Carbon Footprint Analysis in Latin America: Colombian Case

Transcription

1 Carbon Footprint Analysis in Latin America: Colombian Case Vivian Rangel* Center for Latin-American Logistics Innovation (CLI) El Dorado Ave. #70-16, Bogota, Colombia (571) , Fax: Edgar Blanco MIT Center for Transportation & Logistics Cambridge, MA 02139, United States (617) , Fax: Isabel Agudelo Center for Latin-American Logistics Innovation (CLI) El Dorado Ave. #70-16, Bogota, Colombia iagudelo@logyca.org (571) , Fax: POMS 22nd Annual Conference Reno, Nevada U.S.A. April 29 to May 2, 2011

2 Abstract The new requirements of international markets in terms of environmental response to climate change are creating an increasing pressure on companies to measure and show their efforts to reduce negative impacts generated by the emission of greenhouse gases (GHG). This represents a big challenge for emerging markets like Latin America and Colombia is not the exception. Due to Colombia s intensive agro-industrial economy along with the industry s high dependence on fossil fuels and the pressure from its main export destination: United States, the interest from Colombian companies on measure their carbon footprint is increasing, in order to enhance their competitiveness and reduce the related environmental risks. In this talk we will discuss the results of the corporate carbon footprint measurement for a group of the most important Colombian companies from the food and beverage sector. The methodology presented is based on the Greenhouse Gas Protocol Initiative but takes into account the local conditions in order to identify and compare the contribution of different emission sources to the corporate carbon footprint. Moreover, we will show the opportunities to reduce and compensate the GHG emissions. Keywords: Carbon Footprint, greenhouse gas emissions, food and beverage sector, climate change, emerging markets *Corresponding Author

3 1. Introduction The increased concentrations of key greenhouse gases as carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) are a direct consequence of human activities, these are called anthropogenic greenhouse gases. They accumulate in the atmosphere and produce net warming by strengthening the natural greenhouse effect (IEA, 2010). The 2007 Fourth Assessment Report (AR4) compiled by the Intergovernmental Panel of Climate Change (IPCC) concluded that "increases in anthropogenic greenhouse gas concentrations are very likely to have caused most of the increases in global average temperatures since the mid-20th century". According to the World Wildlife Fund, the inventory of the emissions of these greenhouse gases, including also hydrofluorocarbons (HFCs), perfluorocarbons (PFCs) and sulphur hexafluoride (SF6), represent the carbon footprint. The Kyoto Protocol of the UNFCCC is by far the most comprehensive multinational effort to mitigate climate change (IEA, 2010) but does not establish a binding commitment for developing countries (non-annex I parties) to reduce their greenhouse gas (GHG) emissions (UNFCC, 1997). Until recently industrialized countries have emitted the large majority of anthropogenic gases, however this last decade was a breaking point since for the first time emissions from developing countries overtook those of the industrialized countries (annex I parties). Between 2007 and 2008, CO2 emissions from developing countries grew by 6% while those of the industrialized countries decreased by 2%. Latin America s emissions increased significantly by 4% between this period compared to the 3% reduction from North American countries 1 and 1 Annex II North America includes Canada and the United States.

4 the 2% reduction from European countries 2. Moreover, the emission levels of developed countries were below 1990 levels due to the economic contraction arising from the recession and high oil prices in 2008 (IEA, 2010). This shows that emissions of developing countries are rising very rapidly and are projected to continue to do so. Therefore, in order to shift towards a worldwide lowcarbon economy is necessary to engage developing countries in the fight against climate change as their aspiration for economic and social development is growing along with their energy demand, where coal is filling most of these energy requirements (IEA, 2010). In order to track total emissions, the IPCC Guidelines provide a basis for developing greenhouse gas emissions inventories (Oberthür and Ott, 1999). This guideline includes a list of emissions to be tracked, a conversion mechanism that can be used to provide a standard unit of measurement (carbon dioxide equivalent CO2e) along with a group of emissions generating activities to be tracked over an annual basis in order to work to meet a reduction: energy; industrial processes; solvents and other product use; agriculture; land use change and forestry; and waste (IPCC, 1996). For Colombia, agriculture accounts for 38.09% of the total emissions and energy 36.65%. Moreover, transport and energy demand in industry and construction sectors represents 12% and 7.28% respectively (IDEAM, 2009). These emissions depend to a large extent on the country s energetic profile. In terms of generation, 78% of Colombia's electricity is derived from hydro plants, 16.9% from thermal units (11.4% natural gas and 5.4% coal) and 5.1% from smaller generation 2 Annex II Europe includes Austria, Belgium, Denmark, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Liechtenstein (not available in this publication), Luxembourg, Monaco (included with France), the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.

5 plants, cogeneration and wind energy (UPME, 2007). As a result, the country s energy industry is clean relative to developed countries such as the United States (US). Colombia s CO2 emissions per kilowatt-hour (KWh) consumed from the grid are 127 g CO2, which is significantly lower compared with the emission rate of US, 549 g CO2 / KWh (IEA, 2009). However, industry s thermal energy demand depends on the available fossil fuels and the existing economic incentives. Colombia is among the top ten coal producers in the world (World Coal Association, 2009) and the estimated average price of this mineral 3 : USD 1.68 for every 1000MJ (megajules), is significantly lower than the estimated reference price of natural gas 4 : USD 3.14 for every 1000MJ. On the other hand, natural gas emits 31tons of CO2 less than coal for each unit of energy consumed in the process (terajules) 5. This represents a key context factor for the companies when it comes to select the fuel that will supply their energy demand. Food and beverage industry is predominantly intensive in thermal energy consumption, therefore the local conditions such as availability; cost and economic incentives related with fossil fuels can influence the consumption tendencies and then the greenhouse emissions. 2. Methodology The proposed approach is based on the GHG Protocol accounting framework developed by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD). The Corporate Accounting and Reporting Standard provides a guidance for companies to set organizational boundaries, identifying and calculating emissions, tracking emissions over time and reporting 3 Average cost calculated by the author from the Colombian Domestic Prices of Coal and Coke (UPME, 2010) and the Colombian Generic Coal Low Heating Value (UPME, 2005) 4 Calculated by the author from the natural gas historic reference price (Ecopetrol, 2009) 5 Estimation based on the Colombian Fuel Emission Factors (UPME, 2005)

6 emissions. Several programs, including the EPA Climate Leaders and the Chicago Climate Exchange, have adopted these standards for use in their programs (WBSCD and WRI, 2002). According to the GHG Protocol there are three main scopes of reporting that entail different boundaries at which companies can measure their emissions: Scope One (1) represents emissions generated from sources that are owned or controlled by the company (e.g. combustion of fossil fuels in boilers, furnaces, vehicles) Scope Two (2) includes indirect emissions from the electricity purchased from the grid. Scope Three (3) consists of other indirect emissions from the business s value chain, like production of purchased materials, waste disposal and employee travel. The Corporate Carbon Footprint refers to the direct and indirect GHG emissions from sources that are own or controlled by the company, which means scope 1 plus scope 2. The GHG Protocol is often used in programs that focus on emissions directly attributable to a company. For example, scope 1 and scope 2 are required in the EPA Climate Leaders program (EPA, 2005). The ISO standards for greenhouse gas accounting and verification are based on the guidelines of the GHG Protocol Initiative (ISO, 2006). The GHG Protocol is consistent with the IPCC guidelines for compilation of emissions at the national level (IPCC, 1996). They refer to a hierarchy of calculation approaches and techniques ranging from the application of generic emission factors to direct monitoring, which is in many cases unavailable or expensive. The approach used in this

7 research estimates GHG emissions applying emission factors to historical activity data taken from the companies (electricity consumed from the grid, fuel and refrigerant gas consumed). For fuel consumption from mobile and/or stationary sources, the recommended approach is to first convert fuel use data into an energy value using the heating value of the fuel. This is generally more accurate than those based on mass or volume, except when mass or volume based factors have been measured at the company-or site-specific level (WBSCD/WRI, 2004), which is not the case in this study. The CO2 emissions are given as follows: CO 2 emissions Fuel = FU * LHV * EF * CF, where FU: fuel used LHV: fuel s low heating value EF: fuel s emission factor CF: unit conversion factor Emissions form electricity are given as follows: CO 2 emissions Electricity = EC * EF * CF, where EC: electricity consumption EF: local or national electricity emission factor CF: unit conversion factor In order to translate fuel use and electricity consumption into CO 2 emissions, local available emission factors were compared with the parameters given by the IPCC. The general process used in this methodology is presented in Figure 1.

8 Define boundaries (scopes) Collect activity data Validate emission factors Identify reduction opportunities Estimate emissions Figure 1. Corporate carbon footprint measurement process Results and corresponding analysis will be described in the case study. 3. Case Study This case study shows the application of the GHG Protocol Corporate Standards to analyze the carbon footprint of a group of nine companies from the food and beverage sector in Colombia that produce a variety of products based on agricultural raw materials. The purpose is to evaluate the effect in the total GHG emissions of various variables such as fuel consumption, electricity demand and refrigerant gases consumption. To do so, it was necessary to identify key aspects from the Colombian context that affected the methodology parameters such as emission factors. By measuring the corporate carbon footprint the authors provided important insights for the carbon footprint measurement process in emerging markets like Colombia. Moreover, it is presented some GHG emissions trends in this sector along with general challenges that have to be addressed to manage and reduce the corporate emissions. Eight of the nine companies selected for this research are among the Top 100 biggest companies in Colombia. This fact is based on annual sales, revenue and assets according to an annual national ranking (Semana, 2009). In the following lines we will apply the steps of the methodology.

9 3.1.Define boundaries This study focuses on corporate carbon footprint, so it considers the GHG emission sources owned or controlled by the companies. It was consider only the processes related with the manufacturing plants and distribution centers. 3.2.Collect activity data The information collected was based on the following data: KWh of electricity consumed, gallons of fuel consumed and cubic meters of refrigerant gas consumed. 3.3.Validate emission factors Local available emission factors and reference parameters were compared with those given by the IPCC. The emission factors are provided on an energy basis for each fuel. It was found that the Colombian coal and natural gas emission factors were 7% and 2% lower than the factors applicable to US. On the other hand, for the Colombian diesel, liquefied petroleum gas (LPG) and oil crude, the CO2 emissions were higher than the standard parameters given by the IPCC (Table 1). Fuel COLOMBIA* Low Heating Value CO2 emission factor Energy basis Fuel UNITED STATES** Low Heating Value CO2 emission factor Energy basis Coal (dry basis) 26,70 MJ/kg kg/tj Anthracite 26,70 MJ/kg kg/tj Natural Gas (generic) 33,80 MJ/Nm kg /TJ Natural Gas 33,60 MJ/Nm kg/tj Diesel (ACPM) 42,37 MJ/kg kg/tj Diesel 43,00 MJ/kg kg/tj LPG 108,55 MJ/Nm kg /TJ LPG 25,54 MJ/lt kg/tj Oil crude 39,64 MJ/kg kg/tj Oil crude 42,30 MJ/kg kg/tj *Source: Emission Factors for Colombian Fuels (FECOC), Colombian Mining and Energy Planning Unit (UPME), 2005 ** Source: IPCC 2006 Guidelines for National Greenhouse Gas Inventories Table 1. Emission factors for fossil fuels in Colombia and United States Emission factors from electricity and heat generation were also compared between regions and countries (Table 2 and Table 3). They have a direct impact in the scope 2

10 emissions due to the different energetic profiles. Colombia is below Latin America s average as a result of the high availability of hydroelectric plants that supply the 78% of the national electricity demand. However, Costa Rica followed by Brazil have the lowest energy emission factors Region 2007 Average World Annex I parties Annex I Kioto parties Non-Annex I parties OECD North America Latin America OECD Europe Africa Middle East Asia OECD Pacific Table 2. CO2 emissions per KWh from electricity and heat generation (g CO2/KWh) by region (IEA, 2009) Country 2007 Average Country 2007 Average Canada France United States Germany Mexico Norway 7 7 Argentina Spain Brazil Sweden Chile Switzerland Colombia United Kingdom Costa Rica Botswana Cuba Mozambique 1 1 Panama South Africa Peru United Arab Emirates Venezuela India China Australia Table 3. CO2 emissions per KWh from electricity and heat generation (g CO2/KWh) by country (IEA, 2009)

11 3.4 Estimate Emissions For the participating companies, scope 1 (fossil fuels and GHG covered by the Kyoto Protocol) represents 83% of the corporate carbon footprint, of which 92% are generated by the burning of fossil fuels. The remaining 8% are fugitive emissions released (intentional or unintentional) during the use of refrigeration and air conditioning equipment (Figure 2); most of these emissions are HFC s. Scope 2 17% Scope 1 83% Figure 2. CO2e emissions by scope The GHG emissions not covered by the Kyoto Protocol, e.g. chlorofluorocarbons (CFC s) shall not be included in scope 1 but may be reported separately (WBSCD and WRI, 2002). For the purpose of this paper, these gases are accounted in a separated category named Others. For the total GHG emissions, including others category, 71% of the emissions were generated by the burning of fossil fuels (Figure 3). This represents the main source of the carbon footprint of the analyzed companies from the food and beverage sector.

12 Electricity 15% Refrigerants 14% Fuels 71% Figure 3. CO2e emissions by source Figure 4 shows the contribution of each fuel to the energy consumed by the companies. Figure 5 shows the CO2 emissions generated by these fuels. It was found that 41% of the energy demand was covered by coal which generated 52% of the CO2 emissions in the participating companies. For natural gas, CO2 emissions (44%) were lower than the contribution to the energy supply for the productive processes (55%). LPG 0% Diesel 2% Natural Gas 44% Coal 52% Crude or fuel oil 2% Figure 5. CO2 emissions by fuel Alternative scenarios weree developed in order to identify the impact arbitrary portion of coal for natural gas based on the heating value of of replacing an these fuels. The obtained results are shown in Table 4.

13 Coal replacement Projected CO2 emission reduction 25% 9% 50% 17% 75% 26% 100% 35% Table 4. Results of CO2 emission reduction when replacing coal for natural gas This represents an incremental reduction of the CO2 emissions generated by coal when it is partially or totally replaced by natural gas. Figure 5 and 6 represent the usage of each refrigerant gas according to the number of companies and the contribution to the CO2e emissions. It was found that 27% of the companies are still using R-22 which is responsible for 31% of the total fugitive emissions. Some of these gases are not listed in the Kyoto Protocol, but are regulated by the Montreal Protocol: R-12, R-22 and R-502 (UNEP, 2007). Reduction of R-22 is critical. This is demonstrated by this agreement signed by developing countries to reduce its production and consumption by 1% for 2010; 35% by 2020; 67.5% in 2025 and replace its use in R-502 5% R % HCFC-141b 10% R-404a 8% HFC-134a 18% R-12 5% R-22 27% R-407c 2% R-717 (ammonia) 10% Figure 5. Refrigerant usage by type R % R-502 6% HCFC-141b 5% R-407c 0% R-404a 12% R-12 12% HFC-134a 17% R-22 31% R-717 (ammonia) 0% Figure 6. CO2e emissions by refrigerant gas

14 Conclusions Burning of fossil fuels is the main source of GHG emissions in the food and beverage sector in Colombia. Coal and natural gas supply most part of the energy requirements in the productive processes, however, coal is cheaper than natural gas but it emits approximately 31 tons more than this fuel. This represents a big challenge for Colombian companies that are working to reduce the greenhouse gas emissions from their productive activities and want to be profitable at the same time. This means that there are not economic or tax incentives for companies to convert the energy supply from fossil fuels like coal into cleaner or alternative energy sources. On the other hand, is crucial for these companies to find other alternatives to replace the use of R-22 in the refrigeration and air conditioning equipments. For developing countries there is a binding commitment to reduce its consumption and replace completely its use by Some of these companies (10%) have found the ammonia as an alternative gas, which Global Warming Potential (GWP) over 100 years is less than 1 and its contribution to the total fugitive emissions of this study is less than cero. Future work In the case study, transportation of materials, products, waste and employees were not considered as part of the scope 1. Because transportation represents 12% of the total national GHG emissions, it is an important element that has to be considered in a future research.

15 References Ecopetrol (2009), Precio Histórico de Referencia del Gas Natural. Retrieved February 13, 2011 from EPA (2005), Climate Leaders Greenhouse Gas Inventory Protocol Design Principles, U.S. Environmental Protection Agency. Retrieved February 13, 2011 from IDEAM (2009), Inventario Nacional de Emisiones de Gases de Efecto Invernadero, Instituto de Hidrología, Meteorología y Estudios Ambientales, Colombia. p. 127 IEA (2009), CO2 Emissions From Fuel Combustion: Highlights, International Energy Agency, OECD/IEA, Paris. IEA (2010), CO2 Emissions From Fuel Combustion: Highlights, International Energy Agency, OECD/IEA, Paris. IPCC (1996), IPCC Guidelines for National Greenhouse Gas Inventories, Intergovernmental Panel on Climate Change. Reference Manual 3. ISO (2006). Greenhouse gases - Part 1: Specification with guidance at the organization level for quantification and reporting of greenhouse gas emissions and removals. International Organization for Standardization. Oberthür, S. and H. Ott (1999), The Kyoto Protocol: International Climate Policy for the 21st Century, Springer. Semana (2009) The 100 biggest companies in Colombia. Bogota, Colombia, May Retrieved February 13, 2011, from _ pdf

16 UNEP (2007), 19th Meeting of the Parties to the Montreal Protocol Privileges and Immunities Order. Section 5 UNFCCC (1997), Kyoto Protocol to The United Nations Framework Convention on Climate Change. UPME (2007), Plan de expansión de referencia generación transmisión Ministerio de Minas y Energía de Colombia - Unidad de Planeación Minero Energética. p. 203 UPME (2005), Factores de Emisión para Combustibles en Colombia. Ministerio de Minas y Energía de Colombia - Unidad de Planeación Minero Energética. Retrieved October 27, 2010, from WBCSD/WRI (2002), GHG Protocol Initiative: Standards and Guidance, World Business Council for Sustainable Development / World Resources Institute, COP8, New Delhi, India. p. 6 WBCSD/WRI (2004), The Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, World Business Council for Sustainable Development / World Resources Institute. World Coal Association (2009), Coal Statistics. Retrieved February 13, 2011, from