Decision-makers at all levels of government believe it's very likely that humans are responsible for global warming and climate change. A large number also believe we can take aggressive steps now to reduce their impacts. BOMA believes that the end goal of the commercial real estate industry should be to create a voluntary marketplace transformation that creates financial incentives in legislation, or a future carbon marketplace to generate those results.
According to industry experts, the most common greenhouse gas (GHG) is CO2, representing 82 percent of the problem. Two of the largest global sources are electricity and heat (36 percent). Lighting represents 25 percent of emissions from the commercial sector. The largest single opportunity for cost-effective CO2 reduction is increasing energy efficiency in buildings, which consume around 40 percent of the nation's energy (half of which is generated by commercial buildings).
BOMA believes it's just a matter of time before regulators look to office buildings as a major target for achieving carbon-emissions reductions, and economic incentives are needed to be effective in this impending regulatory environment. Some of this is already happening: California is implementing regulations, as are several states in the Northeast. Countries in the European Union already have a program in place; however, BOMA doesn't believe it's actually working to benefit the real estate industry. Through advocacy, education, and research, we have the opportunity to get it right in the United States.
So, what is it we're talking about, exactly? Emissions trading (or cap and trade) is an administrative approach used to control pollution by providing economic incentives for achieving reductions in the emissions of pollutants. A central authority (such as a government or international body) sets a limit or cap on the amount of carbon that can be emitted. Companies or groups are issued emission permits and are required to hold an equivalent number of allowances (or credits) that represent the right to emit a certain amount. The total amount of allowances cannot exceed the cap.
Companies that need to increase their emissions must buy credits from those that pollute less. In effect, the buyer is paying a charge for polluting while the seller is being rewarded for reducing emissions by more than what was needed, thus "monetizing" CO2 reductions. In theory, those that can easily reduce emissions most cheaply will do so, achieving the pollution reduction at the lowest possible cost to society.
So, what does that really mean? Companies that can reduce their emissions stand to benefit economically through the monetization of energy efficiency. In addition, companies that need to reduce emissions can do whichever is cheaper: invest in energy efficiency and carbon-reduction measures or purchase allowances/credits, thereby investing to make another company more efficient.
We can create a baseline operational standard for energy efficiency in buildings and then quantify the additional savings that would generate credits. Earning the value of CO2 reductions will accelerate energy-efficiency investments (and on-site renewables) to the party that makes these investments. In other words, buildings - not utilities - need to accrue the credits or offsets. A CO2 market trading plan or legislation must allow the fair market to work by rewarding investors in efficiency or renewables with the financial value of the resulting CO2 emissions reductions.
BOMA Intl. believes that carbon trading is preferable to other regulatory approaches under consideration to lower GHGs. In Congress, about a dozen bills have already been introduced to regulate carbon emissions, and it's fast becoming an issue among the leading presidential candidates. While the association does not believe that legislation will pass in 2008, the debate has begun.
In order for a cap and trade system to work, the amount of GHG reduction must be measurable and quantifiable so that the appropriate number of credits can be awarded. GHG reductions must be permanent and independently verified and certified by a professional entity that is accredited by the United Nations Framework Convention on Climate Change. Projects must also be shown to be outside "business-as-usual" parameters and only qualify if they would not have been taken on without the opportunity to earn carbon credits. Some examples of energy-efficiency projects that may meet this "additionality" requirement include retrofitted solar photovoltaic arrays, smart metering, energy-efficient HVAC systems, fuel switch projects, lighting retrofits, and any quantifiable process improvement that reduces the emission of GHGs.
BOMA and its members are taking proactive, effective, and voluntary measures to reduce energy consumption, thereby reducing their carbon footprints. Members are stepping up to the plate to reduce energy consumption and reliance on nonrenewable fuel sources through the organization's 7-Point Challenge (see more information on BOMA's 7-Point Challenge, or check out the October 2007 issue of Buildings).
For more information on this and other issues, call BOMA Intl. at (202) 408-2662 or visit (www.boma.org).
