The New Financial Climate: Converting Risks of Climate Change into Opportunities

Submitted by Stephen Muzzy on September 8, 2009 - 12:01pm
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Stephen Muzzy, Program Manager at Second Nature, highlights sessions and resources from the 2009 ACUPCC Climate Leadership Summit, which took place in Chicago in mid August, 2009. In this post, he shares highlights from the presentation of Joe Grasso, Assistant Dean for Finance and Administration at Cornell University.

Mr. Grasso,the Assistant Dean for Finance and Administration at Cornell University and Chair of the National Association of College & University Business Officers (NACUBO) Sustainability Advisory Panel discussed the proposed American Clean Energy & Security Act (ACES) HR 2454 and the potential financial implications climate legislation would bring to the higher education sector. If passed into law, ACES would create a new financial environment that would require higher education institutional leaders to adapt their roles by:

  • Understanding climate change risks to their institutions, higher education, and society
  • Measuring the financial exposure and costs of climate change legislation
  • Using financial modeling techniques to determine when and how much to invest in mitigation efforts
  • Creating a shared vision with Trustees to make these investments
  • Finding creative ways to engage their campuses and communities and to create good will

The institutions that have signed the ACUPCC as well as the institutions that are individually working to reduce their greenhouse gas (ghg) emissions voluntarily will have a competitive advantage when mandatory compliance is required. These institutions are calculating the financial liability of their emissions and have been working on creative ways to fund and reduce them, turning what has been perceived as a financial risk into synergistic opportunities. Institutions are working to reduce operational costs, increase health and productivity, provide innovative learning experiences for the entire campus, meet the demands of a 'greener' generation, and focus on long-term and efficient planning. This work will get easier as more resources are developed. For example NACUBO has written a Financing Guide that will be available this fall and details the following financing mechanisms:

Revolving Loan Funds
Grants, Rebates, and Incentives
Clean Renewable Energy Bonds
Tax-Exempt Lease Purchases
Energy Performance Contracts
Tax Incentives
Power Purchase Agreements
Carbon Offsets and RECs

Mr. Grasso shared some examples of how these financing mechanisms have been used by colleges and universities as well as what incentives exist and what resources are being developed.

Examples of Creative Financing

Clean Renewable Energy Bonds (CREBs)

The University of Minnesota, Morris used $5.6 million in CREBs to:

  • Construct a second and third wind turbine -  one in cooperation with the Mille Lacs Indian Nation
  • Add a steam turbine to convert electricity from a biomass facility
  • By 2010, expected to achieve carbon neutrality and to be nearly energy-independent

Reverse Purchasing Agreements

The University of California, Irvine:

  • Working with Sun Edison, installed solar panels on 12 buildings
  • Sun Edison owns, operates, and maintains the solar panels in return for a 20-year contract from UCI to purchase the solar energy
  • Sun Edison owns the renewable energy credits from the project for at least 5 years
  • CA Solar Initiative provides subsidies to accelerate the installation of solar panels
     

LA Community College District

  • April 2008, built a PV solar farm on top of carports at East Los Angeles College
  • Generates 45% of daytime electricity needs and has a life expectancy of 40 years
  • Savings are expected to be $270,000 per year
  • Contracted with Chevron Energy Solutions to design and construct the facility
  • MMA Renewable Ventures now Renewable Ventures finances, owns, and operates the facility
  • Renewable Ventures delivers power to LACCD under a power purchase agreement at prices below the previous utility rates
     

Blended Financing– Tax Exempt Lease Purchases (TELP)
Mount Wachusett Community College

  • During financially difficult times and faced with a doubling of electric rates, MWCC initiated an energy performance contract to shift from electric grid power to biomass
  • Utilized a tax-exempt lease purchase contract (TELP) funded by the ESCO’s performance guarantee
  • $1 million Department of Energy Grant
  • MassElectric rebates
  • State funds from MA Capital Asset Management fund for deferred maintenance
  • Massachusetts Technology Collaborative Grant

Community Partnerships

The Tompkins County Climate Protection Initiative (TCCPI) is a cross-sector collaboration that seeks to leverage the climate action commitments made by Cornell University, Ithaca College, Tompkins Cortland Community College, Tompkins County, and the City of Ithaca to mobilize a countywide energy efficiency effort focused primarily on the retrofitting of buildings.
 

State Finance and Tax Initiatives

Accounting for Sustainability - FASB

  • FASB and IASB are beginning to focus on accounting issues related to emissions trading and allowances
  • Examining: emission allowances, renewable energy certificates, timing of profit and loss from trades, liability recognition and much more
  • TruCost, a British firm, has valued carbon and other pollutants for European companies which are required to report these externalities on their balance sheets