Greenhouse Gas & Energy Inventory

GE completed its ninth annual global greenhouse gas (GHG) inventory covering emissions during 2010. GE also separately reports GHG emissions from its equity investments in energy projects.

Operational GHG Emissions

GE announced its own internal GHG emissions and energy intensity reduction commitments in connection with the launch of the ecomagination campaign in March 2005. GE achieved one of its three goals by reducing its GHG intensity by 41% by the end of 2008, and exceeded the GHG and energy performance that would be needed to meet the other two goals in 2012. Therefore, GE established two additional goals last year to raise the bar on needed GHG and energy performance, pledging for its operations to (1) reduce its absolute GHG emissions by 25% from a baseline of 2004 through 2015, and (2) improve its energy intensity (MMBtu/$ million revenue) by 50% by 2015 from a 2004 baseline.

To ensure that GE meets these important commitments, GE has put together a multibusiness and multifunctional team to implement our reduction strategy to develop and capture the most cost-effective GHG reduction and energy efficiency opportunities. GE believes that technical innovation will lead to cost-effective GHG reduction opportunities as well as improvements in energy efficiency, and, therefore, we have structured our approach to focus on integrating innovative GE solutions into our goals implementation approach. Our Global Research Center has been participating heavily in these efforts.

Each one of GE’s businesses with significant GHG emissions has developed a strategic plan to meet GE’s goals of reducing the Company’s GHG emissions. The Company has also developed a specialized database for tracking projects and sharing best practices. To date, GE has identified numerous opportunities for CO₂ reduction and has executed on many projects.

Energy Treasure Hunts

GE’s mechanisms to manage GHGs and energy include “Energy Treasure Hunts,” a lean manufacturing–based process originally developed by Toyota. More than 300 treasure hunts have been conducted globally across GE to date, and this process has driven a significant reduction in GHG emissions and energy use. This process has also created a pipeline for future projects.

Recognizing Our People

To recognize the hard work of our employees that drives reductions, we started an eCO₂ awards and certification program recognizing those sites that achieve at least a 5% GHG reduction. To be certified, sites must demonstrate that reductions were achieved independently of any changes in production levels. During 2010, 35 sites were certified and seven sites received eCO₂ awards, based on extraordinary results and use of GE technology.

Outreach

We have shared our approach to GHG and energy reductions with GE ecomagination product partners, various customers and suppliers. GE has also shared its experience with regulatory agencies. GE was one of the contributors to the U.S. Environmental Protection Agency’s (EPA) Lean and Energy Toolkit (www.epa.gov/lean), published during 2007. The U.S. EPA Office of Innovation also completed a case study on GE’s GHG avoidance work at GE Aviation’s outdoor aircraft engine test facility in Peebles, Ohio, where the production team used lean manufacturing techniques to change its processes to reduce GHG emissions per engine test conducted.

GHG Emissions Totals

GE added 16 facilities that were acquired, newly established or newly determined to be within the boundaries of GE’s 513-site Large Site inventory and removed 52 facilities that were divested, closed or newly determined to be outside the boundaries of GE’s inventory during the course of 2010. We anticipate further changes in our emissions profile in 2011 due to acquisitions and divestitures that will be made during the course of the year. Our adjusted baseline is now approximately 0.3% lower than the adjusted 2004 baseline reported last year and 38% lower than the original baseline reported in 2004. About 49% of the sites in GE’s original baseline inventory have been removed. The total number of sites has decreased in 2010 from 549 to 513. Adjusting the 2004 totals to reflect the changes in GE structure allows us to determine the real change in emissions and energy use from 2004 to 2010.

GE’s worldwide GHG emissions from operational sources were reduced by approximately 24% in 2010 compared to 2004, as shown below.¹ GE’s worldwide energy use from operational sources decreased approximately 18% to 53 million gigajoules in the same period. GHG intensity was reduced by approximately 37% and energy intensity was reduced by approximately 33%. The GHG and energy intensity reductions are less than those reported last year due to the decrease in GE revenue in 2010 that overshadowed the decreases in GHG emissions and energy use.

The 2010 data include 513 individual GE Large Sites as well as about 3,450 small and medium sites, the vehicle and air fleets that GE operates for its own use, and numerous desalination plants that GE owns and operates for its customers.

GE has established 2004 as its baseline year for measuring progress toward achieving its GHG emissions reduction commitments. GHG emissions data for 2004 are used for comparison purposes.

GHG Emissions Types

Approximately 87% of our operational GHG emissions are CO₂, as shown below. These emissions result from combustion of fuels and process or fugitive emissions of CO^₂ from our facilities (direct emissions) and from the generation of purchased electricity, steam, hot water and chilled water at third-party facilities (indirect emissions). Natural gas accounts for almost 85% of the fuels directly combusted at our operational facilities on an energy input basis. GE did not combust any coal at operational facilities in 2010.

Approximately 12% of GE’s GHG emissions are HFC-134a and HFC-245fa, which occur during insulation foam-blowing operations at our refrigerator manufacturing plants. Foam is used to improve the energy efficiency of our refrigerators, and HFCs are substitute foam-blowing agents that GE is using to replace an ozone-depleting substance that is being phased out under the U.S. Clean Air Act.

GE operations in the U.S. and Europe account for approximately 91% of GE’s worldwide operational emissions.

Protocol

The GE GHG Inventory is modeled after the World Resources Institute/World Business Council for Sustainable Development (WRI/WBCSD) “Greenhouse Gas Protocol: A Corporate Accounting and Reporting Standard, Revised Edition” (2004) (the “Protocol”). For its operational inventory, GE follows the “control” approach and includes GHG emissions from sources over which it has operational control. The Protocol also identifies three scope categories: Scope 1 includes direct GHG emissions from sources that are owned or controlled by the reporting company; Scope 2 includes indirect emissions associated with the generation of imported/purchased electricity, steam, hot water or chilled water; and Scope 3 allows for other indirect emissions that are a consequence of the activities of the reporting company but occur from sources owned or controlled by another entity. According to the Protocol, Scopes 1 and 2 must be accounted for; however, Scope 3 is optional. GE collects data sufficient to determine most Scope 1 and Scope 2 emissions. Data on Scope 3 emissions are not collected because GE does not control these emissions, because data for these emissions are not readily available to GE and because there is no internationally accepted protocol for quantifying Scope 3 emissions. GE is currently working with WRI/WBCSD on the development of a Scope 3 Protocol.

However, with GE’s decision to become one of the first financial services companies to report GHG emissions related to equity investments in power projects, we are taking an approach that, in one respect, does not conform precisely to the Protocol. The Protocol asks reporting entities to report GHG emissions based on either an operational control or an equity basis. Because GE has both significant manufacturing emissions and significant emissions resulting from equity investments in power projects, reporting on an operation control basis for the manufacturing operations and an equity share basis for the power plant investments is more accurate and more transparent than reporting on either an operational control basis only or an equity share basis only for the entire corporation.

Inventory Process

There are four categories of data for GE’s operational GHG Inventory:

• Energy use and emissions data from the largest facilities in the Company (approximately 83% of total GE GHG emissions)
• Desalination plant emissions
• Emissions estimates for small facilities
• Mobile source emissions from centrally managed vehicle fleets and aircraft

Large Sites

GE created a GHG Inventory database in Gensuite^® (Gensuite), which is GE’s proprietary Web-based EHS management system, to collect the necessary detailed inventory data from the following types of facilities:

• All manufacturing, power generation and engine/turbine test facilities
• All service and distribution facilities with more than 50 employees
• All major business headquarters
• All major stand-alone data centers

GE included 558 worldwide facilities meeting the above criteria in its original 2004 baseline GHG Inventory database and 513 worldwide facilities meeting the above criteria in its 2010 GHG Inventory database. The change in the number of facilities from 2004 to 2010 is the net of those facilities removed from the inventory because of divestment, closure or consolidation with other facilities, those facilities added to the inventory because of acquisitions, newly established facilities or separation from facilities included previously, or facilities removed or added to the inventory due to changes in GHG inventory boundary determinations.

The GHG Inventory database allows each site to enter the quantity of fuel used by fuel type and the unit of measure based on its own fuel purchase and/or combustion records as well as data on emissions of other GHGs. Gensuite calculates the emissions, in metric tons of CO₂ equivalents, for each emission category as well as a total for all emission categories. Gensuite allows entry of data for use of coal, liquid fuel, alternative fuels, natural gas and electricity, as well as data for other GHG uses in process operations. For some of these categories, a specific subcategory can be chosen (e.g., residual vs. distillate oil).

GE uses emission factors primarily from the USEPA Mandatory GHG Reporting Rule (40 CFR Part 98) to calculate CO₂ emissions for the fuel types evaluated in the GE GHG Inventory. Other emission factors are obtained from WRI and IPCC documents when USEPA factors are not available. GE uses USEPA eGRID subregional average emission factors to calculate indirect emissions resulting from the purchase of electricity in the U.S. Indirect emissions resulting from the purchase of electricity outside of the U.S. are calculated using countrywide average factors obtained from the International Energy Agency. Emissions of other GHGs were calculated based on process data. The 100-year global warming potential (GWP) for CH₄, N₂O, HFCs, SF₆, and PFCs are taken from the USEPA Mandatory GHG Reporting Rule (40 CFR Part 98). Emissions of CH₄ and N₂O from the combustion of fuels are calculated using emissions factors obtained from EPA Climate Leaders Program guidance documents.

Gensuite calculates direct combustion emissions by multiplying a given quantity of fuel by an emission factor. As with direct fuel combustion emissions, Gensuite also calculates indirect emissions for electricity that was purchased by multiplying a given quantity of electricity by an emission factor. Direct emissions resulting from the generation of electricity for export off-site are included within the direct emissions. The Protocol recommends this approach and instructs companies to report emissions from exported electricity, heat or steam under supporting information and not to deduct those emissions from company emissions.

The inventory includes 23 sites in the U.S., Europe and Asia that import steam, hot water or chilled water from third-party cogeneration plants, district heating plants or chilled water plants. Each of these sites determined the quantity and type of fuel or electricity needed by the third-party plant to generate the steam, hot water or chilled water purchased by the site. This quantity of fuel or electricity is then multiplied by the appropriate emission factor to determine the indirect emissions from steam, hot water or chilled water purchases. A default thermal efficiency of 80% is used to calculate the quantity of fuel needed to generate the steam or hot water that was purchased, based on guidance provided in the WRI/WBCSD Emission Calculation Tool. Most of the plants use the default thermal efficiency. Methodology provided in Section 8.6 of the California Climate Action Registry General Reporting Protocol, October 2002, which is consistent with the principles stated in the Protocol for the purchase of energy, is used in determining the quantity of electricity and therefore the GHG emissions associated with the purchase of chilled water.

Emissions of other GHGs (direct process emissions of CO₂, CH₄, N₂O, HFCs, SF₆, and PFCs) are entered directly into Gensuite as kilograms or metric tons and converted to metric tons of CO₂-equivalents, using EPA’s published 100-year GWP coefficients. Generally, emissions are based on purchase records and the assumption that all used material was emitted. For certain processes, however, site-specific knowledge of the process and/or emissions factors are used to determine actual emissions. GE emits only minimal quantities of PFCs.

GE reviewed its sites with the largest square footage within its small sites GHG estimate and discovered that seven of these sites had entered electricity and fuel use data into the Energy Management Information System database that was designed to manage utility invoices. Therefore, actual energy use data were available to establish the 2004 baseline and current-year emissions for these sites. GE calculated the GHG emissions using the actual energy use data and emission factors in the same manner as with the large sites inventory.

Desalination Plants

GE owns and operates numerous seawater desalination plants located primarily in Spain and on islands in the Caribbean. These plants provide potable water to various municipalities for distribution to their citizens. Purchased electric power is by far the primary GHG emissions issue for these plants. The quantity of purchased electric power is estimated based on the quantity of potable water produced and an energy use factor provided by the GE Water & Process Technologies business that owns and operates the plants. The International Energy Agency electric emission factor is used to calculate GHG emissions for facilities located in Spain. The Annex II North American average factor obtained from the International Energy Agency is assumed for calculating the GHG emissions for the facilities located in the Caribbean. The appropriate eGRID subregional average factor is used for one facility located in California.

Small Sites

GE has almost 3,450 small locations worldwide for which detailed site-specific data are not collected individually due to the difficulty and expense that would be associated with such an effort in comparison to the relative significance of the emissions in GE’s overall inventory. Emissions for these small facilities in the U.S. are calculated based on the “Energy Usage Determination Based on Commercial Buildings Energy Consumption 2003 Survey Data Calculation Worksheets, November 2004, version 1.0,” obtained from CH2M Hill in its role as support contractor for the EPA Climate Leaders Program. Using this tool, one can determine the expected electricity and natural gas usage for a facility based on the type, location and square footage of the facility. GHG emissions are calculated by multiplying standard emission factors (eGRID sub-regional average electric emission factors in the U.S. and the same natural gas factor used for large facilities) times the calculated energy usage per facility obtained from the tool. Emissions for small facilities outside of the U.S. are calculated using average electricity and natural gas usage values by facility type derived from the tool. These average usage values are then multiplied by the facility square footage data and appropriate country average emission factors to calculate emissions. Emissions calculated from natural gas usage are considered direct emissions and emissions calculated from electricity usage are considered indirect emissions.

Mobile Sources

GE calculates emissions from motor vehicles centrally managed by GE Fleet Services in the U.S., Canada, Europe, Japan, Australia, New Zealand and Mexico, motor vehicles leased or rented from Penske Truck Leasing and Ryder Logistics in the U.S., and motor vehicles owned by GE businesses in the U.S. In addition, GE calculates emissions from GE-owned corporate aircraft, including the flying test-bed (a large airliner used for flight-testing jet engines). Mobile-source emissions are calculated by obtaining fuel-use and/or vehicle-miles-traveled records and applying appropriate emission factors obtained from the USEPA Climate Leaders guidance documents. Methane and nitrous oxides emissions for mobile sources are also calculated using emission factors obtained from USEPA Climate Leaders guidance documents. In addition, GE includes emissions from GE-controlled motor vehicles that are refueled on-site at GE Large Sites. The emissions from these vehicles are included in the combustion of fuels calculations for Large Sites discussed above.

GE’s worldwide GHG emissions are calculated by summing the Large Site, desalination plant, mobile source, and small site emissions for each year.

Sources Not Included

GHG emission sources not included in the Inventory because GE did not have operational control over them include the following:

• Minority-owned joint ventures
• Energy generation facilities where GE has a service relationship but where GE does not have operational control
• Aircraft, motor vehicles, railroad locomotives, etc., owned by GE but leased to and controlled by others
• WRI/WBCSD Scope 3 sources

GHG operational emission sources not included in the Inventory because the emissions from the sources were expected to be insignificant include the following:

• Motor vehicles controlled by GE but not centrally managed through GE Fleet Services, Penske Truck Leasing or Ryder Logistics and not owned by GE businesses in the U.S. and not refueled on-site at GE Large Sites
• Leakage of HFCs from GE-owned and -operated air conditioning, refrigeration and chilling systems
• NBC Universal off-site movie and TV show production operations
• Remedial operations operationally controlled by GE, other than the Hudson River, which was included in the Large Sites inventory for the first time in 2009

Quality Assurance

GE is continuing to work toward increasing the accuracy of its GHG Inventory. It has modified its GHG Inventory collection database to simplify it and to eliminate issues that have tended to introduce errors in the past. In addition, GE has developed numerous guidance documents and an internal guidance Web site and has provided extensive training on the inventory and on the use of Gensuite. Finally, GE has performed extensive data quality reviews on the GHG inventories, including side-by-side comparisons of GHG emissions for 2009 and 2010, to identify and understand the reasons for significant differences (changes in production, fuel, manufacturing processes, etc.). In addition, detailed data reviews were conducted for the 50 highest GHG-emitting sites. A number of data quality issues were identified, analyzed and corrected, where necessary, through this process.

Independent Verification of the 2004 and 2008 GE GHG inventories

Because 2004 serves as GE’s baseline year, the Company retained an independent consultant, Cameron-Cole, LLC, in late 2005 to review its inventory and provide verification. Cameron-Cole issued a verification statement in March 2006, stating that it found nothing to indicate any material errors or omissions or anything that would indicate that GE’s inventory was not complete. Cameron-Cole also found that GE’s inventory generally conformed to the accounting principals in the Protocol.

GE also retained Cameron-Cole during 2009 to perform an independent verification of its adjustments to the 2004 inventory baseline and the 2008 GHG Inventory, since 2008 was the goal year for GE’s original GHG intensity reduction goal. Cameron-Cole issued a verification statement in December 2009 that again stated that they found nothing to indicate any material errors or omissions in the 2004 baseline adjustments and the 2008 GHG Inventory, or anything that would indicate that GE’s inventory was not complete. In addition, Cameron-Cole stated that they believed that GE had met its GHG intensity reduction commitment. Finally, Cameron-Cole found that GE’s inventory generally conformed to the accounting principles in the Protocol.

Power Plant Equity Investment GHG Emissions

GE also reports greenhouse gas emissions from its investments in power projects through GE Energy Financial Services.

GE Energy Financial Services invests in power projects in a number of ways: equity, lease and debt. We are reporting emissions from investments in which GE Energy Financial Services has an equity interest based upon the business unit’s percentage of equity ownership.

In 2010, GE Energy Financial Services’ greenhouse gas emissions totaled approximately 8.7 million metric tons of CO₂ equivalent from 22 investments. In 2009, by comparison, GE Energy Financial Services held an equity interest in 24 power projects, which emitted 6.5 million metric tons of CO₂ equivalent. The increase in emissions between 2009 and 2010 is primarily due to changes in portfolio composition, output from plants that completed construction or maintenance, and higher dispatch of existing assets. Dispatch levels reflected trends across the United States power sector, which recorded stronger electricity production and emissions in the last year, driven by an economic recovery and hotter summer weather.

The renewable energy projects in which GE Energy Financial Services holds equity interests avoided 4.7 million metric tons of CO₂ equivalent in 2010, compared to 4.9 million metric tons reported in 2009. Portfolio additions and improved wind resources increased the projects’ renewable energy production from 2009 to 2010, but reported decreased avoided emissions figures due to our use of more conservative emissions rates for calculating 2010 data. The 2010 emission rates excluded the contribution of baseload power plant emissions, whereas 2009 rates included all fossil power plant emissions. Using the old methodology, 2010’s avoided emissions would have totaled 5.5 million metric tons.

With investments totaling $6 billion at the end of 2010, renewable energy now constitutes nearly 30 percent of GE Energy Financial Services’ overall portfolio, up from about 6 percent in 2006. The investments have spanned 14 countries, 95 wind farms, 40 solar installations, six hydroelectric projects, 12 landfill gas facilities, and 15 projects involving other technologies, across a wide spectrum of capital — from project equity to debt and venture capital.

In 2006, GE Energy Financial Services demonstrated leadership by becoming one of the first financial services companies to report greenhouse gas emissions associated with power project equity investments. The GE unit continues this leadership through exploring a focus on investments in energy conservation and efficiency, pricing CO₂ for coal and other fossil fuel plants into deal approval processes, and continuing to voluntarily report emissions.