1. An Introduction to Two ARB-Approved CAR Protocols:
Livestock Methane Destruction
and
Ozone Depleting Substance Destruction
CAR Offsets Workshop, NYC, July 26, 2011 1

2. Environmental Credit Corp
Environmental Credit Corp. (ECC) is the #1 US Offset Project Developer (Point Carbon, 2010). Since 2004, ECC has been developing emission reduction projects and providing greenhouse gas services to projects throughout the US, as well as in Mexico, Brazil, and India.
ECC has 65 projects listed through programs including the Climate Action Reserve (CAR), the Clean Development Mechanism (CDM), and the Chicago Climate Exchange (CCX).
ECC has registered credits for a wide variety of project types:
Ozone Depleting Substance Destruction
Livestock Methane Destruction
Composting
Landfill Methane Destruction
Renewable Energy 2

3. ECC Projects in the US
When we started ECC, about six years ago, we were one of the first offset aggregators to join in the Chicago Climate Exchange.
Last year, we were ranked as the #1 offset project developer in the US.
We focus primarily on agricultural projects, but also do a number of landfill methane capture, composting and refrigerant gas destruction projects.
These projects have so far formally registered close to one and a half million tons of CO2 emission reductions, and are on track to reduce about a million tons a year or more.
These projects also represent many millions of dollars of investment by ECC and our partners.
Livestock methane capture
Landfill methane capture
Composting
Destruction of Ozone Depleting Substances

4. Presentation Overview
I. Livestock Methane Destruction
General Characteristics of the Project Type
Utilization of the CAR protocol to date
Project process, Crediting issues, and Risks
Outlook for Livestock Methane Projects
II. Ozone Depleting Substance destruction (ODS)
Outlook for ODS Projects 4

5. Livestock- General Characteristics
Livestock Agricultural Methane Destruction projects prevent the release of methane into the atmosphere.
Manure from dairy cows, swine, and other farm animals often decomposes anaerobically- a process which creates methane.
Rather than allowing the methane to escape, Livestock projects capture the methane. Once captured, the methane can be flared; used to create heat or electricity on-site; or cleaned and transported for use as renewable natural gas. 5

6. Case Study: Fessenden Family Dairy
manure lagoon
King Ferry, New York (Finger Lakes Region)
1,100 dairy cows
Liquid manure management (flush system)
Open-air anaerobic manure lagoon
dairy barns
I’d like to quickly give you an idea of what a offset project looks like, and who’s involved.
Here’s a family photo of Tim and Rhonda Fessenden of King Ferry, New York (on the far right) and their extended family.
They milk about 1100 dairy cows. As is common for mid-sized to large dairies, the manure from the cows is stored in a treatment lagoon before being returned to the field as fertilizer.

7. anaerobic decomposition
Animal manure storage is a widespread source of methane emissions
VOC, NH3, H2S, N2O, CO2, CH4
Odor
Greenhouse gases
The liquid manure in these lagoons decomposes to produce a biogas that is about half methane, a potent greenhouse gas.
You can see the biogas bubbling up to the surface in this slide.
anaerobic decomposition
(bacteria)
Air Quality Concerns:
Greenhouse gas emissions (Fessenden Farm ~200 metric tons methane/year)
Odor
Ammonia
Open-air manure lagoon

8. Manure collection
Photos: USEPA AgStar

9. Simple covers can capture methane from lagoons and reduce GHG emissions
Air-tight membrane cover
Biogas collection system
anaerobic digestion
biogas
CH4
Generator/flare
By simply covering the lagoon with what is essentially a very large pool tarp, Tim and Rhonda are now capturing and collecting the biogas for combustion, which destroys the methane.
In this case, Environmental Credit Corp. paid for the cover in exchange for a share of the carbon credits that are generated by the methane emission reductions, which amount to about 4,000 metric tons of CO2 equivalents per year. Enough to offset the CO2 emissions from about 20 rail cars full of coal.
Benefits:
Reduced GHG emissions (Fessenden Farm > 4,000 metric tons CO2e/year)
Reduced odor
Improved stormwater management
Potential for biogas use (renewable electricity, heat)
Covered manure lagoon

10. Lagoon Cover Design & Implementation
Simple, low-cost technology
U.S. supplier, local jobs
Rapid installation
Reliable operation
Farmer friendly
The construction of these covers is done by a US fabricator, often using local labor. It takes a crew of a half dozen several weeks to weld the cover together, accordion style, and pull it over the lagoon with an air tight seal.

12. Renewable Energy Production
Methane Emission Reductions
Methane Combustion
Established protocols
Independently audited
Formal registration
The biogas is monitored and piped to a flare or to a generator to produce renewable electricity that can be used on the farm or sold to the grid.
Methane emission reductions are carefully quantified using established protocols required by offset programs such as the CCX.
Monitoring reports are independently audited before they can be formally registered as carbon credits.
Renewable Energy Production

13. Fessenden Dairy -- Anaerobic Digestion to Energy
2nd Stage Effluent Storage
Manure & Food waste
1st Stage Heated Covered Lagoon Digester
Genset & Heat Exchange

14. Anaerobic digesters in US (livestock)
Number of operating digesters (Nov. 2010): AgStar Database
(129 Dairy)
Source: USEPA AgStar

15. Common Technologies Ambient Temperature “Lagoon Covers”
Plug Flow/Mixed Plug Flow
Complete Mix
Other…
Photo: RCM International
Photo: Fair Oaks Farms

16. Plug Flow Manure Digester

17. Mixed Plug Flow Manure Digester

18. Centralized Complete Mix Digester
Huckabay Ridge, Texas

19. Ag Methane- General Characteristics
Duration of Project
Long years
Relative Credit Yield
Low k per year
Total Available Market
Large, stable
Capital Requirements
High
Associated Revenues
Energy Sales, Manure Management Cost Savings 19

20. Ag Meth- Utilization of the CAR Protocol
# of Issuances:
Average Issuance Size:
,000
,700
,600
,100
2011-
*As of July 14, 2011 20

21. Ag Methane Process, Issues, and Risks
General Process of an Agricultural Methane Project:
Identification of a candidate dairy or swine farm
Selection of digester technology and design
Electricity? Flaring? Thermal? Decision is largely dependent on the availability, on a state by state basis, of incentives, RECs, feed-in tariffs, etc.
Installation of the monitoring equipment necessary to comply with CAR protocol
Accumulation of a year of activity- CRTs are only granted to emission reductions which have already occurred
CAR Project Developers like ECC monitor and quantify the emission reductions, and hire independent third-party verifiers to assess the accuracy of our emission reduction claims 21

22. Ag Methane Process, Issues, and Risks
Ag Methane Projects face some unique challenges:
The CRT value tends to be relatively smaller compared to other revenues and cost savings associated with the project
Relatively small quantity of emission reductions per project means that CAR listing and verification expenses, along with required monitoring and sampling costs, tend to exceed the value of the CRTs for all but the largest farms 22

23. Ag Methane- Outlook
The implementation of new projects will likely be influenced more by Federal and State energy policy than by GHG programs.
However, changes which act to reduce fixed GHG-program related project expenses could spur new project development.
Possible cost-saving mechanisms that could spur investment:
Bundling of projects
Allowing conservative defaults in place of direct measurements
Use of electrical production data in lieu of gas flows and gas composition
CDM-style “small scale” project designation with different requirements and costs 23

24. Ag Methane- Outlook
For their upcoming compliance program, CARB has thus far treated CAR Ag Methane CRTs favorably, but there are risks:
Initial proposal discounted CAR CRTs on a 1 CRT for .87 ARBs basis, but ARB appears to have corrected this in its recent drafts
A “desk review” may be possible for some project verification transitions, but the cost of even a “desk review” is likely to be substantial on a per-credit basis
- 2 - 24

25. Presentation Overview
I. Livestock Methane Destruction
General Characteristics of the Project Type
Utilization of the CAR protocol to date
Project process, Crediting issues, and Risks
Outlook for Livestock Methane Projects
II. Ozone Depleting Substance destruction (ODS)
Outlook for ODS Projects 25

26. ODS- General Characteristics
The destruction, usually by high-heat incineration, of high GWP CFC gases including R-11, R-12, R-114, and R These are gases whose production has been banned internationally by the Montreal protocol.
This project type should not be confused with CDM projects which involve the destruction of HFC-23 (HFC-23 is a by-product of the production of HCFC-22). 26

27. ODS- General Characteristics
ODS gases are primarily sourced from four main stockpiles:
Gases used as refrigerants in older (pre-1996) household appliances, commercial HVAC units, and industrial chillers
Gases used as coolants in older vehicle air conditioning systems
Gases used as blowing agents in foam appliance insulation
Gases used as blowing agents in building insulation ( constructions)
ODS gases have extremely high Global Warming Potential (GWP):
Gas
GWP (CO2 equivalent)
R-11
4,750
R-12
10,900
R-114
10,000
R-115
7,370
In other words, one pound of R-12 is has the same climate change impact as 10,900 pounds of Carbon Dioxide 27

28. Climate Smart PG&E ECC ARCA Video- Appliance Recycling

29. ODS- General Characteristics
Accessible Banks of CFCs in Refrigeration/AC Equipment in the United States will decrease rapidly as CFCs leak (chart assumes no intervention of carbon market- no destructions):
Year
CFC-11
CFC-12
CFC-115
Total (MMTCO2e)
2005 44
290 15
349
2010 31
146 6
182
2015 9 32 1 41
2020
US EPA Vintaging Model 2007 29

30. ODS- General Characteristics
Duration of Project
Short- 0-3 months
Relative Credit Yield
Extremely High- 50k-180k per destruction
Total Available Market
Large, finite, rapidly declining
Capital Requirements
High
Associated Revenues
None 30

31. ODS- Utilization of the CAR Protocol
# of Issuances:
Average Issuance Size:
,000
,325
*As of July 14, 2011 31

32. ODS Process, Issues, and Risks
General Process of an ODS Destruction Project
Refrigerants are aggregated together, often in what the industry calls an “ISO”- a large transportation tank which can hold 30-35,000 pounds of gas
Tanks are taken to one of six destruction facilities in the United States which use EPA-approved incineration methods to destroy the gases
Inbound and outbound weights are measured, along with chemical composition analysis of the shipment
CAR Project Developers like ECC monitor and quantify the emission reductions, and hire independent third-party verifiers to assess the accuracy of our emission reduction claims 32

33. ODS Process, Issues, and Risks
ODS Projects face some unique challenges:
Declining opportunity- as stockpiles are destroyed, they will never be replaced
Increasing cost/ diminishing returns:
low hanging fruit has been grabbed first- eligible gases which were sitting around in large quantities have been destroyed (Note- US government stockpiles are not eligible)
Accessing some stockpiles, for example gases used as blowing agent in building insulation, is possible, but very expensive and logistically challenging
The success of the program causes the market value of the gas to increase- socially desirable outcome, but limits offset supply
Limited destruction facilities in US- capacity constraints 33

34. ODS Outlook
While ODS projects are not likely to grow substantially over the next few years, these projects should be a significant and stable supply of offset credits for 5-10 years.
For their upcoming compliance program, the CA Air Resource Board (CARB) has offered CAR ODS CRTs fairly favorable treatment-
1 for 1 exchange of CAR CRTs for ARBs
Most ODS verifications will be subject to only a “desk review” by an ARB-approved verifier in order to transition
Cost of “desk review” process should be relatively insignificant per project, given the large size of typical ODS verifications 34

35. Portfolio Manager and CFO
Derek Six,
Portfolio Manager and CFO
(607)