Randall M. Overbey, president of Alcoa Primary Metals Development, made a startling statement toward the end of a presentation given this past week at The Conference Board's 2005 Business and Sustainability Conference in New York:
We believe that, within the critical transportation sector, the [aluminum] industry can become “climate neutral” by 2020. In such a state, the global warming impacts of aluminum production will be fully offset by the CO2 emissions saved by its use, on a run-rate basis.
Aluminum saves fuel and recycles like few other materials do. I am aware of no other metal that can support a vision like this. We believe that it can happen, if we in the industry work together. If the vision is shared by our customers, consumers and communities, we may be able to realize it even sooner.
(The full text and Powerpoint slides of Overbey's presentation are available online.)
What, exactly, does this mean? As the accompanying chart from Overbey's presentation suggests, using more aluminum in place of steel or other metals in vehicles would make them lighter and, therefore, more fuel-efficient -- so much so, he says, that the carbon dioxide emissions reductions (the pink line) would be equal to the emissions created in manufacturing aluminum (the blue line).
And that, he seems to be saying, would render the entire aluminum industry “climate neutral.”
Now, I’ve been a student of "climate neutral" claims for more than a decade, and know just enough about that term to be dangerous. I know, for instance, that counting climate emissions is a tricky and complex business. Among other things, you have to figure out where to draw the boundaries. Example: In determining the carbon footprint for a pair of shoes, should you include the gas that went into the chainsaw that cut down the tree to produce the shoebox? Or is that chainsaw gas someone else’s “problem”?
Entire consulting businesses are built upon such conundrums.
So, Overbey’s statement made me curious: Should Alcoa get credit for all of the carbon reductions resulting from its use in cars to make them lighter, and for the resulting fuel and carbon savings?
For answers, I turned to Sue Hall, founder and executive director of the Climate Neutral Network, which administers the ClimateCool certification label for companies and products that meet its standards. Its standards resulted from a broad stakeholder process that included companies, activist groups, academics, scientists, and others -- a process funded in part by the U.S. Environmental Protection Agency. (Disclosure: I was part of that stakeholder process in the mid 1990s.)
My conversation with Hall illuminated the complexities involved here -- and the challenges companies like Alcoa face in making, and living up to, “climate neutral” claims.
Hall began by explaining that Overbey’s optimism was well-founded, given the potential for supply-chain collaboration to achieve sizeable greenhouse gas reductions:
A lot of companies have been focusing on reducing greenhouse gas emissions in their own operations -- their own direct emissions. But most supply chains have some really colossal greenhouse gas reductions that can be achieved, but only if all of the companies collaborate. And aluminum and autos is one of those supply chains.
The problem, she said, is figuring out how to measure the reductions -- and who gets to claim credit for them. That is, if Ford were to use more aluminum and less steel to make a car, does Alcoa get to claim the emissions reductions, or does Ford? And what about the person who purchases the car -- the one responsible for buying and burning the gasoline? Wouldn’t she get some credit?
The answers to such questions could have significant impacts. In a world in which greenhouse gas emissions reductions are becoming a tradable commodity, ownership of a carbon credit is far more than an intellectual exercise. U.S. greenhouse gas emissions totaled more than 5.8 billion metric tons of CO2 equivalent in 2003, 95% from the burning of fossil fuels, according to U.S. EPA data. With carbon currently trading on the Chicago Climate Exchange for about $1.75 per metric ton, we’re talking about -- well, potentially a helluva lot of money.
So, figuring out who “owns” an emissions reduction is no small matter. Said Hall:
Ownership of carbon doesn’t always neatly fit into one simple box, where one decision gets made and the greenhouse gas reduction occurs inside that box. Those are the simple ones. But many of the really huge greenhouse gas reduction opportunities that we face don’t behave in that convenient, all-in-one-box style. And so, from a carbon perspective, supply chains and products and services very often exhibit a high degree of interdependence.
I asked Hall who should get credit for the carbon reductions in the hypothetical example of Alcoa selling aluminum to Ford? The answer, as I expected, was complex. For starters, it has to do with whether a company is doing something beyond “business as usual” -- a key determinant for whether a greenhouse gas reduction even exists in a voluntary carbon offset market. I suggested that in this case, ownership of the carbon reductions should go to Ford, because making an aluminum car body would be something beyond “business as usual” for Ford. Alcoa would merely be selling more aluminum -- something it does every day.
It’s not that simple, said Hall.
If you look at how aluminum gets spec’ed into automobiles, you’ve got quality issues, tolerance ratings, and other factors. Car companies for decades have been trying to lightweight their cars, and they work extremely closely with the aluminum companies and other suppliers to figure out how to do that. It’s not simply, “I decided to buy apples today rather than pears.” There’s a huge amount of collaboration taking place between the partners at that development stage. From the discussions that we’ve had with some of the leading automobile manufacturers and aluminum producers, the impression I get is that there is a fair amount of interdependence as these kinds of decisions get made.
So, how are we ever going to create a rational economic system with so many open questions? In a voluntary market for carbon, explained Hall, most of these ownership decisions get established through contracts.
"What you're saying," I offered, "is that if Alcoa sells aluminum to Ford, their contract theoretically should proscribe how any carbon reductions be allocated and owned across all three parties -- Alcoa, Ford, and Ford’s customers."
Right. Companies essentially would look to incorporate the question of carbon ownership, if there are credits to be established, into the contracts between them. What complicates matters is that if you’ve got recycled aluminum, then a lot of the carbon reductions predominantly fit towards the aluminum company end, if you substitute recycled aluminum for primary metals.
Ah, more complications. And, it turns out, recycled aluminum isn’t the end of it. For example, there are regulatory issues, like federal fuel economy standards, that raise yet more questions: Should an automaker’s use of aluminum should be considered to be beyond “business as usual” if it is required by law to find ways to improve fuel economy? And all this assumes that there is general agreement on what the carbon footprint of aluminum is in the first place. For example, in making his climate-neutral statement, was Overbey including the energy and emissions related to mining bauxite, the main source of aluminum? We don't really know.
Hall grokked my confusion -- and frustration.
There’s a lot of complexities in there. But that doesn’t mean to say that when industries recognize that there are some really significant drivers they can bring to bear to reduce greenhouse gas emissions, that they should throw their hands up and say, “We can’t go there.” Because the goal is to get the reductions down. And we’ve got to use all the levers big and small, but particularly the big ones, to drive greenhouse gas reductions down as fast as we can. If that means we’ve got ownership questions we need to address, then let’s do that. We have to look at the big, hairy, audacious goals, because we’re not going to get there otherwise.
In the end, it may be the last part of Randall Overbey’s recent statement that is most telling: that climate neutrality is achievable if “we in the industry work together.” As Hall put it:
Driving down these emissions means we’ll have to collaborate up and down the supply chain. And yes, it’s more complicated. It’s about finding interdependencies. It’s not all about stovepipes, where we manage our own greenhouse gas emissions and that’s all we need to look at.
And, with more than a little understatement, she added:
Carbon isn’t nice and neat and well behaved. I wish it was; it would be so much easier.