Solving Climate Change: One (Hundred) Busted Fridges at a Time

This week, nations from around the world will sit down in Dubai, United Arab Emirates, to discuss a question that remains central to the battle against climate change: How can the world expedite the phase-down in emissions of the super greenhouse gases that are heating our atmosphere?

Ninety-five countries have now submitted proposals to amend the1987 Montreal Protocol to phase down production of hydrofluorocarbons (HFCs), which are used globally in refrigeration and air conditioning, insulation, aerosols, solvents, and fire suppression. These gases were originally developed to replace chlorofluorocarbons (CFCs), because they don't deplete the ozone layer.

However, HFCs are harmful in their own way: They, like all fluorinated gases including CFCs, are potent greenhouse gases -- from 500 to 11,000 times as harmful to the atmosphere as carbon dioxide by some measurements.  Proposals for winding down their production and use range from regulatory changes to financial compensation, all with long timetables and lengthy lists of expenditures aimed at cushioning the financial and material impact of an essential phase-down.

And while countries haggle over the fine details in Dubai, one company in San Francisco is coming up with its own, albeit unorthodox, answer to the problem.

EOS Climate, the brainchild of Joe Madden, Jeff Cohen and Todd English, was launched in 2009 with the objective of leveraging carbon markets to address climate change, starting with the most powerful greenhouse gases. [Full disclosure -- Joe Madden is on the TriplePundit advisory board, and EOS Climate supported TriplePundit's recent crowdfunding efforts.] The passage of California's landmark environmental bill, the Global Warming Solutions Act in 2006 (AB-32), mandated sharp reductions in greenhouse gas emissions across the state. It also enabled the creation of a market-based system that gave the young company a platform to advance its strategy.

"Jeff authored a greenhouse gas methodology for the destruction of [ozone-depleting substances]," Madden told TriplePundit. The methodology that was later approved by the Climate Action Reserve and adopted by the California Air Resources Board for eligibility for compliance credits under AB-32. This was EOS Climate's launch point in developing market-based answers to climate challenges, like the impact of CFCs.

"That was the basis for creating something that could finance the destruction of these CFCs. And in conjunction with doing that, we built an ecosystem of partners that were associated with CFCs at end of life," Madden continued. Companies like the appliance recycler, Jaco Environmental, and a leading waste management company, Clean Harbors, became partners in EOS' efforts. So did Hudson Technologies, a pioneer in refrigerant reclamation.

"We made a value chain, where one had not existed, to serve a new market, where one had not existed," Madden told us.

California's innovative global warming bill helped launch the company's endeavors beyond the state's borders, Cohen noted.

"As part of the California cap-and-trade program, we have done projects all over the country where we recover CFC refrigerants from older equipment from refrigerators to large commercial or industrial chillers that are still in use," Cohen said.
The direct emissions reductions resulting from those projects amount to somewhere in the neighborhood of 5 million tons of CO2 equivalent. "And that is EOS’ projects. If you add in projects that other project developers have done using the methodology that we originated, it is probably double that," Cohen continued. "In real-world terms, that is like preventing the emissions from the entire city of Los Angeles for a year."

In time, the company's focus in reducing greenhouse gas emissions expanded to high-impact commodities that are carbon-intensive, beginning with HFC refrigerants.

Cohen, who worked for the EPA managing U.S. implementation of the Montreal Protocol, said that government intervention has been incredibly effective in saving the Earth’s ozone layer. But he also noted that regulations cannot fully control the environmental impacts of greenhouse gases like CFCs and HFCs.

"As part of a government agency responsible for controlling those gases, I saw there was a gap in terms of what regulatory programs could do in contrast to market-based [strategies]," Cohen said. From his perspective, the only way to get control of what he saw as a "climate ticking time-bomb" --  which was exacerbated by aging equipment and the potential for unchecked leaks -- was from a market-based angle that engaged private partners and provided both an incentive and financial means for businesses to upgrade their refrigeration units.

Madden agrees. But the process wasn't easy, he added. "We had to forge quite a bit of new territory. There was not a market for that, there was not an ecosystem for that, and the project type itself was fundamentally different than, if you can call them 'conventional' emission reductions or offsets.”

A second lesson the company learned was that "if markets are going to drive environmental benefits, it has to be done in a market context that is not subject to regulatory drivers, or political will." Even though California's Global Warming Solutions bill served as the catalyst to the company's initial success, said Madden, "Interacting in that [cap-and-trade] marketplace is very difficult.

"One of the things that has emerged in the last three or four years is the fact that capital markets, meaning largely institutional investors, have become aware of carbon risk as a material financial risk in their portfolios." He said that wariness changes the way that a business directed at reducing carbon emissions is looked at.  "It moves the driver from political to financial. It moves it out of a regulatory construct into a financial marketplace itself."

That lesson, he said, was largely due to the work of Carbon Tracker, which figured out just how many gigatons of CO2 (GtCO2) could be emitted into the atmosphere before we exceeded the 2 degree C threshold of global warming. They also determined what would ultimately define "unburnable carbon" or in financial terms, stranded assets, tied up in reserve holdings.

"That awareness, is that the risk associated with carbon is a financial matter,” explained Madden. "Markets are quite sophisticated and they don’t like risk. So an incredible amount of effort is now going into trying to create mechanisms to quantify and ultimately price carbon risk for companies, products and supply chains.

Toward that end, EOS has developed a number of instruments to differentiate commodities and materials based on their climate impacts. One of the most recent is a new methodology for the use of reclaimed HFC refrigerants and advanced refrigeration systems, which has just been approved by the American Carbon Registry. EOS is developing the partners and strategy to engage businesses at all levels in expanding the production and use of reclaimed HFC refrigerants that will help negate the need for new production and ultimately prevent greenhouse gas emissions.

"We are going to be working with leading industry associations to give incentives to service technicians, refrigerant distributors, equipment manufacturers and ultimately any retailers and supermarkets or hotel chains to start using or expand the use of reclaimed HFC refrigerants" said Cohen.  "That will change how companies make decisions with their capital investments.”

"Rather than just say, well, we’re going to get out of CFC and HFC equipment today just because it is the right thing to do, now there will be more opportunities to make more strategic decisions based not only on cost but on the environmental impacts. So it won’t be just binary decisions based on getting into a different type of refrigerant class."

New "climate friendly" refrigerant alternatives to replace HFCs in new equipment are available but the HFC-based refrigeration and air conditioning systems and appliances already in widespread use around the world will be around for decades to come. EOS strategy to energize the market for recycled/reclaimed refrigerants provide immediate climate benefits and are an important complement to the gradual production phase-out being negotiated in Dubai this week.

And that ties back into Madden's proposal that to change the way that carbon emission reductions are dealt with, the driver must be a financial one, not a regulatory or value-driven one.

For EOS' founders, reaching this point in the company's growth is one more step in fulfilling the vision they had when they first drafted the company's business plan years ago, said Madden.

"At the very base of the company there was a concept: If we were going to spend some time, let’s try and find an area that if we do it right, it can have potentially global impact."

EOS Climate and its growing list of partners may have not only the best answer for mitigating the climate impact of these super greenhouse gases, but a new, and much needed look on how to incentivize new emission reduction strategies for multiple carbon-intensive commodities that can really make a difference for the climate.

Image: USDA/Flickr