The 5th Edge Debate: 22nd April 1998

Building Services in the Greenhouse Spotlight

David Fisk ScD MA PhD FCIBSE, Chief Scientist, DETR

1. Introduction

It is a great pleasure to give this lecture. Speakers should always be circumspect on these occasions. Speakers on subsequent anniversaries have an uncomfortable habit of looking back and quoting what was said. A hundred years from now, many concerns that fill the building services journals will look hopelessly quaint. But I doubt that the issue of man made climate change will be in that category. A hundred years from now, speakers many even identify last year's Kyoto Conference of Parties to the Framework Convention on Climate Change as a turning point. I therefore make no apology for focusing on what was agreed at Kyoto. The Government will be consulting in due course on the UK's own greenhouse gas commitments arising from that meeting. Without intending to prejudice that consultation, this evening I will look at some of the new challenges that may face building services world wide.

2. State of the Planet

I will begin with a few words first on behalf of our sponsor, poor old planet Earth. The Kyoto meeting buried the extreme scepticism about man made climate change that has marred earlier diplomatic meetings. Because greenhouse gases accumulate in the atmosphere, manmade climate change is a problem that gets worse with time. It is therefore not surprising that consensus seems to grow with each conference just as the evidence of harm grows. Even since first diplomats first began wrestling with text in the 1980's, the concentration of carbon dioxide has risen from just over 240ppm to just over 360ppm. Central to past controversy has been the reliability of large computer simulations of the climate. These simulations of climate change have now improved so much that they can explain most of the changes in climate since the 1800's. They are of course cousins of the simulation techniques used in building services in advanced air movement and fire propagation studies. They cannot be any better than the data fed in, and no engineer would be happy unless their predictions were being continually checked against experience. But being honest about the models had, up to the Kyoto Conference, empowered a raft of sceptical criticism that undermined public confidence that anything needed to be done. It is a dangerous world where we ignore scepticism. But it is an equally dangerous world where other interests seek to over amplify the significance of individual areas of science in need clarification. Perhaps some still find it difficult to believe that something as physically small as a human being, can, as a global society, affect something as physically large as the global weather system. Unfortunately, if we hope to move to a world of 10 billion people living in reasonable conditions, climate will not be the only global process where the human race becomes the dominant force.

3. Conventions and Protocols

If the Kyoto was a turning point in the credibility of manmade climate change, it was an even greater turning point in the approach of the international community to addressing the issue. I am going to devote the rest of this presentation to what differences in approach are. My thesis is that they could represent a very different set of incentives to building services design and operation world wide.

3.1 The 1992 Framework Convention

In 1992 the international community signed a suite of Conventions at the Rio Conference. One of these was the Framework Convention on Climate Change. This placed general commitments on all countries to tackle their emissions of greenhouse gases. It also placed two specific commitments on developed countries. The first was to put in place policies and measures with the aim of bringing down greenhouse gas emission to their 1990 levels by 2000. The second was to provide financial assistance to developing countries to meet their general commitments.

3.2 Out turn Performance

Despite what if often said, most countries did what the Convention required. They submitted national plans, along with projections for emissions, that aimed at reaching 1990 levels by 2000. For some countries those measure were more than sufficient to deliver the aim. This applied to the UK and Germany for example. The East European and Russian economies will also approach 2000 with emissions below their 2000 levels. Overall the European Union is likely to just squeeze by. Unfortunately, many of developed countries will not have reached this level by 2000. For example the US looks likely to overshoot by more than 10%. As the World Resources Institute has recently pointed out, the performance of developing countries, who only had general commitments, was rather more significant. Energy market reform, and the opening up of markets to private sector finance and technology, had shown considerable improvement in their emissions per unit GNP.

3.3 Improving Performance

There are a number of reasons why the performance of many developed countries had been so disappointing. Some reflect differences of view between Federal and State Governments on how measures might be implemented. Even the European Union failed to agree whether it should harmonise a carbon tax across its member states. This was not altogether surprising since it had not agreed to remove energy subsidies first! In other cases, Governments had put in place their national plan's measures, but other events and other policies outside the national plan nullified their impact. For this reason Parties to the Convention agreed in 1996 that the next step in the Convention's evolution had to be one which introduced legally binding objectives.

3.4 Protocol and Entry Into Force

In the terminology of international law, a 'protocol' is a legal instrument attached to a convention that elaborates one or more of the commitments in the convention. Thus, the original Vienna Convention to protect the Stratospheric Ozone Layer contained only general commitments. But it has attached to it the Montreal Protocol. This has since produced all the reduction targets, that the building services industry in some parts of the world seem to have some difficulty meeting. In December of last year, the Parties to the Framework Convention on Climate Change agreed to adopt a text of a new protocol. This would, for the first time, introduce binding commitments. Adoption simply means that a text is now open for signature by Parties to the Convention. Signature in turn implies that a State will proceed to take the text through its own legislative machinery, and in the mean while will not behave contrary to its spirit. Once the domestic legislative process is complete, a country is able to ratify the convention. The protocol text defines the number of ratifications that are necessary before the protocol enters into force. It requires at least 55 ratifications, which have to include at least 55% of developed country emissions before it comes into force. So it cannot come into force if major emitters do not ratify the Protocol. Present expectations are that it will come into force somewhere about 2000. As anyone reading the text will see there is still plenty of work to be done between now and then.

4. Kyoto Protocol

It was only after some of the most difficult negotiations in the history of international environmental politics that agreement was reached. The reduction figures are remarkable. The average over all developed countries is in the region of 5% below 1990 levels by 2000. This is achievable only because the Protocol permits a number of flexibilities. Some simply allow commitments to be carried out with a similar resultant environmental effect. But the most revolutionary are those that permit a nation to meet some part of its commitments abroad.

4.1 Six Gas Basket and 'Sinks'

It was finally agreed at Kyoto that commitments could be expressed as the sum of all greenhouse gases and need not apply to gases individually. To carbon dioxide are to be added, methane, nitrous oxide, and the 'F' gases: SF6, PFC's, HFC's. The current equivalence factors on a per unit weight basis are

Greenhouse Gas Global Warming

CO2 1

CH4 21

N2O 310

SF6 23900

PF4 6500

HFC's 140-11700

In the past there has been much heartache in building services about how to handle commitments on HFCs. Now that HFCs are included in the total basket of gases, there should be a more straightforward approach to controlling their release to the atmosphere in future.

4.1.1 'Sinks'

Consistent with the logic of giving the Protocol comprehensive coverage, it now includes some contribution from forestry and land clearance. Forestry can be a means of absorbing carbon dioxide from the atmosphere. Deforestation and land clearance can be means of releasing natural carbon into the atmosphere. There are difficult problems in resolving exactly how to count these contributions correctly.

4.2 Budget Period

A second flexibility is that the target is expressed as the total national emissions over a period 2008 to 2012. This should enable some averaging out of unusual factors like freak weather conditions that can affect emissions without any long-terms implications for global climate change. As in the Convention we measure the commitments on the major three gases against 1990 levels. However for the 'F' gases Parties to the Protocol can opt for the baseline date of 1995 if they wish/

4.3 Main Commitments

The main commitments are expressed as percentage reductions for each developed country. This differentiation between countries is the third new flexibility. During the negotiations a number of countries offered formulae by which a total carbon target could be shared out among developed countries. The only element in common between these proposals was that the proposer came up with the lowest contribution. In truth the numbers finally negotiated for different countries reflect the result of straight hard bargaining. The table below summarises some of the key country commitments

Country Change on 1990

EU* -8%

US -7%

Japan -6%

Poland -6%

Russia -0%

Australia =8%

Total ~-5%

*to be allocated in the EU

These targets are legally binding.

4.4 Meeting Commitments Abroad

The most novel feature of the Protocol is the flexibilities it provides to meet the national legally binding commitments abroad. These include two forms, the clean development mechanism and international permit trading which have never been tried before in international conventions. It also includes joint implementation of projects, which were allowed under the earlier Convention but only in a pilot phase.

4.4.1 Bubbles

In some environmental conventions, the environmental benefit only arises from reducing the total emissions to the atmosphere. Under these circumstances it makes no difference to the environment if two or more countries chose to reconfigure their commitments between them and implement their commitments jointly. We sometimes call this a 'bubble'. The EU Member States will be allocating their ?8%' among themselves at the June European Environment Council, based on a provisional agreement reached last March and taking into account the new baseline introduced by six gases and 'sinks'.

4.4.2 Joint Implementation

A second external flexibility enables one Annex B country to take a credit for the reduction from a project taking place in another Annex B country, by mutual agreement. These are called 'jointly implemented projects'. Proponents have often canvassed this idea in the context of projects between developed and developing countries. The Protocol was not able to agree to this broaden scope, and the idea is currently limited to projects between developed countries.

4.4.3 Clean Developing Mechanism

The Clean Development Mechanism originated with an idea proposed by Brazil. Essentially it is a mechanism to fund projects in developing countries that result in reductions in emissions. The unusual aspect is that credits for the abatement can begin as early as 2000.

4.4.4 Trading

Finally the Protocol envisages the ability of developed countries to be able to trade greenhouse gas emissions between themselves. That is to say a country that is doing better than its target can offer for sale any surplus to countries who are in difficulty in meeting their own target.

4.4.5 Buenos Aires Meeting

While the Kyoto meeting set out an ambitious and imaginative agenda to tackle global climate change, much of the detail needed to turn this into law remains to be negotiated. This will be the work programme of the Buenos Aires meeting of the convention in November . It seems unlikely that all these issues will be resolved by then. Deriving workable rules on sinks for example will require some very detailed work in the Intergovernmental Panel on Climate Change. However, we do hope to see some progress particularly on fleshing out the rules for trading.

5. Trading and Permits

Much of this fascinating detail may seem a little remote to building services engineering. A healthy 20% national reduction in CO2 emissions is much easier to understand in terms of new complicated designs and exciting debates about Part L of the Building Regulations. The UK's own target will be with you soon enough. I wish to argue here is that these new flexibilities I have described offer all kinds of threats and opportunities to building services world wide, that, before Kyoto, had hardly had a mention. The leading contender among threats and opportunities is emissions trading.

5.1 US Experience With Permits

The US was the main proponent of the trading flexibility. What did it see as its advantage? US experience was based on the use of permit trading in domestic legislation. This included the Clean Air Act and the Clean Fuels Act. The Clean Air Act allocated permits for sulphur emissions to companies, but they were allowed to trade their allocations on the open market. While the opening price for sulphur permits was at the level that opposition to the Clean Air Act had predicted, the price rapidly fell. It has continued to fall with time. This appears to be for two reasons. First projects whose cost per ton abated was less than the market price of an emissions permit became economic as they freed up permits for the firm to sell. This is the classic economic arguments for a permit trading system. But also other companies began to ask question, was he cost of intra-firm abatement really so high that they needed to buy permits from the outside? All kinds of internal savings then emerged when management eyes focussed on the issue.

5.2 The world of legally binding targets

In the past the Institution has argued that the price of energy would have to be very high before clients took serious notice of energy efficient design. But energy taxes high enough to make that happen looked so remote we were able to live in some degree of (dare I say) cosy complacency. The genius of the tradable permit (it was first proposed by a Harvard Professor of Business Studies) is that it needs only cost the firm money at the margin. Unlike measure such as carbon taxed, firms who are already super-efficient may not have to buy any permits at all. Firms who offer savings can actually make money out of selling permits. In the US there is very likelihood of a major greenhouse gas permit market. Here lies the rub for building services engineers. Our response in the past has been oriented towards modifying indirect controls like it must deliver. This philosophy fitted very well with the philosophy of the voluntary convention of the early 1990's. But the broad approach has been rejected in the Protocol. It does not fit well in a world of legally tradable permits where Governments need to meet their international commitments precisely. Of course when we consult later this year, the owners of buildings can ask to be left out of the flexibilities on offer in the Protocol. But what if ASHRAE and some of our other international peers took a different view?

5.2.1 An Illustration

How might this emissions trading work? Let us suppose that building owners have a set of permits which cover all the greenhouse gas emissions from their buildings. There are any number of ways of allocating these permits, and the initial allocation system is often the most contentious part of permit trading politics. Since we are talking about reduction targets for 2008-2012 these permits will be some fraction of typical emissions in the 1990's. They might reflect current best practice standards. To comply with those permits, the building owners will need to invest in abatement technology. But since the permits are tradable, they can choose the most cost-effective projects in their portfolio of buildings that will give them their total permitted emissions. What would be unfamiliar is that the permits will be legal instruments. If the building owners were wise, the projects chosen would not just be judged on potential savings, but now also on the confidence that the saving van be realised in practice. They may however identify projects in their building stock that could yield savings even greater than necessary for the permits that they hold. Instead of shelving the projects as uneconomic, they will want to take a close book at the price they could get selling the savings on the permit market. Who would be the buyers of such projects? Possibly they would be some of the owners of buildings in PROBE studies of the next decade who thought that they had bought a low energy building only to find it unliveable, or never properly commissioned, and who are desperately short of permits. Under the Kyoto scheme these permit buyers can come from any developed country. Even if the IK does not employ a system of permits that embraces the owners of building services, this does not necessarily foreclose other countries devising system that do. East European countries, for example, may want to release on to the international emissions trading market the savings from replacing the district heating schemes of entire cities. International contractors who want to play a part in that work will need to work in an emissions permit framework. As I said at the beginning of this lecture, the Kyoto Protocol is a challenge to building services engineering world wide.

5.3 Targets for Services

Our professional colleagues in chemical process engineering are already used to designing plan to deliver annual total emission targeted for sulphur and nitrogen dioxide. If the US is anything to go by, those industries will be among the first to ask to be included in a permit trading system. BP has already announced that they are conducting a trial of a company wide trading system for carbon dioxide emissions. But then will not these companies notice that the marginal cost of abatement of some chemical engineering process projects are higher than might be achieved by investing in building services engineering? If so will there not be a market for design, construction and commissioning that delivers possibly less ambitious theoretical targets (and fewer rave review in the Journal), but at least delivers what was promised with precision? How different would our engineering be if we had to be sure to undershoot a target? Pure speculation, of course, but this might just possibly be the shift in philosophy that the next centenary lectures would take for granted.

5.4 Designing to Target

The excellent PROBE inquiries reveal all the problems faced in designing low energy buildings. We pay a penalty for the prototype nature of each building. Our construction process may lack feedback, and design is sometimes more of a string of interesting puzzles for he contractor to solve than the initiation of an orderly assembly process. Of course in this brave new world, some of the marginal cost advantages of a system of tradable permits would need to appear as incentives to occupants to work with the services system and not wreck it. In other circumstances I would not venture to suppose that you should consider such a revolution in our way of working. But the Kyoto targets are revolutionary, and buildings world wide account for a good quarter of national emissions.

Conclusions

Let us remind you of the points I have made. The evidence of man made Climate change is mounting. The world's first response, while in many respects worthy, has also shown that voluntary national targets have severe limitations. The Kyoto Protocol adopted in December took a new and radical path. Its targets are legally binding. They are more ambitious and more flexible than anyone perceived. The challenge over the next year or two is to fill in the details of these fexibilities so that the Protocol comes into force by 2000. In many ways the culture of building services engineering was more comfortable in the older regime. We may therefore face a difficult decision. Should we rethink some of our approaches on services engineering, or watch our overseas competitors exploit these new fexlibilities to their advantage? Services engineers will want to think hard about this challenge before the Government begins its consultation on UK commitments this summer. Man made climate change will not have gone away by the time of the next centenary lectures. It would be fascinating to know what those future commentators will make of our endeavours to meet the challenges laid down by Kyoto.

David Fisk is Chief Scientist at the Department of Environment Transport and the Regions. The views expressed are his, and do not necessarily reflect those of the Department.