Existing and emerging greenhouse gas (GHG) emissions registries and trading programs offer companies opportunities to prepare for potential future regulatory actions related to GHG emissions. These programs can also help organizations obtain other benefits through proactive GHG management efforts.
GHG emission registries can protect proactive GHG reduction efforts from future regulations by establishing a recognized GHG emissions baseline for the company. GHG emission trading allows companies to use emission markets to efficiently achieve GHG targets or financially benefit from excess emissions reductions.
Involvement in GHG registries and emissions trading can also provide opportunities that bring competitive advantage and economic benefit. These programs can assist with identifying ways to enhance productivity and energy efficiency, gaining public recognition for early voluntary actions that benefit the environment, and demonstrating environmental concern and good corporate citizenship.
- What is a GHG emissions registry?
- What are examples of existing or emerging GHG emissions registries?
- Why would a company participate in a registry?
- How do I know if a registry is right for my company?
- What is emissions trading?
- What are examples of existing or emerging GHG emissions trading schemes?
- Why would a company engage in emission trading?
- How do know if a trading scheme is right for my company?
- What is the relationship between registries and emission trading?
- Can you participate in both a registry and emission trading?
- What linkages currently exist between registries and trading regimes?
- What efforts are underway to unify registries and trading schemes?
- How can I find out more about registries and emission trading?
What is a GHG emissions registry?
A GHG emissions registry is a repository or an on-going account of verified greenhouse gas emissions profiles. Registries establish and require adherence to measurement, accounting, and reporting standards for GHG emissions that are accounted for in the registry records.
One of the primary purposes of a GHG emissions registry is to assist organizations with establishing GHG emissions baselines against which any future GHG emission reduction requirements may be applied. The registry idea originated with companies anticipating mandatory emissions caps in the future. By offering this early action protection, a registry also encourages the reduction of GHG emissions.
Participation in GHG emissions registries is often recognized as an approach to protect early actions from future regulations. By tracking and “banking” GHG emissions, reporting organizations can, in theory, gain credit for emission reductions achieved prior to the start of a legally imposed emission control period. These credits can then be used to assist in achieving compliance once a legally imposed system begins.
What are examples of existing or emerging GHG emissions registries?
The California Climate Action Registry (CCAR) is an example of an existing state level GHG registry. The purpose of the CCAR is to help companies and organizations with operations in the state of California to establish GHG emissions baselines against which any future GHG emission reduction requirements may be applied. The State of California, in turn, will offer its best efforts to ensure that participants receive appropriate consideration for early actions in the event of any future state, federal or international GHG regulatory scheme. CCAR participants include businesses, non-profit organizations, municipalities, state agencies, and other entities.
The State of New Hampshire also has a GHG registry. The purpose of New Hampshire’s registry is to quantify and submit GHG emission reduction actions to a state database for safekeeping against future federal requirements.
Northeast States for Coordinated Air Use Management (NESCAUM) is currently coordinating a joint effort of six states to create a voluntary greenhouse gas registry for potential support of a regional cap-and-trade system for power plant and other industrial emissions. The NESCAUM registry will consist of an on-line database where companies, municipalities and other emitters of GHGs can record their releases of carbon dioxide.
Outside of the U.S., the World Economic Forum maintains the Global Greenhouse Gas Register (the Register), a new global initiative to stimulate the disclosure and management by companies of their worldwide climate emissions. Developed in partnership with leading international business and environmental organizations, the Register is intended to encourage voluntary corporate climate action around the world by creating a global standard for the disclosure of their emissions inventories and reduction targets.
In addition to these examples, NGOs such as Climate Neutral Network, Clean Air-Cool Planet and Environmental Resources Trust have been working one-on-one with companies, universities and other organizations to develop sector specific or non-regional registries.
Why would a company participate in a registry?
In addition to potential protection of a GHG emissions baseline and early actions, as well as the reduction of risk associated with future GHG regulations, registries offer participants several other benefits. Registry participation can help companies:
- Understand and better manage their GHG emissions,
- Identify ways to enhance productivity and energy efficiency,
- Recognize opportunities for emission reductions that bring economic benefit and competitive advantage,
- Gain public recognition for early voluntary actions that benefit the environment, and
- Demonstrate environmental concern and good corporate citizenship.
How do I know if a registry is right for my company?
Companies will want to choose a registry based primarily on its geographic coverage. A state level or regional registry may be sufficient for a company that operates only in one state or region. Companies operating on the national or international level, however, may choose to participate in a national or an international GHG registry respectively. Other considerations include reporting and verification standards, baseline requirements and general rules of participation.
Emissions trading is the transfer in ownership of emission credits. The most common type of emissions trading program is called cap and trade. This scheme places a cap on emissions for a group of sources that becomes the highest limit for the group. Each source within the group is allotted a certain fraction of the total emissions. Entities that intend to exceed the prescribed limits may buy emissions credits from entities that are likely not to exceed their limits. Governments, companies or other entities participating in the system that have extra emissions credits or allowances, generated from reducing their emissions beyond that which is required, may sell their extra credits or allowances to other participating organizations. The credits or allowances can be used to meet regulatory requirements, plan for future growth and predicted increases in emissions, or sold to generate revenue.
The EPA’s Acid Rain program is an example of a successful cap and trade based emissions trading program. The Acid Rain Program has succeeded in reducing SO2 emissions using a cap and trade system that limits the total emissions of SO2, allowing sources flexibility to find the best and cheapest compliance method and encouraging technological innovation. The trading component of the SO2 program has lowered the costs of compliance and has not resulted in any significant geographic shifts in emissions.
What are examples of existing or emerging GHG emissions trading schemes?
There are a number of emissions trading schemes – both government managed and private. In the United Kingdom, the government has rolled out its UK Emissions Trading Scheme for companies resident in the UK. The European Union Emission Trading Scheme will begin on January 1, 2005, establishing the world’s largest market in emissions allowances. The scheme will initially regulate the CO2 emissions from installations across the EU. This will include power generation companies, oil refineries, offshore installations, other heavy industrial sectors and some smaller non-industrial installations with on-site combustion capacity in the initial implementation phase between 2005-2007. In the U.S., the Chicago Climate Exchange is a private forum for emissions trading that requires companies to meet specific emissions targets.
Why would a company engage in emission trading?
An entity would participate in emissions trading for three reasons – to gain emissions credits to meet its targets, to sell credits, or it to retire credits from the market. Participation in emissions trading can demonstrate corporate leadership on an issue of global concern, help entities gain experience in an emerging scheme, and position an entity to understand and potentially influence future regulations or new programs.
Operationally and strategically, participation in emissions trading has several additional benefits including: the generation of revenue on achievements that previously had no economic value; hedging risk against future GHG restrictions; and informing public policy with knowledge and credibility gained through experience in the market.
How do know if a trading scheme is right for my company?
If a trading scheme is voluntary, a company may want to participate if it has a robust inventory and opportunities to sell emissions reduction credits. Participating may also be a way to enhance a company’s public image on climate change issues. A trading scheme may require a more significant financial investment than a registry, since the company may need to pay for emissions credits in order to meet its targets.
If there are multiple trading schemes available, factors such as which GHGs your company emits and the location of the facility or facilities help narrow the choices of established trading schemes, as many are emission specific and applicable to specific regions or countries. After the list is narrowed, issues such as the types of companies or organizations within each scheme, the experience of other members with emissions trading, and recognition of the scheme by regulators, governments and emissions trading organizations will help you decide if the scheme is a good fit for your company.
What is the relationship between registries and emission trading?
In theory, GHG registries could act as a “bank account” for GHG emission allowances and/or reduction credits. Registries would ensure that these accounts were accurate and provide credibility for the contents of these accounts. Also in theory, the contents of these accounts could then be used to engage in emission trading, with sellers withdrawing sales (credits/allowances) from their accounts and buyers depositing purchases as part of transactions. The trading markets would facilitate the exchanges between parties and provide information about the GHG market.
Currently in the United States, such arrangements between existing registries and emission trading markets have not occurred. Registries and emission trading markets exist as separate entities.
Can you participate in both a registry and emission trading?
Yes, in fact corporations may choose to participate in several registries, as well as trading schemes. Participating in multiple registries can be a hedge against future regulatory developments in various areas and markets around the globe. However, participation in multiple registries and emissions trading regimes would require careful GHG management and reporting. The company would need to ensure that its registry report accurately reflected any changes in GHG emissions or reductions ownership resulting from its emissions trading activity.
What linkages currently exist between registries and trading regimes?
Registries and emission trading programs have evolved independently due to different drivers. Most registry participation is undertaken for baseline protection against future regulatory actions. Most current GHG emission trading activities are related to financial risk management.
Currently, in the Unites States, there are no established links between the registry programs and the emission trading programs or markets. Informally, companies that participate in registries may have the internal capabilities (i.e. knowledge and insight, management systems, etc.) to engage in emission trading and vice versa, but these are company specific situations rather than links between programs.
What efforts are underway to unify registries and trading schemes?
Recognizing that interaction between these structures could enhance both efforts, many existing and emerging registries and trading programs are investigating bridges between their activities.
An example of such a potential unification is the linking of the Northeast and Middle Atlantic states’ Regional Greenhouse Gas Initiative’s (RGGI) cap & trade program with the NESCAUM Regional Greenhouse Gas Registry (RGGR). Though these programs are currently separate efforts, each group has been monitoring the other’s activities “with the goal of harmonizing the two efforts to facilitate possible future integration or interaction.”
Most programs recognize that in order to attract participants, they must work toward establishing at least a basic set of common principles and greenhouse gas accounting fundamentals. In this manner, greenhouse gas accounting may function much like financial accounting, with a common set of basic principles modified to fit national regulations and policies. Consequently, a corporation in the future will most likely prepare several slightly different reports regarding the same emissions and trading activity for the trading schemes and registries in which it participates. The common principles will likely be based on the GHG Protocol of the World Business Council for Sustainable Development and the World Resources Institute and the upcoming ISO 14064 standard on climate change.
How can I find out more about registries and emission trading?
Further information on registries and emission trading can be obtained from the following sources:
Jay Wintergreen
First Environment Inc.
770 L Street, Suite 950
Sacramento, CA 95814
Tel: 916-492-6080
Fax: 916-492-6089
The California Climate Action Registry can be found on the web at:
http://www.climateregistry.org/
The website for the Chicago Climate Exchange is:
http://www.chicagoclimateexchange.com/
Information on the Regional Greenhouse Gas Initiative of the Northeast and Middle Atlantic states is available at:
GHG Emissions Registries and Trading Schemes
Because of the potential benefits, many companies are considering participation in GHG registries and/or emission trading programs. We have included some of the more frequently asked questions on this topic and hyperlinks to First Environment’s responses below:
