China has now outpaced the United States as the world’s biggest emitter of greenhouse gases (GHG).  With a power sector that relies heavily on coal and continued aggressive construction of coal-fired power stations, the country currently accounts for almost 50% of global coal consumption.  According to the European Commission’s Joint Research Centre, China’s carbon emissions increased 9% in 2011 to 7.2 tons per person.   This figure is only slightly less than the European average of 7.5 tons – though significantly less than the average American at up to 17.3 tons per person.

Realizing the need to address the country’s serious GHG emissions problem – especially with record smog levels in Beijing – the Chinese government is taking a number of steps.  It plans to add 49 GW of renewable energy capacity this year and develop an energy plan with the goal of gradually transitioning from fossil fuels to cleaner energy sources, such as hydropower and intermittent resources like wind and solar power.  In 2012, about 15 GW of wind and 3 GW of solar energy capacity were added.

New Lows

Most noteworthy is the government’s effort to curb CO2 emissions by initiating a new carbon emissions trading pilot scheme.  It is set to launch seven such pilots in various cities and provinces this year that are expected to eliminate at least 700 million tons of annual emissions.  The first pilot will be kicked off on June 17 in Shenzhen (southern China) to initially include 635 companies that were responsible for 38% of the city’s total GHG emissions in 2010.  This pilot scheme will create the second-largest carbon trading scheme in the world, after the European Union Emissions Trading System (EU ETS).  Beijing and Shanghai may soon follow suit, though neither city has scheduled a launch date yet.

It remains to be seen if the Chinese carbon trading program will be as successful as the EU ETS scheme, which has indeed reduced carbon emissions since it was initiated in 2005.  But will China, like the EU, eventually face the challenge of a growing surplus of allowances?  Recently, the European Parliament proposed to delay the release of 900 million CO2 emission permits in order to stop over-flooding an already saturated market (mainly caused by the economic recession, which has depressed emissions more than anticipated) – a decision that was narrowly defeated soon thereafter in a parliamentary vote because of fear of raising costs for businesses in a sluggish economy.  Earlier this year, permits traded at below €3 ($3.90) a ton – compared to €7 ($9.10) a ton last year and €25 ($32.50) a ton in 2008.  Shortly after the vote, carbon allowances dropped to €1.70 ($2.20).  It is clear that carbon trading can be fraught with problems, and the Chinese market will undoubtedly face its own unique issues in the years ahead.  Still, China should be able to draw upon the EU’s experience and its hard-won lessons.

For years, the compact fluorescent light bulb (CFL) has stood as an icon of the modern sustainability movement.  Simply replacing an incandescent bulb with a CFL can reduce energy consumption by 75%.  That impressive saving has led college sustainability groups across the United States to hold light bulb swaps in an effort to get more CFLs into use.  It has even led countries around the world to ban or begin phasing out incandescent bulbs, driving the adoption of CFLs.   The tell-tale swirl of this favored bulb has worked its way deep into our popular culture, standing as a symbol of efficiency.

Though widely admired, the CFL has never been perfect.  The bulbs can be slow to start, they do not dim well, and they operate poorly in low temperatures.  For the environmentalist, a more significant problem is the tradeoff these bulbs pose between toxicity and global climate change.  CFLs contain between 1 mg and 5 mg of mercury, which can be released when the bulbs are broken or disposed.  Many have argued that the mercury in CFLs is more than offset by a reduction in mercury emissions from coal-fired power plants.  Few would deny, however, that it would be preferable to avoid this compromise altogether.

Mercury Rising

Enter the light emitting diode (LED).  Years of falling prices for LED lighting are finally making LED lamps a reasonable alternative to both incandescents and CFLs.  LEDs are more efficient, avoid the problems of dimmability and low temperatures, and, of course, contain no mercury.  While the combined effects of price and performance will drive consumers toward this type of lighting, there are also new signs that the issue of mercury will begin driving consumers away from CFLs.  In January, the governments of 147 countries approved the Minimata Convention on Mercury, which limits mercury from multiple sources including CFLs.  The current limits will still allow for the manufacture of CFLs, though the writing may be on the wall for stricter limits in the future.

A new report from Navigant Research, Energy Efficient Lighting for Commercial Buildings, forecasts that revenue from CFL sales will experience a steady -9%  compound annual growth rate (CAGR) between 2013 and 2021.  During the same time period, revenue from LED lamp sales will increase at a 23% CAGR.  While CFLs will surely remain a widely used light source for years to come, their tenure as an icon for sustainability will quickly come to an end.

It’s clear that fuel economy remains an important part of the purchase decision for a vehicle, but it doesn’t appear to be the greatest driver of innovation in this arena.  In 2011, about eight in ten people we have surveyed say that fuel economy is either “important” or “extremely important” in their purchase decision.  While this points to market demand today, the industry is focused on developing technology to meet new corporate average fuel economy (CAFE) requirements that won’t take effect until after model year 2017.

At the Automotive Megatrends conference in Dearborn, Michigan, the looming fuel economy and zero emission vehicle (ZEV) requirements dominated the powertrain discussions that I participated in.  For example, the panel on alternative drivetrains focused heavily on technology that can meet the CARB’s zero emission vehicle (ZEV) requirements.

ZEV Reality Check

Some argue that this sort of government intervention in the market is unrealistic, when ultimately the free market will decide.  This was made clear in Toyota’s presentation during the alternative drive panel, in which Tom Stricker, Vice President of Technical & Regulatory Affairs and Energy & Environmental Research, pointed out that hybrids have achieved 6% of the market in California in the past 13 years.  The question he essentially asked was: is it realistic to think that the market will reach 2.5 times that share for ZEVs within the next 13 years?

The answer is likely no, but the circumstances are certainly different than they were a decade ago.  Rising fuel prices are pushing greater interest in reduced petroleum fuel consumption.  There’s greater product support, with six ZEV models in showrooms (seven if you were to count CODA) only 2 years after introduction, compared to half that number of hybrids 2 years into their launch.  Not only are the vehicles available, but they are clearly cars customers want and customer satisfaction is high.

Of course, the challenges for ZEVs remain.  Public recharging infrastructure isn’t yet ubiquitous.  Our survey found a large disconnect between the expected and actual price of electric vehicles.  Finally, consistent range throughout the year remains a challenge.  Even so, 13,916 ZEVs sold nationwide last year.

To meet the upcoming mandates, I expect that we’ll see some additional experimentation in the coming years, in battery leasing, price reductions, and perhaps even different battery size options.  Of course, legal battles and delayed regulations aren’t off the table either.

In his State of the Union address, President Barack Obama said he would take unilateral action to limit climate change.  He declared, “If Congress won’t act soon to protect future generations, I will.”  Obama’s new resolve raised hope that the United States will finally move forward to address climate change by regulating greenhouse gases (GHG).  So, what are the prospects for meaningful legislation?

So far, efforts in Congress have focused on a carbon tax, which some Democratic legislators describe as a win-win proposal that would reduce carbon emissions while generating significant additional revenue to reduce the federal budget deficit.   In February, Independent Bernie Sanders of Vermont and Democrat Barbara Boxer of California proposed a bill to tax carbon emissions and raise $1.2 trillion in revenue over 10 years, most of which would be returned to consumers.  And on March 12, four Democrats from the House and Senate – Representative Henry Waxman (D-CA), Senator Sheldon Whitehouse (D-RI), Representative Earl Blumenauer (D-OR), and Senator Brian Schatz (D-HI) – introduced a related draft bill to put a price on carbon emissions by charging the nation’s largest polluters a fee for each ton of GHG they emit.  The latter proposal attempts to minimize the compliance and administrative burden and costs by leveraging the resources of existing U.S. agencies, such as the Environmental Protection Agency (EPA) and the Treasury.  Predictably, a few days later 105 Republican members of Congress introduced a resolution opposing a carbon tax, citing increased energy prices and a negative impact on the U.S. economy.

Small Ball

Acknowledging that the passage of a carbon tax is unlikely, Obama apparently has given up on pushing for a comprehensive climate change policy and is pursuing smaller-scale projects that won’t require new sources of revenue.  For example, he is proposing to divert $2 billion over the next 10 years in oil and gas royalties to fund alternative fuel research as part of the administration’s Energy Security Trust.  Obama is also expected to set new guidelines for all federal agencies to follow as they consider the effects of major federal projects on air, water, and soil pollution.  These guidelines are currently being reviewed by the White House’s Council on Environmental Quality and may require agencies to consider the impacts of global warming – e.g., increases in GHG and the potential for flooding, drought, or other extreme weather – before approving major projects such as the development of new pipelines and highways.

While lawmakers wrangle about climate change, atmospheric carbon dioxide (CO2) continues to rise.  According to the National Oceanic and Atmospheric Association, global CO2 levels jumped in 2012, increasing to 395 parts per million – the second biggest increase since record keeping began in 1959.