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Comment Details

Comment Author:Llewellyn Matthews
Organization:NWPPA
Comment Date:Monday, 22 June 2009
Uploaded Comment File:Download File
Comments: Jurisdictional Scan of Approaches to Early Reduction Recognition Under Other Trading Systems:
2. Jurisdictional Scan of Approaches to Early Reduction Recognition Under Other Trading Systems NWPPA appreciates that WCI has provided a scan summarizing approaches to early reduction recognition in other jurisdictions and for other pollutants. NWPPA believes the information provided is supportive of approaches that would address the key concerns expressed by NWPPA: • Longer eligibility periods are appropriate (Canada reaches back to 1990) • All verified ERAs should be recognized and are in addition to the cap. • Additionality criteria should be minimized or eliminated (RGGI). • Methods to quantify ERAs should be valid, but should be flexible based on protocols applicable to the project at the time it was undertaken.
Comments: Issues for Discussion: Entities that are eligible for ERAs:
3.2 Entities that are eligible for ERAs Reductions across corporations should be considered as well as specific projects, provided that appropriate documentation is provided.
Comments: Issues for Discussion: Additionality:
3.1 Additionality The White Paper reiterates the Design Recommendations that indicate that the emission reductions qualifying for ERAs must be “additional, real, verifiable, permanent and enforceable.” A key purpose of the White Paper is to solicit comment on how these criteria should be structured and defined. The White Paper then goes on to discuss these criteria in a manner that is very analogous to application of these criteria to credits generated from offset projects. NWPPA offers that it is counterproductive to think of these criteria in the same manner as offset projects for the reasons given in our general comments. With regard to the criteria of “additionality,” NWPPA offers that this criterion is of little relevance and should be minimized. As a policy matter, WCI should be welcoming any effort at early reduction of greenhouse gas emissions without elaborate criteria of “additionality.” As to the specific possible criteria of additionality: “Surplus to regulatory requirements:” This potential criteria is almost irrelevant as there are unlikely to be regulatory requirements to reduce greenhouse gases prior to a cap and trade program in most WCI states. “Reductions not due to production decreases or shutdowns or transferring production to other facilities:” NWPPA agrees with these criteria. “Beyond business as usual, and financial additionality:” This criterion is almost irrelevant given the poor economic climate characterizing the four-year eligibility period. Capital investments of any type since mid-2008 are difficult and scarce. WCI should do as much as possible to encourage early actions without the need to show that “but for” the ERA, the project would not have proceeded. NWPPA replies to the four questions: • It should be sufficient to show that the possibility of an ERA was helpful in promoting early action but there should be no specific criteria. • Yes, government funded projects should be eligible if the possibility of an ERA was a motivating factor. • Additionality tests should be avoided or be as flexible as possible. • Reductions should be verifiable pursuant to appropriate protocols for the type of action; however it should be recognized that there might be a variety of appropriate protocols. Also, any verification approach must be sensitive to confidential business information and focus more on what reductions were achieved. • Costs should be minimized by recognition of any legitimate reporting or quantification method selected by the applicant. These were likely determined at the time the project was undertaken.
Comments: Purpose and Objectives of Early Reduction:
NORTHWEST PULP AND PAPER ASSOCIATION COMMENTS WESTERN CLIMATE INITIATIVE EARLY REDUCTION ALLOWANCES WHITE PAPER JUNE 18, 2009 1. GENERAL – Purpose and Objective of Early Reduction Northwest Pulp and Paper Association represents the pulp and paper mills in the WCI states of Oregon, Washington. The pulp and paper/forest products industry accounts for approximately 6% of the total US manufacturing GDP, putting it on a par with the automotive and plastics industries. The industry is among the top ten manufacturing sectors in 48 states. In the Pacific Northwest, our industry is even a larger factor in the economies of our states. In terms of competitive issues, NWPPA respectfully requests WCI to keep in mind that our industry faces not only international competition but also significant competition from 46 other states. The pulp and paper/forest products industry is the leading US producer and user of renewable, carbon neutral biomass energy. In fact, the energy we produce from biomass presently exceeds the total energy produced from solar, wind, and geothermal sources combined. Almost 75% of the energy used at pulp and paper mills in the Pacific Northwest is generated on-site from carbon-neutral biomass. The industry is also a leader in combined heat and power technology (CHP) with highly efficient co-generation of electric power, most from biomass, for internal use and for sale to the power grid. From 2000 to 2006 our combined industry reduced carbon dioxide emissions by 14%. Collectively the industry reduced direct greenhouse gas emissions by 34%, approximately half due to improvements and half due to decreases in production or other changes to the baseline. It is important for WCI partners to keep in mind that many large manufacturers participated in predecessor programs to voluntarily track and reduce greenhouse gases such as the EPA Climate Leaders and Climate Vision programs, WRI and WBCSD, etc. As a result many early actions were taken motivated by climate change issues and documented pursuant to well established protocols. The pulp and paper industry looks forward to producing even more energy on-site from biomass by: (a) greater application of available technologies such as CHP and measures to improve energy efficiency; and (b) eventual adoption of advanced ligno-cellulosic technologies that are still in the research and development stages. Either route, greater application of available technologies or eventual adoption of advanced technologies are/will be extremely costly decisions. Frequently these are one-time capital investments. The industry tends to make these types of decisions in good economic times and less so in poor economies such as the present. These types of investments are viewed as extremely important not only for reduction of greenhouse gases from fossil fuels and to reduce dependency on foreign fossil fuel but also many other important environmental improvements may be tied in. At the end of these comments NWPPA gives an example of a major pulp and paper energy and greenhouse gas improvement project that may be undertaken in the 2008-2012 timeframe. If the project proceeds, the mill will decrease greenhouse gas emissions by 45% and will achieve significant additional environmental improvements by reducing other air emissions. This is a specific proposed project that should qualify for early reduction allowances and should be contemplated in the WCI design criteria. NWPPA appreciates the succinct and thoughtful white paper on early reduction allowances and offers the following general observations: 1. Early reduction allowances are quite different from allowances based on offsets: • ERAs will be granted for actions within limited defined period of time, i.e., the verified emission reductions between January 2008 and 2012. As per WCI design recommendation, these ERAs are in addition to each Partner (state) budget. Partners may recognize early action prior to that period, but these will be treated differently, likely subtracted from the Partner budget. NWPPA has previously commented that the eligibility period for WCI purposes is too short. • In contrast, programs for offset credits are future oriented and will span a much longer period of time. • Offset projects are more likely to be undertaken with specific WCI design recommendations in mind, while many early actions to reduce greenhouse gas emissions were likely undertaken with predecessor programs in mind. • There are likely fewer opportunities for mis-use of ERAs as compared to the concerns raised by some stakeholders regarding offsets. 2. WCI should avoid analogies between the criteria for ERAs and offsets when possible • To the extent WCI creates analogies between the criteria for early reduction allowances and offset credits (specifically the verification and additionality criteria) the fewer early actions will qualify. • The more difficult it is to obtain recognition for early actions, the more likely it will be that WCI creates the very perverse incentive it wishes to avoid – namely that projects will not be undertaken immediately prior to implementation of cap and trade programs. 3. WCI should adjust and adopt a more flexible view toward eligibility of early actions undertaken in the poor economy in the period prior to a cap and trade program • Many industries implemented significant early actions to reduce greenhouse gas emissions under predecessor programs when the economy was healthy. We can expect to find that fewer were planned and capitalized during the current poor economy that will characterize most of the 2008-2012 eligibility period. • In balancing criteria for ERAs, WCI should give priority to the central objective of removing disincentives for early action. However, WCI should recognize that many projects have multiple environmental benefits. If WCI creates the perverse incentive to delay a GHG reduction or energy efficiency project, it is likely also creating a perverse incentive to delay other environmental improvements. 4. In the final analysis, it should not be more difficult for an applicant to obtain an ERA than it would be to submit the same reductions to meet a compliance obligation under a cap and trade system. NWPPA replies to questions on P 2: 1: WCI can best fulfill the goal of encouraging early action by ensuring the program to recognize early actions is less burdensome than criteria for the same action were it submitted to meet a compliance obligation under the cap and trade program. 2 and 3: WCI should accept any valid documentation under predecessor programs such as Climate Leaders and Climate Vision and protocols of the WRI and WBCSD. WCI should develop some guidance documents that ensure both flexibility and consistency. 5: There should be no limit on ERAs for projects in the 2008-2012 time frame.
Comments: Issues for Discussion: Potential limits on total ERA issued:
3.3 Potential limits on total ERAs issued The White paper states; “ The availability of a large volume of ERAs at the start of the first compliance period could be a key cost containment mechanism; however, excessive amounts of ERAs could affect the market and lead to an unintended reduction in the price of allowances.” Again, WCI should focus on what is the paramount objective of ERAs – to encourage action in advance of a cap and trade program. Actions undertaken in advance of a cap and trade program have the potential to reduce emissions of greenhouses to the environment sooner and this is an environmental positive. The fact that there is an unintended consequence of reducing the price of allowances in the early stage of a cap and trade program is irrelevant to the environmental objective. NWPPA responses to the two questions: • Any limit on ERAs will act as a disincentive if such limits more stringent or more difficult to navigate than submitting the same reduction later to meet compliance obligation under a cap and trade program. The limits on ERAs ultimately will have little bearing on concerns such as “gaming” that might occur with some types of offset projects. The two are fundamentally different. • Again, NWPPA questions the need for any limit on the number of qualifying ERAs if the environmental objective is to achieve early action.
Comments: Issues for Discussion: Coordination of Implementation of ERA:
3.5 Coordination of Implementation of ERA Generally NWPPA favors a programmatic approach as opposed to the baseline approach as described in the White Paper. While some consistency across jurisdictions is important and reductions should be verifiable, there should be flexibility. This is appropriate given the limited duration of the program and the environmental desirability of encouraging early reductions, particularly those requiring capital that may be in short supply during this recession. NWPPA opposes the baseline approach if the emission reductions must be verified using the same reporting infrastructure as WCI. At this time, NWPPA is not supportive of some of the protocols advocated in the WCI “Essential Elements of Reporting.” Thank-you for the opportunity to make these comments. Llewellyn Matthews Executive Director, Northwest Pulp and Paper Association 1400 113th AVE SE Suite 200 Bellevue, WA 98040
Comments: Other/General Comments:
APPENDIX – Example of a pulp and paper project reducing greenhouse as well as other air pollutants that may take place in the 2008-2012 timeframe The proposed state-of-the-art TMP system (#5 TMP) will process up to 475 ODTPD of wood chips into pulp fibers using heat and mechanical refining. The #5 TMP system will be equipped with a Heat Recovery System (HRS) that will recover the waste heat from the TMP refining process for conversion to clean steam for use in IEP’s processes. The new #5 TMP with HRS will result in substantial energy savings by offsetting natural gas currently used to provide steam for IEP’s processes. The project also results in a significant reduction of air emissions associated with the combustion of this natural gas and the virtual elimination of air emissions from IEP’s existing TMP systems. With the new #5 TMP system in operation providing 100% of the refined pulp, IEP estimates the following significant economic and environmental benefits: Natural Gas Reduction: 528,000,000 cubic feet per year Ø Carbon Dioxide (CO2) Emissions Reduction: 33,000 tons per year Ø Carbon Monoxide (CO) Emissions Reduction: 22 tons per year Ø Nitrogen Oxide (NOX) Emissions Reduction: 82 tons per year Ø Volatile Organic Compound (VOC) Emissions Reduction: 40 to 48 tons per year The above estimates result in the following approximate mill-wide reductions: Ø Natural Gas Reduction: 77% Ø Carbon Dioxide (CO2) Emissions Reduction: 45% Ø Carbon Monoxide (CO) Emissions Reduction: 72% Ø Nitrogen Oxide (NOX) Emissions Reduction: 58% Ø Volatile Organic Compound (VOC) Emissions Reduction: 72 to 75% The proposed state-of-the-art TMP with HRS will replace production from IEP’s four existing TMP systems that were originally installed in the 1960’s.