by: Larry Butz
“There is a 90 percent chance the planet's average temperatures will rise 3 to 9 F (1.7 to 4.9 C) by 2100.” This simple statement in the June 2001 report released by National Center for Atmospheric Research in Boulder, Colorado leaves little doubt of the magnitude of the threat from global warming. The UN Environment Program estimates that the extra economic costs of disasters attributable to global warming are running at more than $300 billion annually.
The global community is responding with actions lead by the Kyoto Protocol, which aims to reduce emissions of global warming gases. Nearly 90% of global warming gas emissions are CO2, which are primarily from the use of fossil fuels for energy. The focus on energy will undoubtedly continue to increase. Throughout the world different methods are being used to encourage reduced energy use. Japan has enacted the Energy Conservation Law in 1999. The U.S. has revised ASHRAE Standard 90.1 to raise the minimum COP level for centrifugal chillers from the current value of 5.2 to 6.1 effective in October of this year. A growing number of countries are using environmental costing which includes an estimated cost for resource depletion and environmental deterioration.
Although such fees to discourage pollution were first proposed in 1920 they did not see widespread application until 1990 when Finland implemented the first carbon tax.
At present there are more than 30 countries that have some type of carbon tax in effect.
Environmental accounting (or costing) is a broader term than just a carbon tax on energy. For example, subsidies being provided to energy producing industries are a form of negative tax. Removal of such subsidies has the same effect as a carbon tax, which is to raise the price of energy to the user. Such methods make more energy efficient alternatives more financially attractive.
In the recently released "OECD Environmental Strategy for the First Decade of the 21st Century" the goal is to include “cuts to energy, farm and other subsidies so prices more accurately reflect environmental impacts”. China, the U.K., India, Indonesia and Thailand are countries that have recently eliminated subsidies to parts of their energy industries.
Will environmental costing continue to spread? Environmental costing is an estimated cost for resource depletion and environmental deterioration. One can only guess. It is intuitively attractive to tax something bad, i.e. environmental damage rather than something good such as one’s salary or company’s profits.
As a building owner, facility engineer or factory manager the implications are enormous. Just how much could energy prices change? According to European Research Commission Report released in July of this year “The cost of producing electricity from coal or oil would double if costs such as damage to the environment and health were taken into account”.
Coal subsidies in China have been more than halved since 1984, and nearly 1 million coal-mining jobs have been eliminated over the past five years as a result of far-reaching coal reduction initiatives. In 1999 alone, total coal use in China dropped 4.4%. Petroleum subsidies fell from 55% in 1990 to 2% in 1995. Source: EIA April 2001.
Any significant change in the price of energy can have a major impact on the profitability and value of a building or factory. One can protect their interests by investing in the highest possible efficiency that is economically justifiable.
In the past energy efficiency improvements in the U.S. have had a median payback of only 1.9 years meaning that IRR’s of up to 70% were not being selected. This is now changing. In addition to the economic attractiveness of high efficiency there are environmental gains through reduced emissions of carbon dioxide and other power plant emissions that are harmful to the environment.
The move to high efficiency equipment is accelerating. And at the same time, there is increasing emphasis in system design and optimization. Low flow/high delta T systems are offering energy savings in operating costs and first cost through smaller pipe diameters and pump sizes.
The focus on high efficiency HVAC equipment and systems will continue to increase as additional emphasis is being placed on the environmental costs associated with energy use.
About The Author
Larry Butz is a business globalization and energy efficiency expert for GEA Consulting. GEA Consulting is a global resource dedicated to developing practical solutions that drive client revenue, efficiency, and operational productivity. GEA Consulting can be found online at http://www.gea-consulting.com
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