Technology and the Environment DD's Eco Notes

It appears that the Obama administration is getting closer and closer to implementing some sort of GHG cap and trade system, since the WSJ and others are reporting that the proposed budget is counting on revenues from the sale of allowances.

You may read these articles and see numbers in the 10's or 100's of billions of dollars thrown around, and you may wonder "what is this really going to mean for me?". Let's do some math and find out.

We'll start with the impact of driving a car, which is pretty straightforward. Independent of your vehicle, driving style, etc, gasoline generates just shy of 20 pounds of CO2e per gallon. With around 2200 pounds in a metric ton, that means there's about 110 gallons per ton of CO2e. With carbon at $20 as suggested in the article, if the cost of carbon is passed straight to the consumer (more on this below), then added cost per gallon from the carbon cost is $0.18. This is an interesting number for those of us here in Massachusetts, since its close to the $0.19 increase in state gas taxes that the Governor is considering, and would put the total "tax" on gas in Mass at $0.60/gallon.

At $2.00/gallon, the $0.18 is just shy of 10% "tax". Based on this result you can see that a $40 price of carbon would be a tax of $0.36, and a $10 price at $0.09. Note again that these results hold anywhere in the US.

Next we'll look at the effect on your electricity bill. This isn't quite so simple, since the CO2e varies by location, as well as the cost of electricity. Let's look at Massachusetts as an example, and we'll use the EPA eGrid data, along with the local cost of electricity as reported by the EIA. Using the file eGRID2007V1_1_year05_SummaryTables.pdf from the eGrid site, we find that the output emission rate for GHG for the New England region is 1350 pounds per MWh, or 1.35 lbs/kWH (about average for the US). With 2200 lbs/ton, this results in about 1630 kWH/ton of CO2e. At $20/ton, this is about $0.012 per kWH.

On the price side we'll use the residential cost in Massachusetts, which is $0.177/kWH (in the top 5 highest rates nationwide, btw). With the high price of electricity and the low GHG emissions, this is only bumped up by 6.8% or so to $0.189. Again, $40/ton is twice this, and $10/ton is half this if you want to see a couple of other simple points on the curve.

As a quick comparison, at $20/ton Colorado works out to a $0.018/kWH hike on an average rate of $.099/kWH for an increase of 18%.

Now remember that all of this assumes that the price difference passed on to the consumer is exactly the price that the utilities or refiners pay for the allowances. It's hard to believe we'd pay less, and likely more. In Germany it was reported by the WSJ in 2006 that the consumer prices rose much higher than the allowance costs (full article by subscription only, unfortunately).

Today Sun took an important step forward in transparency and reporting by posting an update to our 2008 CSR Report. We've posted this mid-year update for two reasons:

1. We want to make sure we were holding ourselves accountable throughout the (reporting) year - not just during the report process at the end of the year. Over the long term we would like to move toward a reporting model where we publish timely data throughout the year rather than just once a year in a neatly packaged report. By definition, some of the data is stale by then.
2. We're trying to sharpen our internal processes around data collection and progress measurement. With some of the CSR reporting being new in the company, if you only do it once a year its easy to talk yourself into not automating the collection and reporting process. We think in the end we can report some data more often AND at lower cost.

As far as our performance to date, I think it's fair to say we are about where we expected to be at this point in our fiscal year. There is some important data missing, data we couldn't easily uncover in time to publish a relevant update (proving the point that we have some work to do). But overall, we feel good that we are on track to meet the commitments we set for ourselves, and in some cases, surpass them.

I encourage you to read about our progress and give us your feedback by using the comments feature within the report. Providing a mid-year report and accepting in-line comments are two of the innovative features that Marcy Lynn, our CSR Director has come up with to make the report more useful and impactful - let us know what you think.