Partnering in the Fight Against Global Warming

Global warming and the need to reduce greenhouse gas emissions is one of the most pressing issues facing our industry and the nation. As we have continued to monitor the science on climate change in recent years, including 2007, the evidence has compelled us to reaffirm our view that the potential consequences of warming are serious and the need for action is urgent. This belief has, in turn, driven us to take a number of initiatives aimed at advancing policies and practices to address this issue, often in partnership with other stakeholders.

Understanding and Reporting Our Emissions

Identifying and quantifying the sources and magnitude of greenhouse gas emissions is an essential first step to create a foundation for policies and programs to reduce emissions cost-effectively and efficiently.

Accordingly, PG&E undertook a rigorous effort to identify and account for our greenhouse gas emissions. We are a charter member of the California Climate Action Registry. In 2002, we became the first investor-owned utility in California to complete a third-party-verified inventory of our CO2 emissions. Most recently, we verified our 2006 entitywide greenhouse gas emissions for six greenhouse gases (CO2, methane, SF6, N2O, HFCs and PFCs). (Please see the chart below for greenhouse gas emissions by source category.) We also verified the CO2 emissions rate associated with our 2006 electric delivery mix of 456 lbs CO2/MWh.

Total 2006 Greenhouse Gas Emissions by Source Category

(Total: 20.7 Million Tons CO2-e*)

Total 2006 Greenhouse Gas Emissions by Source Category

* PG&E's 2006 greenhouse gas emissions, which equate to 18.8 million metric tonnes, were calculated and independently verified in accordance with protocols of the California Climate Action Registry. Given that a portion of the electricity that PG&E delivers comes from unspecified sources, the total emissions may range between 18 and 21 million tons.


Demonstrating leadership, PG&E also joined The Climate Registry, a new national organization dedicated to creating a common standard for measuring, reporting and verifying greenhouse gas emissions consistently across industry sectors in North America. And, for the past three years, PG&E has participated in the Carbon Disclosure Project, which provides additional detail on our actions as they pertain to climate change and our greenhouse gas emissions profile.

Reducing Our Greenhouse Gas Footprint

PG&E provides its customers with electricity that has among the lowest rates of greenhouse gas emissions in the nation. In fact, PG&E's CO2 emissions rate is at least 65 percent lower than the national average among utilities.

We also continue to work to minimize our carbon footprint:

  • Since 1998, we have reduced our sulfur hexafluoride (SF6) leak rate by 89 percent and our absolute emissions by 83 percent. SF6 is an extremely potent greenhouse gas, approximately 23,900 times as potent as CO2 on a per ton basis, and is used as an insulating material in high-voltage circuit breakers.
  • We continue to reduce the methane leak rate from our natural gas pipeline operations, avoiding the release of more than 2,060 tons of methane, or approximately 43,270 tons of CO2-equivalent, in 2007.
  • We are offsetting all of the greenhouse gas emissions associated with the energy used in PG&E's buildings, by participating with shareholder funding in our ClimateSmart™ program. In 2007, this amounted to over 50,000 tons of CO2 reductions.

Empowering Customers to Make Efficient and Smart Energy Choices

PG&E has been a pioneer in developing innovative smart energy solutions that benefit both our customers and the environment. We present our customers with a portfolio of options—providing incentives for them to use less energy; supporting clean distributed generation, such as the installation of rooftop solar systems; and creating voluntary programs such as the first-of-its-kind ClimateSmart program to offset the greenhouse gases associated with their electricity and natural gas use. The third option, ClimateSmart, was launched in June 2007.

An increasing number of cities and counties in northern and central California have set aggressive voluntary greenhouse gas reduction goals. As a result, many are conducting inventories of their communities' greenhouse gas emissions as a key step toward developing an emissions reduction strategy. Last year, PG&E assisted nearly 100 cities and counties with these inventories by providing them aggregated historic energy consumption data for residential, commercial and industrial PG&E customers within their jurisdiction. PG&E also provided estimates of the associated greenhouse gases, based on PG&E's independently verified emission rates.

These efforts benefit from our partnership with the Bay Area Air Quality Management District and International Council for Local Environmental Initiatives, which have helped drive standardized data formats and have been a venue for sharing best practices and demonstrating how PG&E can help communities accomplish their greenhouse gas reduction goals.

Advancing Responsible Solutions

Peter Darbee at the launch of the U.S. Climate Action Partnership at the National Press Club in Washington, D.C.

PG&E supported the enactment of two important California laws aimed at curbing greenhouse gas emissions: Assembly Bill 32 (AB 32), the Global Warming Solutions Act, which established greenhouse gas reductions goals for California; and Senate Bill 1368, which requires that all power sold to utilities in the state under long-term contracts meet a greenhouse gas emissions performance standard equivalent to that of an efficient, combined-cycle natural gas plant.

The regulations implementing Senate Bill 1368 have been finalized and are structured in a manner that will allow PG&E to continue to provide customers with affordable and reliable electricity. The law will not impact the continued development of generation assets in which PG&E currently plans to invest.

AB 32 sets a goal of reducing California's greenhouse gas emissions to 1990 levels by 2020. To date, specific goals or targets for individual sectors or entities within sectors have not been set. Recognizing that these requirements will be forthcoming, PG&E has not set a greenhouse gas reduction target for our operations.

PG&E is currently working cooperatively with the CPUC, CARB and Cal/EPA to implement AB 32 in a way that maximizes environmental benefits, minimizes costs, provides for economic opportunities and serves as a model for federal legislation. Our work in 2007 focused around active participation in CARB hearings, the California Market Advisory Committee's examination of market-based approaches and the CPUC's and CEC's work to create a model rule for the utility sector.

PG&E believes a well-designed cap-and-trade system—coupled with our customer energy efficiency, renewables and demand-side management programs—will reduce greenhouse gas emissions, diversify our energy supply mix and help to minimize customer costs.

Ultimately, we believe a national response is required to address greenhouse gas emissions. As a result, we expect California's greenhouse gas reduction program will be harmonized with a broader federal program, and, ultimately global framework. This will allow California to reduce greenhouse gas emissions at the lowest possible cost and also provide the opportunity to more seamlessly "export" innovative technologies, programs and practices. We believe a national program should recognize and reward the significant investments already made by the state of California and its energy consumers to reduce greenhouse gas emissions.

PG&E has actively promoted the creation of a mandatory, market-based program at the national level that meets these objectives. For example, Peter A. Darbee, Chairman, CEO and President of PG&E Corporation, participated in the U.S. Senate's Committee on Environment and Public Works hearings on climate change in February, June and November last year. Mr. Darbee indicated in his testimony that PG&E believes the Lieberman-Warner Climate Security Act of 2007 provides a "solid starting point for constructively advancing a comprehensive, national response to and policy on climate change." The framework established in the bill—a cap-and-trade system with key complementary policies and measures—provides the foundation for a program that will achieve significant and sustained emission reductions from all sectors of the economy. It also includes important mechanisms to manage costs for energy consumers, recognize and encourage early action and advance energy efficiency.

Forging Industry Partnerships to Drive Action

Peter Darbee at the launch of A Roadmap to Combating Climate Change, released by Combat Climate Change (3C) in 2007

PG&E is also working in partnership to advance a federal program and global framework. For example, PG&E Corporation is a founding member of the United States Climate Action Partnership (USCAP)—a group of businesses, such as GE and Dupont, and leading environmental organizations, such as the Natural Resources Defense Council and Environmental Defense Fund, that have come together to call on the federal government to quickly enact strong national legislation to require significant reductions of greenhouse gas emissions.

PG&E has also worked for nearly a decade with a group of progressive energy companies through the Clean Energy Group, comprised of utilities and power generators, such as Exelon and FPL Group, that serve millions of customers in more than half of the states and account for more than 15 percent of the nation's generating capacity. The Clean Energy Group is working to advance national climate change policy that takes a mandatory, market-based approach to achieving emission reductions and does so in a way that recognizes the significant investments already made by energy consumers and businesses across the country.

And last year, PG&E also joined in a landmark proposal for a global framework for addressing climate change as part of our participation in Combat Climate Change (3C), an international business initiative involving more than 50 leading companies, including Vattenfall and Citigroup. In advance of the climate change negotiations in Bali, Indonesia, the group called on governments to work together to develop a global policy framework that emphasized the critical roles that the rapid deployment of energy efficiency and low-carbon-generating technologies will and must play. During 2008, 3C will work to provide more detail to policy makers on how to accelerate the penetration of these vital technologies throughout the world economy to combat climate change.

Impacts of Climate Change

In 2007, the Intergovernmental Panel on Climate Change (IPCC) determined that warming of the climate system is unequivocal and that many natural systems are already being affected by climate change. This century, the IPCC predicts increased average global temperatures, changes in precipitation, rising sea levels and more extreme events such as hurricanes, droughts, wildfires and other impacts. As part of our formal Enterprise Risk Management process, a team overseen by our Senior Vice President of Engineering and Operations is looking closely at these predictions and working to understand the implications for our business and our customers.

PG&E is beginning to collaborate with leading climate scientists in California to gain a better understanding of potential impacts to our infrastructure and ability to provide clean, affordable electricity, and to develop tools and methods to assist PG&E with adaptation to climate change. Last year, this included co-sponsoring a workshop with the U.S. Department of Energy's (DOE) National Energy Technology Laboratory (NETL) and the Lawrence Livermore National Laboratory (LLNL) to explore these issues in more depth.

In 2008, PG&E will work with scientists and climate modelers at LLNL to develop new tools for high-resolution regional climate modeling. The results of these studies will enable PG&E to develop adaptation and mitigation plans that ensure a high standard of customer service and reliability in both the near and long term. Additionally, PG&E will collaborate on studies with leading researchers at organizations such as DOE, NETL, the CEC and the Scripps Institute of Oceanography, as well as Stanford University, Princeton University and the University of California, on a variety of climate change adaptation topics.