In January 2010, the U.S. Securities and Exchange Commission issued new guidance clarifying that publicly-traded companies need to disclose financially material impacts related to climate change. Material impacts may range from compliance costs related to emissions regulation, to the physical impacts of changing weather patterns on operations.
The SEC ruling creates more incentives for capital to flow to sustainable businesses, while also improving awareness of the importance of climate change among the financial community. Companies are expected to improve GHG emissions accounting and reporting - an important stepping stone to managing and reducing corporate carbon footprints. WRI plans to continue engagement with the SEC, companies, and other advocates to help develop more specific rules, methodologies, and guidance relating to environmental disclosure.
For the past decade, WRI’s Markets and Enterprise Program (MEP) has been working to analyze material impacts of climate change on companies. MEP’s publication, Coming Clean, was one of the first reports identifying the need for improved corporate disclosure and providing specific recommendations for the SEC that were grounded in detailed financial analysis. Since then, WRI has worked closely with the investment community, as well as businesses, to foster support for better financial analysis and climate change-related reporting.
Meanwhile, WRI’s GHG Protocol team has worked over the last six years to build the foundation, constituency and the accounting infrastructure for companies to engage in corporate emissions disclosure and prepare for exactly this type of requirement. The GHG Protocol’s Corporate Accounting and Reporting Standard in particular is an important precursor to the SEC requirements. The SEC guidance refers to three business programs – the Carbon Disclosure Project, The Climate Registry, and the Global Reporting Initiative - that illustrate increasing corporate disclosure of climate change impacts and risks. All three of the programs’ greenhouse gas emissions reporting components are based on the GHG Protocol’s Corporate Standard.
Since 2007, both the Markets and Enterprise Program and the GHG Protocol Team have also been working through an international collaborative effort – the Climate Disclosure Standards Board (CDSB), which includes the Carbon Disclosure Project (CDP), The Climate Registry (TCR), CERES, and the World Economic Forum (WEF) to inform and guide SEC and other national financial accounting regulatory boards to address the issue of climate change reporting in the financial statements.
Rio de Janeiro is a leader among the Brazilian cities aggressively promoting low-carbon development. In 2011, the city passed a landmark climate change law with a target to reduce greenhouse gas (GHG) emissions 8% below the business-as-usual (BAU) emissions scenario by 2012, 16% by 2016, and 20% by 2020.
Now Rio is conducting a GHG inventory for 2012, the first target year under its climate change law. The inventory will measure the city’s emissions against its 8% reduction target for 2012, and assess the effectiveness of GHG mitigation actions implemented so far.
On July 2, the city government of Rio invited me and my colleagues from the Greater London Authority and the Federal University of Rio de Janeiro (COPPE) to a seminar to share our experiences in conducting GHG inventories and to discuss Rio’s 2012 inventory. At the seminar, Nelson Moreira Franco, Director for Climate Change Management and Sustainable Development for the City of Rio, stressed that GHG inventories help identify emission sources and provide scientific evidence on GHG levels, so it is extremely important that the city gets it right. To me, the seminar covered four important items:
Historically, the world has talked about climate change primarily as an environmental issue. We focus on the amount of greenhouse gas emissions in the atmosphere, rising seas, climbing temperatures, and other hard data. While this narrative is important, it’s missing a critical component — people.
After all, communities everywhere will be affected by climate change’s impacts. Those in impoverished, developing nations will likely be hit hardest. That’s why it’s necessary to talk about climate change not just as an environmental issue, but also as an issue of climate justice focused on the way in which people, especially the most vulnerable, are being affected.
Extreme weather and climate events such as storms, floods, droughts and wildfires visibly impact not only our communities and livelihoods, but also our resources and related infrastructure. In its latest report, U.S. Energy Sector Vulnerabilities to Climate Change and Extreme Weather, the U.S. Department of Energy (DOE) warns that domestic energy supplies are likely to face more severe disruptions given rising temperatures that result in extreme weather events. The report accurately outlines the risks climate change poses to the energy sector in the United States and serves as a wake-up call on this critical issue, which I highlighted in my testimony before the Energy and Power Subcommittee of the House Energy and Commerce Committee earlier this year.
While manufacturing is a critical part of the U.S. economy, it’s struggled over the last several years—both financially and environmentally. Overall U.S. manufacturing employment has dropped by more than one-third since 2000. Meanwhile, U.S. industry—of which manufacturing is the largest component—still uses more energy than any other sector and serves as the largest source of U.S. and global greenhouse gas emissions.
The good news is that energy efficiency can help U.S. manufacturing increase profits, protect jobs, and lead the development of a low-carbon economy. The Midwest’s pulp and paper industry is a case in point: New WRI analysis finds that the pulp and paper sector—the third-largest energy user in U.S. manufacturing—could cost-effectively reduce its energy use in the Midwest by 25 percent through use of existing technologies. These improvements could save hundreds of thousands of jobs, lower costs, and help the United States achieve its goal of reducing emissions by 17 percent by 2020. As the White House moves to cut carbon dioxide pollution in America, energy efficiency improvements in Midwest pulp and paper mills are a tangible example of the win-win-win emissions-reduction opportunities in U.S. industry.
In October 2009, President Obama signed Executive Order (EO) 13514 on Leadership in Environmental, Energy, and Economic Performance, requiring the federal government to lead by example towards a clean energy economy and measure, report and reduce, direct and indirect greenhouse gas emissions. The EO also set an important precedent by mandating that a national government reduce GHG emissions from its own operations.
“Every year, the Federal Government consumes more energy than any other single organization or company in the United States,” said President Obama. “That energy goes towards lighting and heating government buildings, fueling vehicles and powering federal projects across the country and around the world. The government has a responsibility to use that energy wisely, to reduce consumption, improve efficiency, use renewable energy, like wind and solar, and cut costs.”
The collective emissions reduction targets established by the EO (a 28% total reduction in scope 1 (direct emissions) and scope 2 (indirect emissions associated with purchased electricity) below 2008 levels by 2020 and a 13% reduction in scope 3 (other indirect emissions)) will ensure significant reductions in the U.S., while demonstrating that ambitious reductions are achievable by other large U.S. entities and corporations. By including scope 2 and 3 emissions, the EO will also drive important shifts throughout the government’s vast supply chain.
To comply with the EO, agencies will conduct GHG inventories based on the GHG accounting principles articulated in the newly developed GHG Protocol for the US Public Sector, which outlines how government agencies in the U.S. – whether federal, state or local – should develop a GHG inventory. WRI coordinated a large stakeholder process to develop this protocol that included over 50 U.S. agencies, ensuring its relevance and utility to the government. This extensive engagement during the process also built capacity within the federal agencies for effective emissions measurement and management. The federal government also drew upon the principles in the draft of the GHG Protocol Corporate Value Chain (Scope 3) Standard in developing rules to account for Scope 3 emissions.
Specifically, INFONAVIT connected CTS-México to the mid-sized city of Aguascalientes to transform a new low-income housing development, encompassing 10,000 houses for 40,000 people. CTS-México recommended solutions for mixed land use, public transportation, green spaces, and walking and bicycling.
In March 2010, the municipal government revised its development plans to include about 70 percent of CTS-México’s recommendations. The new design is expected to increase the neighborhood’s demand for public transportation, biking and walking. And the level of social interaction is expected to quadruple through the addition of four community centers and a 1.5-kilometer pedestrian-cyclist road. Dense development connected to mass transit can help reduce carbon emissions and lower urban infrastructure costs.
The redesigned development plan is estimated to reduce traffic speeds by 34% and also increase the demand for public transport by 30% to 60%, bike trips by 4% to 50%, walking trips by 24% to 40%, and green space by 5% to 30%.
This has been a big week for U.S.-China collaboration on climate change. Yesterday the U.S.-China Climate Change Working Group (CCWG), which was established in April by the Joint Statement on Climate Change, presented their report on bilateral cooperation between the two countries. Not only does it lay out actions to reduce greenhouse gas emissions, a close reading sheds light on important themes for the future of U.S.-China collaboration on climate change.
The report centers on five separate “action initiatives.” to address key drivers of greenhouse gas emissions in both countries. The U.S. and China make up more than 40 percent of global CO2 emissions, so significant collaboration between the countries is absolutely essential to addressing the problem. The five areas that the report singles out include: vehicle emissions; smart grids; carbon capture, utilization and storage; greenhouse gas data collection and management; and building and industry energy efficiency.
Although the report is built around these five initiatives, four big themes can also be seen:
Ahmedabad launched South Asia’s first complete BRT in October 2009. Janmarg, which means “the people’s way” in Gujarati, focuses the city’s massive growth into sustainable, high-capacity bus corridors. By 2014, Janmarg will serve 90 kilometers and carry 175,000 daily passengers.
Ahmedabad’s success was made possible through the support of several partners, including EMBARQ, whose India staff exposed city officials to best practices of bus rapid transit design and operations during study tours to Mexico City, Mexico; Bogota, Colombia; and Curitiba, Brazil. EMBARQ also conducted an in-depth review of the Janmarg system in August 2009 and provided ongoing advice to the project’s technical leader, CEPT University, to help reinforce critical design concepts.
Indore is one of the fastest growing cities in India, faced with the daunting task of providing a modern and efficient public transit system to its 1.8 million residents. Rising to the challenge, Atal Indore City Transport Services Ltd. (AICTSL) established an effective and well-organized transit agency to operate and manage the city’s public transport system. AICTSL is India’s first long-term public-private partnership (PPP), which has enabled the city to expand its transit system to 225 buses and double capacity to 220,000 daily trips. The city also began developing a BRT system, which is expected to be operational by June 2011.
CST-India was instrumental in AICTSL’s success by providing technical support for Indore’s successful request to the Ministry of Urban Development to fund 170 new buses, and preparing and negotiating contracts with private partners. CST-India also helped plan bus routes, develop vehicle specifications, establish AICTSL’s organizational structure, and design and implement a performance monitoring system. In addition, EMBARQ advised on important changes to the BRT system design, including high-platform island stations to ensure level-boarding, making the system more efficient, convenient and accessible for all passengers.