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Intensity
An Effective Approach to Regulate Greenhouse Gas Emissions
Peter K Krahn PEng The debate in Climate Change has generated a policy war between proponents of hard caps versus those who favour intensity unit approaches to regulating discharges of greenhouse gases. Those against intensity units frequently argue that this approach will result in continual increases in carbon dioxide (CO2) output, however there is insufficient substantive evidence to support this position.
The legal mechanism of regulating industry by intensity units actually presents a proven, reliable, efficient and highly cost-effective method that can be applied to improve air quality and reduce greenhouse gases that can be verified by regulatory agencies. Intensity units are far more likely to also help reduce local pollution and improve general health and help lower health care costs at a quicker rate than CO 2 trading schemes. Ultimately, the proper setting of intensity units will result in an effective cap on pollution. Effective government enforcement programs utilizing intensity units as part of their regulatory arsenal can achieve 60% to 90% reductions in pollution from targeted industries in six to seven years. Any government that ignores the significant benefits of implementing intensity unit based regulations risks losing a tremendous opportunity to reduce CO 2 emissions and improve the quality of the environment and protection of human life and health. and intensity-based regulations. Concentration-based regulations usually limit the maximum concentration of deleterious material that can be in a discharge; the greater the volume or concentration, the more deleterious material that is discharged. Intensity unit regulations allow a limited quantity of pollution to be discharged for every unit of product produced; the more units produced, the more pollutant that is discharged.

A Short History Lesson

In Canada, one of the oldest, best known and most durable pieces of legislation has been the Federal Fisheries Act, first promulgated in 1868. The basic anti-pollution section (now Section 36.3) is essentially a zero discharge statute. Paraphrased, it reads no person shall deposit a deleterious substance into a place where it may enter or does enter waters frequented by fish. This means that absolutely no deleterious material can be discharged into our streams, lakes, rivers and oceans. There are then two basic concepts by which these quantities are limited: concentration-based

A Canadian Example of the Success of Intensity Units

In Canada, both approaches have been highly effective in achieving over 99% reduction from polluting industries in very short periods of time, usually six to seven years. Some of the best-documented cases are in the forest sector, particularly

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Units:
pulp and paper production and wood preservatives. In the late 1980s and early 1990s, Canadian pulp and paper mills came under heavy public and government scrutiny for their harmful liquid effluent discharges. After considerable technical and public debate, these chemicals were regulated both by concentration-based and intensity unit approaches. Through the Canadian Environmental Protection Act, the concentration-based approach was applied to chemicals called dioxins and furans, which accumulated in fat tissue of shellfish and other organisms. Strict ultra low concentration limits required that new technology be installed that virtually eliminated these chemicals from the process. The new regulations required on average $20,000,000 per mill to remove what was in total no more than a sugar cubes worth of dioxins and furans from millions of litres of daily liquid eff luent discharge. Figure 1 shows a remarkable decline of over 99% improvement within a span of about six years. The intensity-based approach was applied to the same mills to deal with the bio-chemical oxygen demand (BOD) and the total suspended solids (TSS). BOD would deplete oxygen from the water, killing off fish, and the TSS would smother the bottoms of oceans and rivers, killing off shellfish and bottom-dwelling organisms. Biochemical oxygen demand intensity was limited to 5 kg of BOD per tonne of pulp produced. Total suspended solids intensity was limited to 7.5 kg of TSS per tonne of pulp produced. The graph below shows a similar 95% reduction for BOD in roughly the same six-year time frame as occurred with the dioxins and furans. TSS, which was already closer to the regulated limit, showed a 50% reduction in the same time period. Figure 2 illustrates that the intensity-based approach also produced a highly effective result. At one location in Port Alberni, BC, nationally applicable intensity units could still potentially produce harmful effects, therefore at this location, intensity units were lowered indicating the flexibility of this approach to deal with site-specific issues.
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Fig. 1: Comparison of TCDD Loadings Between Fraser Basin Mills and all BC Mills from January 1987 to January 1997 Start Enforcement Negotiation
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Why would Intensity Units Work Well in the Greenhouse Gas Global Warming Regulatory Debate?
To determine this, one needs to look at the characteristics of regulatee behavior and the public and governments ability to modify that behavior through both punitive and reward or carrot and stick policies. The fi rst principle to recognize is that any population group including an industrial sector has at least three basic behavioral sub-groups which can be labeled A Group, B Group and F Group. The A Group characteristics consist of management teams that are leaders, innovators and investors. They are oft en socially conscious and recognize that pollution is a result of poor efficiency and wasted resources, which results in higher costs and lower profits. They also lead both government and their own industries in the development of more efficient and lower polluting processes and technologies. Th ey

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can often be found lobbying government to implement stricter controls in order to level the economic playing field. If government wants to develop a regulation, it is usually the A Group that provides the technical and legal basis for development of a regulation. Th is group is usually less than 10% of the members of the overall industrial sector but generally belong to an industry association that looks out for the general interests of their membership. B Group members are characteristically followers who will do what is necessary and are moderate to

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Fig. 3: Three Basic Behavioural Groups

F Group
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B Group
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A Group
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- Obstruct - Delay - Resist - Need - Heavy

- Followers - Will do whats necessary - Moderate polluters - Moved by Regulations

regulations Polluters

- Leaders - Innovators - Investors - Low Polluters - Dont need

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high polluters. They are moved by regulation and characteristically form 75% to 80% of an industrial sector and most will join an industry membership association. F Group members are on the far side of the scale and when dealing with regulators are typically obstructive and will delay or resist changes. They are often the heaviest polluters and need regulatory enforcement to effect change in behavior. As a group they form less than 10% of the population group with to 1% needing to be prosecuted to change their behavior.

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Population Bell Curve

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Fig. 4: Combined Data for 5 Pulp and Paper Mills in BC owned by one Corporation
Total Green House Gas Output tonnes of CO2 600 (equivalent / year) Intensity Units for Pulp & Paper kg of CO2 / tonnes of Pulp

How do the A Group, Intensity Units and Carbon Trading Impact the Regulatory Agenda and Economic Playing Field?
The following is a classic example of A Group behavior. The two graphs on Figure 4 reflect the total greenhouse gas output and intensity units claimed by a group of five mills in British Columbia that use wood and/ or recycle paper to produce pulp and raw paper. In the 1990s this groups management team decided on a comprehensive program to reduce the dependency on fossil fuels and significantly reduce unnecessary losses, which wasted energy and therefore produced excessive greenhouse gases and increased production costs. Programs such as replacing fossil fuel with recovered wood waste produced big changes but also important was a program of looking for small incremental efficiency factors such as repairing compressed air leaks. Elimination of the leaks reduced compressor operation, equipment wear, greenhouse gas production and operating costs. Utilizing both large and small-scale changes from 1990 to 2000, the program reduced the total hydrocarbon based greenhouse gas output by up to a million tonnes per year over the starting year. Over the same period, the intensity units dropped from 600 kilograms of CO 2 per tonne of pulp to about 200 kg of CO2 per tonne. Th is 66% decline in intensity unit was achieved by a focused

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Total Carbon Credits Available to this Company = 11,580,000 tonnes CO2 (eq)

Fig. 5: Estimate of Total Greenhouse Gas Output, Tonnes of CO2 (equivalent / year)

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management decision in the absence of any regulatory requirement. These two graphs show typical and important features. The graph on the left shows that significant reductions in CO 2 of over 66% can be achieved within a period of less than 10 years. In this case, the majority of reduction occurred in seven years. What is equally important is that the rate of reduction hit a significant plateau with virtually no reductions after a 66% decline had been achieved. The graph on the right is an identical trend but expressed as a reduction in intensity units, which shows very little change can be achieved after the 66% decline. Th is graph is important in that it represents the combined reduction from five mills that have varying pulp and paper making processes including recycled paper. Th is gives a reasonable indication that the industry as a whole, could likely achieve a 66% reduction in CO2 emissions. Th is is an important estimate in performance and would suggest that a regulation specifying a 200 kg CO 2 per tonne of pulp intensity unit would likely be possible, and that setting such a limit could reasonably be achieved in seven to 10 years.

assumptions, the previous industry examples suggest a significantly different outcome. When these industries were required either by law or by management decision to implement best management practices they achieved 66% to 99% reduction in CO 2 or other pollutant discharges. What critics of intensity unit based regulation fail to recognize is that it would have required a 66% to 99% increase in production to generate the same quantity of pollutants as were produced before the improvements were made, let alone exceed those levels. While industrialists in developed countries would likely relish the thought of such high percentage increases in market demand, these are unlikely to occur given their stable to declining population trends.

What About Cap and Trade Markets?

Under current Canadian federal regulatory proposals, a company that made the early improvements and reduced its emissions would likely suffer significant financial penalties for showing early environmental stewardship. This is because currently proposed federal regulations would allow a maximum of only 15,000,000 tonnes of CO 2 early credits for all companies in all industry sectors in Canada combined. It would be further detrimental in that only 5,000,000 tonnes per year would be allowed to be claimed and examination of the following case example chart (Figure 5) shows why. The proposed Canadian federal regulations would set 2006 as the base year by which to calculate reductions in CO2 . The data on the right is the annual amount of tonnes of CO 2 avoided by making the improvements

Wont Intensity Units Simply Allow Emissions to Increase as Production Increases?

Critics claim that intensity units will simply allow emissions to increase with increased production but rarely if ever provide any substantive evidence to their position. Their claims suggest indefinite increases in production and pollution without seeming to consider the market forces at play. In contrast to these

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to the five A Group mills. The chart shows that since 1990 these five mills had accumulated over 11,500,000 tonnes of CO 2 reductions and would be hard pressed to achieve significant reductions if the base year is the year 2000 or later. A further disincentive to making improvements is that these five mills would have to compete for a split of the annual allotment of 5,000,000 tonnes with all other facilities in Canada. Whereas other B Group and F Group mills that have continued to discharge CO 2 at much greater levels during the previous 16 years would stand to gain large CO 2 credit balances by making changes after the year 2006 and showing significant reductions after that date. providing the local population the greatest possible protection. The British Columbia pulp and paper industry is a well-documented example wherein 1,000 square kilometers of ocean was re-opened to shellfish harvesting several years after the rigorous liquid eff luent standards were imposed. Had these mills been able to purchase pollution credits these areas might still be closed, or at best, have remained closed for years longer, depriving the local community of the benefits of the ocean resources. The cost of carbon credit trading systems should therefore include an additional factor to account for health costs. Regulatory actions related to intensity units are much simpler and therefore, likely to be much less costly to enforce. The parameters needed for the intensity unit can be calculated from data that is already available, is easy to collect and easy for the local regulator to verify. A local inspector can readily verify any fuel consumption and production records and the greenhouse gas output can be calculated using combustion equations that are well established. This makes it cost-effective for the regulator to verify performance and, if necessary, respond to violations in a local jurisdiction over which it has legal authority. The key to achieving actual reductions in pollution, including greenhouse gases is to have an effective legislative basis that allows a regulating agency the ability to verify results. Intensity units are an effective tool for measuring performance in reducing pollution and ensuring that the public interest is protected. Carbon trading schemes can follow as a secondary approach, as the country that implements the lowest intensity units will enjoy the greatest benefit to human life and health, and have the largest balance of credits to trade. One unknown factor remains will the growing corporate popularity of environmental issues cause the industry compliance behavior curve to shift naturally to the right, resulting in more A Group members? Or, will significant enforcement effort be required to promote such a shift? History suggests that strong enforcement measures will still be required. Peter Krahn PEng is a chemical/environmental engineer with over 24 years experience in toxic chemicals management and regulatory development. He has researched, designed and implemented numerous provincial and national environmental enforcement programs and provided both material and expert witness testimony in provincial and supreme courts and before the National Parliamentary Standing Committee on Environment. v

Intensity Units are far More Likely to Protect Local Health than Carbon Trading
Pollutants, particularly the discharge of small particles and ground level ozone are at their highest concentrations closest to the source and therefore have the highest impact on local populations, be they plant, animal or human. Properly set intensity units require that a facility reduce its emissions to the lowest level technically possible, therefore

Intensity Units Related to Greenhouse Gases are Much Easier and Costeffective to Enforce
The other issues that are rarely if ever discussed in the intensity unit versus cap and trade debate is the cost to enforce and the reliability to validate. These are perhaps the most important of all issues to examine. The parameters for a traded unit usually involve up to five parties in the transaction. The first is the seller, which in our example would be one of the five mills, usually selling to a broker (which in the case of the European emission trading market is frequently a bank). The broker has to register with a third party, the regulator, and then sell to a fourth party (usually another broker who then issues the credit to the fifth party, the purchaser. It is far more complex for the regulator to first verify that the seller has actually created credits and confirm that all the transactions between the multiple parties occur. Prosecution for fraudulent transactions will most likely be extremely complex as the regulator in the jurisdiction of the seller will most likely have little or no legal jurisdiction in the country of the purchaser.

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