HVACRDB

Does Global Warming + Energy Independence = Good Business?

Rarely have major economic and political shifts occurred as quickly in any country as we are experiencing in the United States with the tsunami of global warming and climate change hysteria in the last five years. To debate the veracity or causes of global warming is, for the time being, a distraction from the reality of the significant discussions dominating state and federal legislatures. Policy advancements in this area continue and are changing the landscape of our industry and the entire global economy. While environmental advocates continue to drive changes in building codes, regulations and equipment standards that directly affect our industry, the general sense of HVACR professionals has been that many of these new policies lead to good business. However, before this global warming boat really enters deep water, all American industries (not just those in the HVACR market) should pay attention to the direction where it may be heading.

When adding the energy independence/energy security arguments to the global warming movement, it would appear that there are more incentives than ever to drive high-efficiency heating and cooling commercial and residential systems. The Gas Appliance Manufacturers Association has reported that more than 70 percent of residential gas furnaces sold in the Northeast are high-efficiency, condensing systems. Energy Star® ratings have helped drive demand for 14 SEER air-conditioning systems and programmable thermostats. The rapid adoption of the LEED® rating system encourages high-efficiency heating and cooling systems in commercial applications, and similar residential initiatives are emerging. Arguing whether or not global warming is in fact happening falls a distant second to the fact that more home and business owners are paying attention to anything our industry can offer that will make their buildings “greener” and more efficient.

ASHRAE has been, perhaps, the most aggressively “green” organization in the HVACR industry (however, they would be quick to point out that their focus is rather “sustainability”). With the development of new standards by 2010, buildings will use 50 percent less energy than those built to today's standards. ASHRAE is also providing guidelines for ways to upgrade current building codes to increase a building's performance and efficiency. They soon hope to introduce standards for “net-zero” energy buildings — buildings that would essentially require no draw from the utility grid. These are remarkable goals for the built environment, and the trend thus far has been that what is initiated in commercial applications shows up residentially a few years later (not to mention there are already builders advertising “net-zero” home designs).

However, before getting caught up in the business potential that the green/global warming fight may present and joining the National Resources Defense Council or Greenpeace, let's look outside the box. We should determine where this may be going because that's what environmental advocates and many legislators are doing. Without sounding too cliché, carbon is the key. “Carbon restriction,” “carbon footprints,” “carbon sequestration” and “carbon reduction” are hot key phrases in a wave of climate change legislation that is sprinkling congressional calendars. The climate change bill introduced last fall by senators Joe Lieberman (I-CT) and John Warner (R-VA) is receiving the most attention right now. This massive bill sets the guidelines and establishes a structure for an American carbon “cap and trade” program. Many would like to see carbon become the prime global commodity, and this bill (as well as nearly a half-dozen like it) proposes to do just that by bringing the world's largest economic power into the fold.

Carbon is becoming the unit of measure for production, both industrial and energy. Many experts tout carbon emissions as the primary contributor to global warming, and CO2 is the main target. The Global Warming Potential (GWP) has classified carbon's impact on a rating scale that the EPA is using to prioritize the most serious climate change contributors.

For example, HCFC, the most common refrigerant in our industry, has a 100-year rating of 1,700 yet the EPA now considers these ozone-depleters low in priority because of their current phase-out.

More importantly, HFC, the refrigerant our industry has turned to in the post-HCFC world, actually has a higher GWP 100-year rating of 1,890. In essence, as the climate-change focus unseats ozone depletion as Mission 1, our carbon-loving industry could be rapidly brought back to square one searching for the next refrigerant of the future before our current refrigerant of the future has even become widely adopted. While our industry struggles to transition to ozone-friendly HFC refrigerants, the clock is ticking on the regulatory life-span of such greenhouse gases.

The Lieberman-Warner bill does not address refrigerants but rather goes more directly to the source of carbon emissions. The sponsors have loosely modeled the proposed bill as a “cap and trade” approach after similar programs in Europe. Initially targeting energy producers, each would be subject to a maximum “cap” on carbon emissions resulting from their production processes. The bill would create a basis for determining the producer's “carbon footprint” and a carbon emission ceiling as well as significant penalties for emitting an excess of carbon. Similar to the “Renewable Portfolio Standard” proposals that were considered in varying versions of energy legislation in 2007, the intent is to encourage energy utilities to generate a greater percentage of their energy inventory from renewable sources such as wind, solar and hydro power.

The “trade” part of the proposal attempts to reward producers who significantly reduce carbon emissions. Energy producers who embrace renewable energy sources or the cleanest production processes can earn carbon credits. Credits would equal the difference between allotted carbon emissions limits and actual emissions. Companies can trade these credits like a commodity on the Chicago Climate Exchange to energy producers struggling to stay under their capped carbon emissions. This is already huge business for those who “own” carbon credits and have capitalized on major corporations seeking to boost their green-ish-ness by paying for their carbon footprint.

While on the surface, this capitalism-meets-environmentalism looks like the best of both worlds, all U.S. businesses need to wonder aloud who would be setting these limits and how widely these limits could be imposed domestically since our Chinese counterparts, for example, are the world's largest carbon emitter but don't appear to be considering a similar carbon-capping system. Before trading their stocks and bonds for carbon credits, carbon-intensive U.S. manufacturers and their distributors — who rely on the transportation industry's gas-guzzling prowess — need to look closely at who really benefits in a carbon-capped world.

Should you be able to contain your carbon footprint enough to be allowed to stay in business, HVACR businesses involved in residential markets next need to consider if they are equipped to function in a “green” world. Building on their commercial accomplishments, the U.S. Green Building Council is introducing new LEED for Homes certifications to guide the green building of new residential construction. Simultaneously, the National Association of Home Builders (NAHB) is having their National Green Building Guidelines ANSI-certified into a recognized standard for the same purpose. Many state and local authorities have already codified LEED certifications into commercial building codes, as has the federal government. Others may pursue NAHB's new standards for new construction. New green building “authorities” are emerging as well to compete for the attention of environmentally conscious elected officials and code administrators, and green initiatives for the existing built environment will certainly impact the remodeling market.

HVACR professionals, as part of a targeted energy-consuming, pollutant-emitting industry in these times of climate change and carbon consciousness, may find themselves starting to look more like environmental engineers should these trends continue. The industry already faces pressure and regulations that force us to keep up with rampant complication and variation in local building codes. Further, the added complexity and increased cost of new, high-efficiency HVACR systems certainly present new sales challenges. HARDI joined the USGBC and is engaging with other environmental/efficiency organizations so HVACR distributors and our member companies can be involved in these evolutions. HVACR companies need to be engaged in their local markets, lending expertise and comments to ensure that a greener world can still be a profitable one. There certainly are opportunities in this new environment (pun intended), but there are also seemingly endless unintended consequences. To quietly ride the current wave of environmentalism is to have someone else chart your business's destiny. To help navigate the ocean is the most likely way of finding the new lands of opportunity.


Talbot Gee is vice president of HARDI. Contact him at 614/488-1835 or [email protected].

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