Giving Credit Where Credit Is Due: Energy Efficiency in CO2 Emissions Trading

Panel: Energy and Environmental Policy: Planning for Greater Impacts

Authors:
David Nemtzow, Nemtzow & Associates
Omar Siddiqui, Electric Power Research Institute

Abstract

The more efficient use of electricity is widely considered to be a major and low cost means of lessening greenhouse gas (GHG) emissions and mitigating global climate change. Not surprisingly, increasing responses to climate change - including CO2 cap-and-trade and offset schemes1 - are placing greater emphasis on utility energy efficiency and demand-side management activities.2 This paper provides an overview and exploration of methods to account for CO2 emissions reductions specifically associated with implementation of energy efficiency (EE) programs into GHG cap-and-trade programs and offset schemes.3 It is intended to assist electric utilities, policymakers and others interested in incorporating EE projects into evolving CO2 offset schemes to better understand key methodological, analytic and policy issues. The paper focuses on how to understand, account for, quantify, verify, and optimize how a given level of electricity savings may both reduce CO2 emissions and potentially be granted credits for such CO2 savings that may be traded in cap-and-trade regimes. The paper evaluates the analytical methodologies for crediting EE with CO2 offsets applied by various emissions trading schemes. In addition, the paper assesses that rationale used by certain emissions trading schemes to disallow EE as an eligible project category for CO2 offsets. In particular, the paper discusses key analytical barriers to the inclusion of EE as an eligible category for CO2 offsets and approaches to overcoming those barriers.