Coming to America

U.K.'s A-Gas Plans Expansion Into North America

A-Gas’s acquisitions in the U.S. will set it up for a significant expansion into North America, including the international rollout of its refrigerant reclamation technology.

This year, A-Gas celebrates its 20th year in business, but no time in those two decades has been quite as busy as last year. The past 12 months have seen intense activity as the Bristol refrigerant distributor and reclaimer bought two U.S. specialists, Coolgas and RemTec, and set up a fully fledged North American division. The firm has transplanted U.K. managing director Ken Logan to oversee the establishment of the U.S. operations for the next two years at least.

The acquisition of the U.S. businesses, plus a further distributor in Australia, Technochem, has seen the A-Gas Intl. group top £100 million turnover for 2012, with a worldwide headcount of 237.

Acquiring Assets

“A-Gas is now the largest independent refrigerant player outside of the U.S.,” said Jon Masters, European managing director. “Our core territories are in the U.K., South Africa, and Australia, in each of which we have a 30-35 percent market share. So we were keen to try and take that offering to the U.S. — it was the right opportunity in terms of the business and the regulatory framework.”

That framework is the U.S. phase out of HCFCs and the probable phase down of HFCs, expected to closely follow the European Commission’s proposed F-Gas model — although progressive states like California are already bringing in more stringent rules.

The particular attraction of RemTec is that its core business is halon reclamation. Although these are largely from fire suppressants, this offers the right range of skills and technology to allow an expansion into refrigerant reclamation. This is where A-Gas brings its own skills to bear, said Masters. “We can bring our reclamation knowhow, and the benefit of the U.K. experience of selling the reclaimed HCFC product. The U.S. market is maybe four or five years behind Europe, but it is rapidly developing, and the EPA [Environmental Protection Agency] has announced more cuts in HCFC volume.”

The plan is for the RemTec operation to be brought up to the same standard for refrigerant reclamation as A-Gas’s Bristol facilities by the end of this year.

The commercial implications of the rapid cuts should not be underestimated; in the U.S. over the past year, virgin R-22 has increased in price from $3 per pound to $15 per pound.

Coolgas, by contrast, is a conventional refrigerant distributor, but again the purchase is strategic, providing a foothold in the Southwest, from which A-Gas can build, with a brand name well known to the American market. It also holds all-important import rights to HCFCs.

A foothold in such a large territory is a big deal in its own right, but the potential is far bigger. “The U.S. business is roughly the same size as the U.K. business, but whereas in the U.K. that brings a 30 percent market share, in the U.S. it is only 2 percent of the market. It should be easier to double from 2-4 percent than from 30-60 percent.”

If the plans for reclamation at RemTec go well, it could be joined by other sites. While the U.K. can function well with a single reclamation site, the scale of the U.S. is likely to require a network of two or three more. With reclaimed HCFC expected to be useable in the U.S. beyond 2020, that is an attractive long-term target.

Reclamation Technology

In a relatively short time, refrigerant recovery and reclamation has become a serious business for A-Gas. Its environmental services operations now account for around 20 percent of turnover (refrigerants is the largest proportion at 60 percent).

U.K. business director John Ormerod said, “What we do falls into two areas: cleaning up dirty gas by removing contaminants and separating out gases from refrigerant mixtures.

“We probably lead the world in refrigerant reclamation. There is only one other company in the U.K. and three in the U.S. who can separate refrigerants like we do,” he said.

The separation facilities at Bristol have come on apace since the pioneering days when its technology could be housed in a corner of the warehouse. The original plant is still in situ, but it has been joined by Separator 3, located outside the warehouse and large enough to be able to accommodate tanker-sized volumes of refrigerant, with a capacity to process around 400 tonnes a year.

Although the precise technology is secret, both plants are designed to reclaim refrigerant to Air-Conditioning, Heating & Refrigeration Institute (AHRI) 700 standards, as well as being able to split mixed refrigerants into usable batches and to reclaim individual gases from cocktails of recovered refrigerant. The latter is where A-Gas claims distinctiveness, as “the only supplier who has both the technology and the capacity to provide this level of service.”

Content for the European Spotlight is provided courtesy of Refrigeration and Air Conditioning Magazine, London. For more information, visit www.racplus.com.

Publication date: 5/20/2013

U.S.-China climate deal called "breakthrough" but no long-term cuts yet

By Valerie Volcovici

       
WASHINGTON (Reuters) - China and the United States took a major step in the fight against climate change over the weekend, but what was termed a "breakthrough" might not do much in the longer term to lock in legally binding carbon emission cuts from the world's two biggest emitters of greenhouse gases.

Still, environmental groups and some U.S. and global policymakers said the agreement could give fresh momentum to the United Nations' arduous process of finalizing a global treaty to replace the Kyoto Protocol on climate change by 2015.

In their first talks, U.S. President Barack Obama and Chinese Premier Xi Jinping agreed to phase out production and consumption of the gases known as hydrofluorocarbons (HFCs), working under the U.N's 1987 Montreal Protocol.

Used mostly in air conditioners and refrigerators, ozone-harming HFCs make up roughly 2 percent of greenhouse gas emissions, but are rising at a rate of up to 9 percent annually.

The White House said a global phase-down could reduce the carbon dioxide equivalent of 90 billion tons by 2050, roughly two years worth of global greenhouse gas emissions.

"We see that as just the first step of a long and robust international climate agenda in the second term," Heather Zichal, deputy assistant to the president for energy and climate change said on Tuesday.

Analysts worry that the U.N. climate talks continue to be hampered by deep divisions between developed and developing countries over the responsibility for carbon emissions.

One official close to the negotiations said the agreement was a political breakthrough, but the road ahead to a global deal on climate change would still be long.

The official said the weekend agreement, which followed earlier talks between Secretary of State John Kerry and Xie Zenhua, a vice chairman in China's top economic development body, can inject a dose of optimism into the U.N. climate talks. But the deal represents a powerful example of what can be done when two major powers work together, the official added.

TALE OF TWO TREATIES
Experts have said addressing HFCs under the separate Montreal Protocol, regarded as a successful international treaty, can lead to major emissions reductions while negotiators hammer out parameters of a workable new climate treaty by 2015.

"This is the biggest, fastest, most effective climate mitigation that could happen in the near term," said Mark Roberts, international policy advisor of the Environmental Investigation Agency, a group involved in climate issues.

Unlike carbon dioxide, the most prevalent and longest-lasting greenhouse gas produced across many sectors of a country's economy, HFCs are short-lived and confined to just a handful of sectors, making them easier to tackle.

The Montreal Protocol also creates different timetables for rich and poor countries to phase out production of the gases and gives poor countries financial support to use alternatives. It has already phased out the use of 100 hazardous chemicals.

The United States, Mexico and Canada first proposed the phase-out of HFCs under the Montreal Protocol in 2009. At that point China, India and Brazil opposed the plan, arguing that HFCs should be addressed in U.N. climate negotiations.

Durwood Zaelke, founder of the Institute for Governance and Sustainable Development, said the constraints of U.N. climate talks have created the need for diplomatic moves outside of that process, such as the new U.S.-China agreement.

"This is the beginning of a movement to enlist more climate mitigation from parallel venues," he said, adding that such deals take some pressure away from U.N. climate talks and open the way for other solutions.

Zaelke pointed to negotiations within the International Maritime Organization and the International Civil Aviation Organization as examples of venues where shipping and aviation emissions can be addressed untethered from U.N. climate talks.

The HFC agreement is "rebuilding an urgent sense of optimism" in the multilateral process that can pave the way for agreements on other short-lived greenhouse gases, such as black carbon, the soot emitted from cook stoves and diesel engines, Zaelke said.

More of these kinds of agreements could be on the horizon, those familiar with climate negotiations have said.

A U.S.-China climate change working group formed in April is expected to come forward with a number of new proposals at the next U.S.-China Strategic and Economic Dialogue from July 8-12.
Diplomats will also gather in Bangkok on June 24 for a week of Montreal Protocol meetings and could start negotiations on an HFC phase-down at that point.

UPDATE 2-California carbon permits sell for record high price

Tue May 21, 2013 4:22pm EDT

(Adds details on market, quotes from consultant and broker)

By Rory Carroll
SAN FRANCISCO May 21 (Reuters) - California's largest greenhouse gas-emitting businesses paid $14 per metric tonne (1.1 tons) for the right to release carbon this year, a record-high price that narrowly beat market expectations, the state said on Tuesday.
The state sold all of the more than 14.5 million allowances it offered to cover carbon emissions in 2013 at its third permit auction on May 16.
Allowances that cover emissions in 2016, which were also for sale, saw lighter demand, with buyers snapping up 7.5 million of the more than 9.5 million permits that were offered.
Those allowances cleared at the program's auction floor price of $10.71 per tonne.
"The auction results show increased maturity from program participants and from the market and confirm the good health of the carbon market in California," said Emilie Mazzacurati, managing director of climate consultancy Four Twenty Seven.
Following the release of the results, California carbon allowances in the secondary market were trading at $14.50 a tonne in large volumes on the IntercontinentalExchange, one carbon broker said on Tuesday.
Had allowances cleared the auction at a price higher than $14 a tonne, market speculators would have been more inclined to buy allowances, he said.
"The market looks pretty flat," he said. "I don't see the results as having a dramatic impact either way."

REVENUE RAISED
The state's three auctions have so far raised $256 million for the state and $556 million for its largest utility companies, which are required to use the money to protect ratepayers from higher energy costs.
The state is currently drafting a spending plan for the revenue it takes in from the program, which is required by law to be spent on efforts to drive down the state's emissions of heat-trapping greenhouse gas emissions.
Last week, California Governor Jerry Brown announced that he would lend the $500 million the state expects to raise during the program's early years to help balance the state's budget under the condition that the money be paid back eventually with interest.

LAWSUITS
California's quarterly allowance auctions are not without controversy.
The auctions are currently the subject of two lawsuits, one by the California Chamber of Commerce, California's largest business group, and one by the Pacific Legal Foundation, a conservative legal group that filed the suit on behalf of a handful of affected California businesses and residents.
Both lawsuits argue that the California Air Resources Board, the program's regulator, is violating state law by raising revenue by selling permits. (Reporting By Rory Carroll; Editing by Peter Galloway, Bernard Orr)

Taking Stock of Climate Change Efforts: As European Carbon Market Falters, CA Expands Cap and Trade to Canada

Unlike many environmental problems, which can be addressed at a local or regional scale, climate change is inherently global in nature: greenhouse gas (“GHG”) emissions from any source join with historic and contemporary GHG emissions from other sources globally to contribute to the total store of GHGs in the atmosphere.  The global nature of the issue is a key reason why, from the onset of climate change efforts, policymakers and environmentalists have attempted to address GHG emissions at an international scale.

Failure of Kyoto Protocol Leaves Void in International Climate Change Efforts
The primary effort to address climate change at an international scale is the Kyoto Protocol, adopted in 1997 in connection with the United Nations Framework Convention on Climate Change.  Unfortunately, through the first “commitment period” (which ended in 2012), the Kyoto Protocol has not achieved expectations, as the two largest GHG emitting countries—China and the United States—never signed the Protocol.  The sense that the Kyoto Protocol will ultimately fail as a climate program was compounded by the inability of negotiators at the 2009 Copenhagen Summit to agree on a framework for climate change mitigation for the period following the end of the first commitment period in 2012.  Since Copenhagen, climate policymakers have looked for a regional model to lead the way to a new international climate framework.

European Trading System in Disarray
With the Kyoto Protocol faltering, hopes have been pinned on the European Union’s climate change program—the Emissions Trading Scheme (“ETS”).  These hopes are rapidly fading.  In the past few months, the ETS has experience significant growing pains, with the price of carbon allowances having dropped from about € 25 per ton in 2008 to below € 3 per ton in April.  Although reductions in GHG emissions in the EU are still on pace to meet the target of the Europe 2020 Strategy (20% lower than 1990 emissions), most analysts believe that carbon prices at this level are too low to spur investment.  The severe drop in carbon allowance prices has led many, including The Economist, to question whether the ETS has any future.

California Expanding its Cap and Trade Program to Canadian Province of Quebec
In the midst of Europe’s difficulties, California has moved forward to link its cap and trade system with that of the Canadian Province of Quebec.
On April 19, 2013, the California Air Resources Board (“CARB”) approved a plan to formally link with Quebec beginning on January 1, 2014.  Linkage will create a relatively seamless cap and trade market, with compliance instruments—carbon allowances and offset credits—being interchangeable in the two systems.  California and Quebec will also hold joint auctions of carbon allowances.
The linkage of the California and Quebec cap and trade systems is a modest first step towards a robust North American cap and trade system.  Although Quebec is Canada’s largest province by size and has a population of about eight million people (second only to Ontario among provinces), its economy is not nearly as large as that of California: Quebec has a GDP of about $300 billion compared to California’s GDP of about $1.9 trillion.  About 80 entities (referred to as “establishments” in Quebec’s program) are subject to Quebec’s cap and trade regulations.  In comparison, California’s cap and trade program covers about 350 entities representing 600 facilities.  Also, Quebec’s allowable GHG emissions are substantially lower than those of California: Quebec’s cap starts at about 23.2 million tons of GHG emissions (CO₂e) in 2013 and ends at about 54.7 million tons in 2020, while California’s cap starts at about 162 million tons of GHG emissions (CO₂e) in 2013 and ends at about 334 million tons in 2020.  (Note that the increase reflects the addition of transportation fuels and natural gas in 2015; over time, the cap will go down — become more stringent —for all covered sectors.)

Testing the New Model
CARB recognizes that a key aspect of linkage with Quebec is that it may establish a new template for climate change efforts globally.  As stated by CARB in its response to comments: “[T]he experience gained now in demonstrating that two separate governments, in two separate countries, with two separate economies, can effectively partner to put a price on carbon and reduce greenhouse gas emissions is invaluable to accelerating national and international efforts to address climate change.”
However, California’s cap and trade program is less than a year old and already several lawsuits have been filed challenging various aspects of the program.  So the jury is still out as to whether California’s program will succeed.  Moreover, the addition of Quebec will make the cap and trade program more complicated (and mistake prone) without offering a meaningful test run that could be expected of a larger, more complex regional program.
Nonetheless, given the problems with the Kyoto Protocol and the ETS, the need for a successful model is certainly there, and California and Quebec may be the start of such a model.  In the interim, California and Quebec will undoubtedly have to iron out a number of issues (ranging from the integrity of offsets to the logistics of operating a linked market in two languages).
In the event that the California-Quebec market sets the tone for a revamped European system or a new Kyoto, monitoring the developments of the North American effort will be a key task for businesses and governments (not only within California and Quebec, but in other states and provinces as well), as they may be incorporated into the system at some point in the future.

Gov. Brown wants to grab $500 million in cap-and-trade proceeds for general fund

 

Molly Peterson | May 15th, 2013, 10:22am

David McNew/Getty Images

California's carbon-credit market has raised $500 million in revenue, which Governor Brown wants to borrow to balance general fund expenses.

Gov. Jerry Brown plans to borrow $500 million from a program to fight climate change, as part of his effort to balance the budget - a move that has stirred up clean air advocates.

California has begun auctioning off carbon emission permits as part of its cap-and-trade program. They're basically licenses to pollute that businesses can buy to offset their emissions. The money -- $500 million collected so far -- goes into the Greenhouse Gas Reduction Fund.

Brown wants to use that money to cover the state's general fund expenses, and pay it back later, with interest. He argues that it's okay to borrow the money because greenhouse gas reduction programs are just getting off the ground.

The Sierra Club, the Greenlining Institute and other environmental groups say the permit fees can only be spent on programs that reduce greenhouse gases.

They argue that some of the money the governor wants to borrow was going to fund clean air programs in low-income and minority neighborhoods near refineries and other sources of pollution.

The governor did sign a law last year meant to protect carbon fees from being diverted for general fund use. But SB 535 doesn't stop him from borrowing the money.

California Considering 25 Projects for Carbon Offset Credits

 

By Lynn Doan - Mar 8, 2013 6:27 PM ET

             

California, the second-largest carbon-polluting state in the U.S. behind Texas, will decide whether to award its first carbon offset credits for 25 projects designed to cut greenhouse-gas emissions.
The candidates for offset credits include a project to improve forest management practices to avoid emissions related to timber harvesting and several to destroy biogas at farms, according to a list posted on the state Air Resources Board’s website. All of the projects must be reviewed by a certified “offset verifier” and then by the air board itself before being deemed eligible.
Should all of the projects be approved, they’ll generate as many as 3 million offset credits to be used under California’s carbon cap-and-trade program, the only system of its kind in the U.S. and the second-largest in the world, behind the European Union’s program. The state defeated a lawsuit in January that claimed the offsets, which companies can use to cover as much as 8 percent of their emissions, aren’t new efforts to cut carbon and would occur without investments.
The projects listed by the air board today will be held to “rigorous verification standards,” Mary D. Nichols, the agency’s chairman, said in a statement posted on its website. “We have determined that every single California offset credit allowed into the program represents a real ton of greenhouse gas reductions.”

Contracts Rising

Contracts based on California offset credits, each allowing the release of one metric ton of carbon, have risen 25 cents, or 2.1 percent, in the past month, according to data compiled by environmental broker Evolution Markets based in White Plains, New York. “Golden” offsets, which come with a seller guarantee to replace any invalidated credits, were unchanged at $12 a ton today, according to Evolution.
The projects would be awarded “early action” credits, which the state agreed to consider to generate an initial supply of offsets for the market. To be eligible, they must cut emissions in the U.S. between 2005 and 2014 and be listed in a preexisting registry designed to meet the state’s early action criteria, among other things.
Emissions-reduction projects that begin in 2015 and beyond must meet a different set of state standards.

Carbon Allowances

Under the cap-and-trade program, California established a pool of carbon allowances, each permitting the release of one metric ton of carbon. That pool is designed to shrink through 2020 to cut statewide emissions by roughly 15 percent. Companies over their emissions limits can buy allowances from those below the cap, as well as a limited number of offset credits, to meet their compliance obligations.
Futures based on 2013 California carbon allowances, which also allow for the release of one metric ton of carbon each, climbed 5 cents to settle at $14.55 a ton today, according to Atlanta-based IntercontinentalExchange Inc. (ICE)
California’s cap-and-trade system will eventually regulate 85 percent of greenhouse-gas emissions released in the state and cover all industries, including power generation, oil refining and transportation. A similar program in the U.S. Northeast, known as the Regional Greenhouse Gas Initiative, regulates emissions from power plants only.

Europe Glut

In Europe, an oversupply of offset credits has added to pressure on European Union carbon futures, already trading 49 percent below a year ago because of a glut of allowances due to the recession.
Kathrin Goretzki, an analyst at Unicredit Bank AG in Munich, estimated Jan. 29 that the EU market may have been oversupplied by much as 1.6 billion metric tons of permits by the end of 2012.
The United Nations Clean Development Mechanism has approved 6,619 offset projects in developing countries, more than half of which are in China, according to the UN’s website. More than 2,000 of these projects have supplied 1.26 billion tons of “Certified Emission Reduction” offsets for emissions-trading systems participating in the Kyoto Protocol, UN data compiled by Bloomberg show.
California’s air resources board may take “several weeks” to issue its first offset credits, according to the agency’s statement.
To contact the reporter on this story: Lynn Doan in San Francisco at ldoan6@bloomberg.net

Canadian Cap-And-Trade Program

http://www.arb.ca.gov/cc/capandtrade/capandtrade.htm