CHICAGO CLIMATE EXCHANGE PROGRAM by lindayy

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									                                                                                          Agenda Item 5.1
COUNCIL REPORT

                                                                                       26 September 2006

CHICAGO CLIMATE EXCHANGE PROGRAM


Committee        Environment


Presenter        Cr Brindley


Purpose

1.     To recommend that the City of Melbourne join the Chicago Climate Exchange Program.


Recommendation

2.     That Council:

       2.1.   join the Chicago Climate Exchange; and

       2.2.   investigate with the Victorian government, the feasibility of establishing, through the Victorian
              Local Sustainability Accord, a mechanism to aggregate greenhouse gas emissions from
              Melbourne’s metropolitan local government councils with a view to establishing an entity
              which would join the Chicago Climate Exchange.




Council Report Attachment:
1.    Environment Committee, Agenda Item 5.1, 5 September 2006
                                         Page 1 of 6

ENVIRONMENT                  COMMITTEE REPORT                                          Agenda Item 5.1

                                                                                      5 September 2006

CHICAGO CLIMATE EXCHANGE PROGRAM


Division       Sustainability & Innovation


Presenter      Robyn Leeson, Manager City Sustainability


Purpose

1.   To recommend that the City of Melbourne join the Chicago Climate Exchange.


Recommendation from Management

2.   That the Environment Committee recommend Council:

     2.1.   join the Chicago Climate Exchange; and

     2.2.   investigate with the Victorian government, the feasibility of establishing, through the Victorian
            Local Sustainability Accord, a mechanism to aggregate greenhouse gas emissions from
            Melbourne’s metropolitan local government councils with a view to establishing an entity
            which would join the Chicago Climate Exchange.

Key Issues

3.   The City of Melbourne has been invited to join the Chicago Climate Exchange (“CCX”).

4.   As a member of CCX the City of Melbourne would make a commitment to reduce its baseline
     greenhouse gas emissions (i.e. average of annual emissions during years 1998 through 2001) by 1.2
     percent per annum until 2010. The commitment would cover significant greenhouse gas emissions
     from Council including from Council owned facilities. CCX refers to these emissions as “owned
     emissions”. Emissions data would be subjected to independent verification and progress would be
     demonstrated through an annual “true-up” process which would determine whether targets were
     met. Given the strength and performance of Council’s existing greenhouse program it is likely that
     Council would be able to meet the reduction targets. However, if Council fails to meet the annual
     targets it will be required to purchase offsets or ‘credits’ to cover the shortfall.

5.   The CCX methodology distinguishes between a member’s direct and indirect emissions. Direct
     emissions are those resulting from on-site fuel use such as natural gas to heat buildings and petrol
     and other fuels in vehicle fleets. All direct emissions must be accounted for in the CCX program.
     Indirect emissions are those resulting from energy (i.e. electricity) purchases. Members can choose
     to include or exclude indirect emissions. However, once the choice has been made it cannot be
     reversed. Should Council resolve to join the CCX it is recommended that indirect emissions be
     included on the basis that this is the main source of emissions for Council. Moreover, the inclusion
     of indirect emissions would provide a true reflection of Council’s greenhouse footprint.




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                                         Page 2 of 6

6.    If indirect emissions are included Council will need to undertake a robust review of its data
      collection, management and reporting processes to ensure it can meet the CCX verification
      requirements. Additionally, Council will need to determine all of its “owned emissions” i.e. those
      emissions for which it is responsible under the CCX definition. Areas requiring particular attention
      will be direct and indirect emissions associated with contracted services, Council owned commercial
      entities, all Council owned buildings (whether housing Council operations or not) and public lighting
      especially street lighting.

7.    Membership of the CCX is likely to result in Council having to broaden the coverage of its data
      collection, management and software use to areas not currently covered under the Cities for
      Climate Protection program. While it is likely that this will result in Council having a larger
      emissions profile, there will be long term benefits which outweigh any of the short term
      inconveniences.

8.    It is likely that the associated transaction costs and the current market price (approximately $1.90
      per metric tonne) will prohibit Council’s involvement in trading, at least in the short term.
      Membership of the CCX should therefore be viewed as a strategic decision which would provide
      other benefits for Council including building the City’s understanding of emissions trading markets
      and mechanisms. The knowledge gained through exposure to trading activities will prepare Council
      for involvement in any national or state-based trading regimes that may eventuate in the future.

9.    Through its membership Council may also be able to facilitate the establishment of a consortium of
      Melbourne metropolitan local government councils with the goal of aggregating emissions for
      possible trading on the CCX. This option requires further investigation and it is recommended that
      this opportunity be pursued with the advice, support and assistance of the Victorian government.

Time Frame

10.   Should Council resolve to join the CCX, the commitment would be until 2010.

Relation to Council Policy

11.   This proposal is consistent with Council’s objectives as expressed in City Plan 2010. In particular
      the Zero Net Emissions by 2020 Strategy

Government Relations

12.   The City of Melbourne’s work to reduce greenhouse gas emissions supports international and
      national commitments and objectives. Specifically, it supports Australia’s national commitment to
      reduce greenhouse gas emissions to 108 percent over the 2008-2012 periods, in response to the
      Kyoto Protocol. On a State level, Council’s greenhouse work supports the objectives of the
      Victorian Greenhouse Strategy.

Finance

13.   Membership of the CCX will incur a one-off joining fee of approximately $6550 (US$5000) as well
      as annual dues and transaction fees (should Council choose to buy or sell ‘credits’). There is
      provision in the City Sustainability Branch to accommodate this fee. There may also be ancillary
      legal and other costs incurred as Council determines which emissions it “owns” and reviews and
      improves its data collection and management processes.




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                                            Page 3 of 6

Legal

14.     The recommendation made in the report is within the functions and power of Council. Ongoing
        legal advice will be provided in relation to formally joining CCX including the review and execution
        of any agreements.

Sustainability

15.     Membership of the CCX in itself will not reduce greenhouse gas emissions. However, membership
        should assist Council to improve its data management processes which will be of benefit to the
        overall greenhouse program and Council’s broader sustainability objectives.


Comments

16.     The steps to becoming a member of the CCX are as follows:

Establish inventory and baseline

        16.1. establish emissions baseline by gathering data for the CCX baseline period. The emission
              baseline will be the average of annual emissions during years 1998 through 2001. As part of
              it Cities for Climate Protection (“CCP”) commitments Council maintains a comprehensive
              greenhouse gas emissions inventory. However, membership of the CCX may require Council
              to account for emissions not currently included in the CCP inventory. Also, Council will need
              to determine all of its “owned emissions” i.e. those emissions for which it is responsible under
              the CCX definition. Areas requiring particular attention will include contracted services,
              Council owned commercial entities, Council owned buildings and public lighting;

Send baseline data to CCX

        16.2. CCX provides preliminary analysis and greenhouse gas conversions. The six types of
              greenhouse gases are covered under global warming policies and in trading programs are
              carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O), sulphur hexafluoride (SF6),
              perfluorocarbons (PFCs) and hydrofluorocarbons (HFCs). The CCX converts each of the
              greenhouse gases to a standard carbon dioxide equivalent (CO2e) amount for trading
              purposes;

Outline reduction trends planned

        16.3. identify greenhouse gas abatement and emission reduction schedules;

Make CCX reduction commitment

        16.4. join CCX and commit to emission reductions through to 2010;

Demonstrate progress through annual “true -up”

        16.5. confirm emission increases/reductions achieved and buy, sell or trade accordingly. If Council
              fails to meet its annual reduction target it will need to buy ‘credits’ to cover the shortfall; and

Participate in CCX governance committees

        16.6. this step is optional.




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                                          Page 4 of 6

17.   CCX Members with direct emissions commit to reduce greenhouse gas emissions by 1.2 percent
      each year over the years 2006 through 2010 relative to an agreed emissions baseline. By 2010
      emission reductions of six percent below baseline must be achieved. Members who reduce their
      emissions below the required level can sell surplus emission allowances on the exchange or bank
      them. Members that do not achieve their reduction targets must purchase emission allowances
      from other CCX Members who have reduced their emissions beyond the reduction target, or
      purchase project-based offsets. Eligible offsets can come from methane collection and carbon
      sequestration projects.


Background

18.   The establishment of a city-based emissions trading scheme is a key recommendation in the Zero
      Net Emissions by 2020 strategy. City Sustainability branch has been investigating carbon trading
      opportunities for Council including the proposal for Council to join the CCX. Membership of the
      CCX would provide Council with a means for gaining experience and knowledge in emissions
      trading activities and programs. Additionally, membership provides Council with the potential to sell
      carbon credits should Council choose to in the future. Participation in the CCX will prepare Council
      for involvement in any future Australian emissions trading schemes.

19.   The CCX is “a self-regulatory organization that will administer a voluntary pilot greenhouse
      gas emission reduction program for emission sources…”.

20.   Its goals are:

      20.1. to facilitate the transaction of greenhouse gas emissions allowance trading with price
            transparency, design excellence and environmental integrity;

      20.2. to build the skills and institutions needed to cost-effectively manage greenhouse gas
            emissions;

      20.3. to facilitate capacity-building in both pubic and private sector to facilitate greenhouse gas
            mitigation;

      20.4. to strengthen the intellectual framework required for cost effective and valid greenhouse gas
            reduction; and

      20.5. to help inform the public debate on managing the risk of global climate change.




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                                         Page 5 of 6
                                                                                         Agenda Item 5.1
                                                                                  Environment Committee
                                                                                       5 September 2006



FINANCE ATTACHMENT



CHICAGO CLIMATE EXCHANGE



Funding of the one-off joining fee of approximately $6550 (US$5000) is provided in the 2006/07 budget of
the City Sustainability Branch.

Funding in future years will be subject to the normal budget processes.




Joe Groher
Manager Financial Services
                                         Page 6 of 6
                                                                                           Agenda Item 5.1
                                                                                    Environment Committee
                                                                                         5 September 2006



LEGAL ATTACHMENT



CHICAGO CLIMATE EXCHANGE



In seeking to achieve the best outcomes for the local community having regard to the long term and
cumulative effects of its decisions, section 3C(2) of the Local Government Act 1989 (“the Act”) provides
that Council must have regard to facilitating objectives, including:

         “(a)      to promote the social, economic and environmental viability and sustainability of
                   the municipal district;”

Section 3D(2) of the Act provides that the role of a Council includes:

       “(c)     maintaining the viability of the Council by ensuring that resources are managed in a
                responsible and accountable manner;”

Section 3E(1) of the Act provides that the functions of a Council include:

      "(h)          any other function for the peace order and good government of the municipal
                    district.”

Further, section 3E(2) of the Act confirms that the Council may perform its objectives inside and outside
its municipal district.

The recommendation made in the report is within the functions and powers of Council. Ongoing legal
advice will be provided in relation to formally joining CCX including the review and execution of any
agreements.




Kim Wood
Manager Legal Services

								
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