GreenSuite: Interview with Karla Bell Pioneer in Green Building and Visionary Eco-Entrepreneur

I am speaking with Karla Bell, one of Australia and indeed the world’s best-known environmentalists. Karla is a pioneer in green building and was responsible for the green building requirements in the 1994 Sydney Olympics, and now is boosting the formation and adoption of the carbon market with the company she has formed to service it, CarbonFlow. CarbonFlow develops and markets software for carbon market participants, which as explained in the interview below, could help unlock tremendous opportunities in the green building industry. For more information on the Carbon Market visit The Greenhouse Gas Blog at www.ghgblog.com .

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Q1: As one of the initial global pioneers in Green Building, beginning with your work in creating the first Green Olympic Village and Games in Sydney Australia in 1994, how have you seen motivations for “going green,” evolve over the last 15 years?

I think as an early pioneer of anything, there is a first flush of excitement around a new initiative such as ‘Green Buildings’, particularly when the first global initiative was associated with the Olympics in Sydney and still continues with Beijing having just been awarded the LEED Green Building Council Award (1). However, there has been a cooling off period from the initial hope that Green Buildings would go out and multiply beyond the Olympics. Since, the adoption of the Environmental Guidelines for the Summer Olympic Games, in September 1993, I would say enthusiasm for Green Buildings has waxed and waned. This is normal and during this period the vested interests have emerged to challenge the wisdom of the new program. Then overtime as the concept has merit new advocates have emerged such as the various Green Building Councils, around the world, accreditation programs such as LEED (1) and practitioners: architects, engineers, developers, real estate agents such as Studley (2), have also sprung up who know how to develop and build Green Buildings.

Overtime these advocates start the slow drip feed process of influencing the community and in this case Green Buildings have been accepted as a good idea through-out the community at all levels, government and the private sector. We are now at the stage where in the USA and Europe, Australia

and perhaps now even in the developing world, where green buildings may well be mandated or swept up hopefully in projects under carbon trading. More of this later.

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Q2: How developed is the adoption of Green Building practices in the United Statesvs. the rest of the world and what best practices would you like to see the US learn from?

I think that no country has gone beyond pilot programs and Green Building demonstrations programs. There is a lot of advocacy everywhere. The Austin Green Building

(3) program in Texasencourages participation and this seems to be the most common global approach. There are few mandatory Green Buildings standards in the USA, which is also the case in most European countries as well.

So, to answer your question how many countries across their building portfolio of residential, commercial and industrial have adopted a Green Building program that covers all these issues. The answer is none.

What we have is a continuation of the pilot, demonstration model and voluntary programs. The Olympic Villages from Sydney on have continued to be pilots, albeit large demonstrations of what is possible. Sydney, Athens and now Beijinghave continued on with the Olympic spirit of leading the world in the development of GreenBuildingprograms. Beijingreceived the US Green Building Council LEED Award last week. Even bidding cities such as Stockholm, Swedenwho lost out to Athens

in 2004, went ahead and built a green village called Hammerby Sjostad on the Olympic village site. There are many examples of private developers creating Green Villages like Prairie Crossing in Chicago.

At this point, I should make a distinction between energy efficiency measures in buildings and Green Buildings. Since the signing of the Kyoto Protocol in 1997, aimed at reducing energy consumption to combat Climate Change, most western countries have adopted some energy efficiency measures. These measures so far are minimum standards that means a building can be classified as energy efficient. To qualify under these systems most require some passive design measures such as orientation, energy efficient lighting, insulation and some energy efficient appliance selection such as washing machines, dishwasher, refrigerators and other household appliances. .

Most of the energy reduction measures have not gone so far as to mandate natural ventilation, day-lighting or prescribed renewable energy use on-site such as solar hot water, Photovoltaic cells, wind, geo-thermal energy etc. In a true Green Building

program energy efficiency and the use of renewable energy is a subset of all the sustainability measures. This comment does not downgrade the importance of energy efficiency in Green Buildings, it is a major factor, however a Green Buildingcovers more than energy. .

A Green Buildings includes measures in

- Energy efficiency and the use of renewable energy

- Water efficiency and the use of recycled water

- Waste avoidance and minimisation of solid and hazardous waste

- Selection of materials to prevent out-gassing from paints, gums, glues, adhesives

- Protection of biodiversity through sustainable timber selection and native landscaping:

In Californiasince the late 1990 California Bill SB 280 legislation on Green Buildings has been stalled. Hillary Clinton had as one of her energy program initiatives standards for Green Buildings, which I discussed on my blog www.GHGblog.com (4) What measures it included is not clear, was it just energy efficiency, I don’t know. What measures has Senator Obama and John McCain put forward on green buildings would be interesting to know.

In the absence of mandated across the board legislation, the voluntary system seems to always predate anything further. It allows industry to feel comfortable with the issues and able to build. To that end resource centres spring up and there are many in all US

states. In Californiafor example there are centres such as The California Green Builder (5), a voluntary program for green builder and The Green resource centre also. (6) _____________________________________________________________________________

Q3. What are the most significant impediments to more widespread adoption of green building practices?

The most significant impediments include to my mind a holistic way of thinking from the setting of the brief for the building all the way through the implementation from design to construction and operation. When I worked on Green Buildings I always endeavoured to create a role called Environmental Design Management on the same level as the architects, engineers, design and construction managers, which was supposed to be a collaborative process between myself and the whole team. A green building needs an Environmental Design Manager, someone to be responsible for following the entire process from the brief, design and the selection of materials and technologies and if necessary interacting with the workers onsite.

Suffice to say, this approach is contrary to the way the process normally works, which is hierarchial, with the Architect as God. Additionally, once the environmental brief and the brief for the building (what it is actually used for) has been set, the building often times will emerge and design itself. The role of the architect is to resolve these issues. Green Buildings are not about statement architecture.

Another issue concerns the tendering process. Each individual item is tendered for in a building and costs measured item by item. This process does not work well for Green Buildings, particularly if best practice is the objective, only one material or technology may provide the solution. Therefore you actually have to know something and select the material/system through a process of one’s own discernment. Tendering is designed to remove discernment and provide lowest cost. This approach does not mean the buildings should be a field day for people to procure the most expensive on the contrary, if you procure a system the overall system has to be procured. For example take a lighting system – If you include natural ventilation and day-lighting as part of the lighting system (natural and artificial light) then you will actually need fewer lights and wiring and this means you can afford more expensive energy efficient lights and with less wiring you can afford non-pvc wiring which is about 10% more expensive because you have less wiring overall.

Q4. What would be your most useful advice for a company or project owner to overcome the perceived or real obstacles at the outset of a green project?

I would advise that a company or project owner create a collaborative design process, with an Environmental Design Manager responsible for the brief all the way through the design, construction and delivery and operation of the Green Building. It is important to be flexible with tendering for materials and systems when trying to achieve best practice. In the case of a building owner it must be remembered that the 80./ 20 rule applies and that, the real cost of the building is in its operation over its life time. It makes sense to focus on the real costs, which means that the operation of the building upkeep and understanding of the green building technologies is required by the Building manager or Facilities manager.

5. With you newest endeavour, CarbonFlow, your team is helping to create and monetize a market for carbon. How do you envision carbon markets impacting green building?

The Carbonflow team include other people with a keen interest and background in Green Buildings, Helen Priest is on the board of the NZ Green Building Council, the Corporate Ventures Manager of Meridian Energy (7) a utility in New Zealand and an investor in CarbonFlow.(8). Meridian has been undertaking Green Buildingprojects in New Zealand, called the “Righthouse” (9)

A Quote from Helen Priest from Meridian: “We think there is a huge opportunity to create a range of very effective offset-related products around green buildings (especially residential) if only there was a way to create high-quality (certified, verified) credits at a micro-scale. Just look at the (now famous) McKinsey graph around carbon and see how much below the line (ie negative carbon cost) is sitting there and not getting done that has to do with buildings. But somehow there needs to be a way to pull all the smaller, disaggregated pieces together and streamline the ability to create credits from energy efficient/green building space. When that happens, energy companies can create products and services that will encourage better decisions around energy design and use in buildings. We think the opportunity to get this rolling through our relationship with Carbonflow is a win-win."

Meridian Energy has also been active in green buildings in the commercial sector through our representation on the NZ Green Building Council Board and with the Customhouse Quay building. We think carbon seems an obvious place for the NZGBC to apply their excellent skillsets with high quality tools and standards to incentivise others to look at the opportunity with carbon and green buildings.

Meridian's Customhouse Quay building is a leading example of carbon abatement through energy efficiency. Meridiansought the highest sustainability design principles in reducing its building carbon footprint - including analysis of the products and services used in the building. Through linked design features such as chilled beams and thermal mass, use of rain water and solar hot water, the Meridianbuilding demonstrates that energy efficiency can be both carbon friendly and award winning”.

Listening to Meridian and others involved in Green Buildings, it is my view that the best way to get widespread take-up of Green Buildings is to lobby the Voluntary Carbon Standard (VCS) (10) to include Green Buildings as a sector eligible for Carbon Credits. Simon Dawes, our strategic partner DNV, a company that audits more than 50% of the global carbon market has also agreed. (11)

Why the VCS?

The reason is that so far the regulated carbon markets in Europehave not included Energy Efficiency, an important subset of Green Buildings at this stage. The Voluntary Carbon market has been set up to include countries and sectors outside the compliance markets. The VCS uses CDM as the de-facto standard. The price of credits is approximately similar to that of the compliance markets. For more information see The Voluntary Carbon Standard website (10) In the USA, the parties interested in Green Buildings should develop a project and a methodology under the VCS and get it approved. In this case whilst, the USis not a compliance Kyotocountry there is an anomaly that would allow a project to be developed in the USA. CarbonFlow is an interested party in such an energy efficiency project. CarbonFlow has a suite of software called CarbonStep for the VCS markets especially designed to automate the documentation process for all energy efficiency projects. (8) _____________________________________________________________________________

Q6. What stakeholders are participating in the carbon market now?

To get to the stakeholders working in both the compliance markets and the Voluntary markets, I will have to backtrack to describe briefly the Emissions Trading mechanisms under the Kyoto Protocol. The United Nations Convention on Climate Change official website explains the Protocol very well (12). In brief, The Kyoto Protocol, in the 1st commitment period 2008-2012, the Annex B parties, (developed countries) except the USA, agreed to reduce emissions by -5% on 1990 levels. (12)

Annex B Parties with commitments under the Kyoto Protocol can achieve these targets using flexible mechanisms known as emissions trading. Emissions trading, allows countries that have emission units to spare to sell this excess capacity to countries that are over their targets. A new commodity was created in the form of an emission reduction of C02e (Carbon dioxide equivalents). As carbon dioxide is the principal greenhouse gas, people speak about trading in carbon. Carbon is now tracked and traded like any other commodity. This is known as the "carbon market." (12)

A tradeable asset or carbon credit is created by a series of contracts promising to deliver greenhouse gas (GHG) reductions through the markets under the Kyotoprotocol.

The Clean Development Mechanism (CDM), Article 12 of the Protocol, allows an Annex B party, a party with an emission reduction commitment to implement an emission-reduction project in a developing country. Such projects can earn saleable credits called certified emission reduction (CER) credits. (12) The incentive to invest in projects is created by the different costs of carbon abatement. A CDM project might involve, for example, a rural electrification project using solar panels or the installation of more energy-efficient boilers. CDM projects are currently clustered in South America and Asia, although there are several emerging countries in Africawhere CDM projects are currently being developed.

Joint Implementation is the mechanism known as “joint implementation,” defined in Article 6 of the Kyoto Protocol, allows an Annex B party, with an emission reduction commitment under the Protocol to earn emission reduction units (ERUs) from another Annex B Party with an emission reduction commitment. Joint implementation offers Parties a flexible and cost-efficient means of fulfilling a part of their Kyoto

commitments, while the host Party benefits from foreign investment and technology transfer. An example is a project in Canadasold into Japanor a project in Bulgaria sold in to Italy or Spain. (12)

Voluntary Carbon Markets under the Voluntary Carbon Standard have been established to allow many types of projects to earn credits not currently included in the sectors under the various Emissions Trading schemes and to include developed countries like the USA not currently a Kyoto Protocol country with emission commitments. The voluntary market follows the same process of creating credits as the CDM or JI market but can occur in a country outside the Kyoto Protocol like the United States. The VCS obviously highlights anomalies in the carbon trading system as a whole for example EU ETS (European Emissions Trading Scheme) does not at this stage include transport or energy efficiency projects, whereas CDM does cover these types of projects. Energy Efficiency projects like Green Buildings in the developed world may well be best developed under the Voluntary Carbon Standard in the USA.

Now back to the stakeholders!

A Multi-Party stakeholder documentation process has been set up by the UN for the creation of carbon credits in each market, which follows a similar path. CDM is the de-facto standard for all other carbon markets. There are a range of multi-party players in the project creation, approval, certification and trading process for a CDM/ JI project and with the exception of the UN the VCS follows a similar process.

- The United Nations has established for CDM credits the CDM Executive Board which has an Executive Board, of 10 members from developed and developing countries. The Executive Board (EB) can establish panels or working groups and has created five Panels to date, which govern registration of projects, methodologies for projects etc to create credits (CERs) etc. The role of the CDM Executive Board is very important in agreeing project methodologies. There have been methodologies approved on energy efficiency projects such as energy efficient lighting and solar hot water projects. Methodologies are approved on application. If a methodology has been approved under CDM it can be fairly guaranteed to be accepted under JI or the Voluntary market. (12)

- Designated National Authorities (DNA) are government established national bodies in each country involved in the CDM. They are responsible for granting approval to local projects, which have fulfilled national criteria for sustainable development and with a good chance of succeeding at eventual registration, as well as acting as a focal point for CDM activities.

Buyers and Sellers require approval from the DNA of the industrialized country where they have commercial operations in, while Sellers will require approval from host country DNAs. (12)

- Designated Operational Entity (DOE) are the independent parties, which act as "auditors" to CDM. These auditors generally are the auditors for JI and VCS projects. These companies are certified by the CDM Executive Board as Designated Operating Entities (DOE), before they are able to provide this service to project owners. DOEs are responsible for checking and validating the Project Design Document (PDD); this is a technical document, which fully describes the CDM project. Registered DOEs include companies such as DNV, SGS or TUV-SUD. (12)

- Project Owners are on the sell-side. They own the assets, which may be developed into CDM projects e.g. farms, chemical factories, steel plants, cement plants, or state-owned energy companies seeking to develop alternative power generation sources. Project owners may also be the project developers if the CDM activity is related to their core industries.

- Project Consultants are a growing market of environmental/technical consultants, which advise on implementation, compile the required project documentation starting with the Project Design Document (PDD).

- Buyers come from a variety of sources public and private utilities, oil companies, investment banks, government programs and institutional and private hedge funds. Some Buyers approach Sellers directly, whilst others operate through brokers. Sellers can access a wider market of interested buyers through using a CER broker. Example of a broker is CantorCO2e.com (13)

- Legal Firms, such as Baker and McKenzie (14) are usually engaged to create the legal documents concerning the normal commercial aspects of a project and the Issuance of the CERS for sale to third parties.

This gives you some idea of the parties involved and the complexity in creating a carbon credit.

Q6. What do you believe will be a, or the, catalyst(s) for the US and our businesses to participate in the carbon market?

The US may or may not join the Global Agreement, the Kyoto Protocol but I do believe it will participate in Greenhouse Gas (GHG) reductions.

To date nine Northeastern U.S. states formed a state-level emissions capping and trading program known as the Regional Greenhouse Gas Initiative (“RGGI”) (15), and in 2006, California

enacted Global Warming Solutions Act (“GWSA”) (16) aimed at reducing GHG emissions 25% by the year 2020. GWSA puts Californiain line with the Kyotolimitations, but at a date later than the 2008-2012 Kyoto commitment period.

In addition twenty three states have set goals or mandated standards for the adoption of electricity generation from renewable sources, such as wind and solar.(17) Many States require utilities to implement energy efficiency programs to reduce electricity consumption. Both renewable energy projects and energy efficiency programs could yield carbon credits, if they can be shown to reduce GHG emissions under the VCS. The McKinsey Global Institute estimates that energy demand in the United Statescould be cut in half over the next fifteen years through energy efficiency programs.

U.S. Presidential Candidates Senator McCain and Senator Obama both have proposed a cap and trade system, In a for-runner of the debate next year after the George Bush exits the Whitehouse, in June, 2008, the U.S. Senate considered the Lieberman-Warner Climate Security Act (S. 2191) (18), which proposed the establishment of a cap-and-trade system for CO2 emissions, analogous to the cap-and-trade program in place in the U.S. for acid rain pollutants since the mid-1990's. The bill was defeated, before going to a formal vote. In a press release, Senator Lieberman said "We have convinced a majority of the Senate to support mandatory, comprehensive, market-based legislation to curb global warming and enhance U.S.energy security." (19).

The size of the Carbon Trading market may induce the USto participate in one way or another. According to the World Business Council on Sustainable Development (WBCSD) (20) the Carbon markets are set to explode. Analysts believe the global carbon market could see a veritable boom in the next 12 years, especially if the USsteps in.

The value of the global carbon market shot up by 80% in 2007, with some 2.7 billion tons of CO2 credits, worth €40.4 billion in a sign of growing enthusiasm for the carbon trading industry among companies and investors worldwide. The WBCSD further noted around 60% of this trading took place through the European Union's Emissions Trading Scheme (EU-ETS), with 1.6 billion tons of carbon emissions, worth €28 billion, changing hands in the bloc. (20). The UN-administered Clean Development Mechanism (CDM), which allows companies to meet part of their emission reduction targets by financing carbon-cutting projects in the developing world, accounted for a further 947 million tons of carbon dioxide, worth €12 billion.

Voluntary markets, where companies or individuals concerned about their carbon footprint can choose to buy emission credits, are also starting to grow; the largest being the US-based Chicago Climate Exchange, where trading volume doubled in 2007 to 22.9 million tons.

Q7. What do you believe are the most significant opportunities for businesses and organizations to improve their carbon footprint and sustainability?

I think government and the private sector should step up to the plate and not focus on the cost of change, but on the new industries, new jobs, local jobs to be created in the clean tech sector. Smart technologies will transform transport (cars, buses, trains, aviation), buildings (commercial, residential, industrial) industry (oil and gas, manufacturing, metals, mining) agriculture. In fact all sectors can develop new technologies to meet the challenge of combating global Climate Change. Most clean tech solutions will also create energy security reduce conflict in the world and make the earth a better place to live on many levels.

Everyone can participate at all levels – it is a massive opportunity and Climate Change should be viewed as that.

Q8. Is there anything else you would like to add on GreenBuilding

or Carbon Markets?

At this point I would like to explain what the CarbonFlow team believes the carbon market needs both in the compliance markets and in the Voluntary Carbon Market At CarbonFlow we believe that the market needs a more efficient process as the project cycle takes up to 12 to 18 months from project origination to issued CER. All the way through the process there are inherent delays, which cost money and raise the cost of the process, which in itself acts as a disincentive to more rapid project creation. The Carbonflow eRecord -CarbonFlow, Inc. develops and markets software for carbon market participants. Carbonflow was founded in 2006 to address the process inefficiencies and supply hurdles in the current carbon market.

Despite rapid growth, carbon markets remain very inefficient today. The current creation process acts as a constraint on the supply, and, along with the lack of transparency, affects the price of credits. Supply constraints are obvious hurdles in a market where there is clearly a growing demand from both the Kyoto

targets and an emerging voluntary market.

CarbonFlow works to drastically lower the cost and time it takes to create a credit. Our product suite also improves the velocity and transparency of this growing market, while enabling the expansion of the carbon credit supply.

Our Carbonflow™ suite enhances productivity, reduces both administration costs and the financial risks of managing Greenhouse Gas (GHG) offset projects, and manages the delivery of certified carbon credits for buyers and sellers worldwide. These carbon markets have accelerated since the inception of the "cap-and-trade" market system of the Kyoto Protocol to the United Nations Framework Convention on Climate Change and in 2006 exceeded US$30 billion in total value.

The Carbonflow™ eRecord delivers exactly what the market participants are clamoring for -- faster cheaper processes, more transparency, and better quality data. CarbonFlow's solution is based on patent pending cross-organization collaboration engine and eRecord technology.

It lets everyone in a project talk with everyone else and keeps a permanent eRecord that stays with the project from inception forward.

The technology is designed to meet Kyotoproject methodology requirements including registration, verification, certification and monitoring requirements under the Kyoto CDM, JI and ETS compliance mechanisms.It is also suitable for the voluntary and regional compliance markets in the United States. It could be applied to create carbon credits which are tradable worldwide.

Voluntary Carbon Standard Market Entry Point

CarbonFlow's Carbon Step™ module enables the low cost automation of validation and verification processes. Part of Carbonflow’s Solution targets the rapidly growing voluntary market. The patent pending Carbon Step software automates the delivery and distribution of greenhouse gas emissions offsets or carbon micro-credits created by gas and electric energy conservation programs and renewable energy sources such as solar power. Carbon Step complements existing utility billing systems (including eBilling and smart metering programs) by providing a key component in driving customer participation in both residential efficiency and industrial demand response programs — the carbon microcredit.

In the compliance and Voluntary markets we believe that the CarbonFlow and Carbon-Step suite is what the market needs.

This is an ideal software tool to work with energy efficient projects / green buildings in the voluntary carbon market.

Bibliography:

1. http://www.mediabistro.com/unbeige/awards_competitions/beijings_olympic_village_takes_home_LEED_award_91647.asp

2. http://www.studley.com/page.ww?section=root&name=Home

3. http://www.austinenergy.com/energy%20efficiency/programs/Green%20Building/Participation/index.htm

4. www.GHGblog.com

5. www.cagreenbuilder.org

6. www.greenresourcecenter.org

7. www.meridianenergy.co.nz

8. www.carbonflow.com

9. www.righthouse.co.nz