Sunday, April 27, 2008

How GHG Emission Cap and Trade Will Impact Existing Building Owners

There appears to be little doubt that the next administration in Washington, D.C. will bring about federal GHG emission reduction legislation and that it will be based on a cap and trade program. In the absence of federal GHG legislation, however, many states and local governments have already adopted ambitious plans for reducing GHG emissions. Twenty-two states have entered into regional pacts that impose mandatory GHG emission caps and over 800 cities have adopted GHG programs calling for reductions in GHG emissions. The Regional Greenhouse Gas Initiative (RGGI), for example, which includes Connecticut, Delaware, Maryland, Massachussetts, New Hampshire, New Jersey, New York, Rhode Island, Vermont and Pennsylvania (as an observer), will implement a regional cap and trade program in January 2009. The first auction of carbon dioxide allowances is planned for this September. Another example is the Western Climate Initiative (WCI) which includes six western states (Arizona, California, New Mexico, Oregon, Utah, and Washington, with Colorado, Kansas, Nevada and Wyoming as observers) who have agreed to reduce aggregate GHG emissions by 15% below 2005 levels by 2020. It is clearly evident that the use of cap and trade programs for the reduction of GHG emissions is the direction in which the U.S. is moving.

Why should existing building owners be concerned about this? Commercial buildings account for 38% of the carbon dioxide emissions in the country. As cities and states begin to implement their aggressive GHG reduction goals, it is highly likely they will realize that they will be unable to achieve their goals simply by imposing green building standards on new construction projects. As a result, existing building owners should anticipate that local government will move to impose energy reduction measures on their properties as well, at the very least on building renovation.

What can existing building owners do about this? In my view, the time is now to conduct an energy audit of all facilities to learn where and how much energy is being used, and where energy savings might be realized. With the spiraling cost of energy, the energy savings will be an attractive operating expense reduction. Also, if you are located in a state with GHG reduction plans, it would be prudent to keep abreast of the discussion, particularly how it may impact you.

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