and must lose two tons of carbon output, just to put a mere 10% dent in my estimated individual carbon emissions.  Ouch! And that’s after taking into account that we don’t even drive our car more than once a week.

When I heard that Earthlab was providing Al Gore’s Alliance for Climate Protection website with a carbon calculator, I decided to give it a test drive. There are quite a few out there, and I am still on the lookout for the ultimate user friendly model that my clients and colleagues can work with without much difficulty.

Earthlab’s Live Impact Calculator provided an interesting experience, since it satisfied the need for instant gratification on a key level: you get immediate info on how specific lifestyle changes reduce your carbon output plus you are encouraged to make a personal pledge to improve your carbon footprint.  Most calculators just move you over to the ‘buy offsets here’ screen and send you on your way.

Learning that, as a frequent flying business traveler, my carbon score is much higher than the average 325 score for Americans or 305 for Canadians and that I alone generate approximately 20 tons in emissions was depressing, to be honest.  But I am now armed with info on how to behave my way out of the problem.

And unlike any fad diets out there, at least I can ‘offset’ the weight that I can’t lose entirely.

Do you know your carbon score? Have any experience with reducing and offsetting your emissions that you would like to share?