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

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Presentation on theme: "An Introduction to Two ARB- Approved CAR Protocols: Livestock Methane Destruction and Ozone Depleting Substance Destruction CAR Offsets Workshop, NYC,"— Presentation transcript:

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

2 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

3 ECC Projects in the US 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) General Characteristics of the Project Type Utilization of the CAR protocol to date Project process, Crediting issues, and Risks Outlook for ODS Projects

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.

6 Case Study: Fessenden Family DairyCase Study: Fessenden Family Dairy King Ferry, New York (Finger Lakes Region) 1,100 dairy cows Liquid manure management (flush system) Open-air anaerobic manure lagoon manure lagoon dairy barns

7 Animal manure storage is a widespread source of methane emissionsAnimal manure storage is a widespread source of methane emissions anaerobic decomposition (bacteria) VOC, NH 3, H 2 S, N 2 O, CO 2, CH 4 OdorGreenhouse gases Open-air manure lagoon Air Quality Concerns: Greenhouse gas emissions (Fessenden Farm ~200 metric tons methane/year) Odor Ammonia

8 Manure collectionManure collection Photos: USEPA AgStar

9 Covered manure lagoon Biogas collection system Generator/flare Benefits: Reduced GHG emissions (Fessenden Farm > 4,000 metric tons CO 2 e/year) Reduced odor Improved stormwater management Potential for biogas use (renewable electricity, heat) Air-tight membrane cover anaerobic digestion biogas CH 4 Simple covers can capture methane from lagoons and reduce GHG emissionsSimple covers can capture methane from lagoons and reduce GHG emissions

10 Simple, low-cost technology U.S. supplier, local jobs Rapid installation Reliable operation Farmer friendly Lagoon Cover Design & ImplementationLagoon Cover Design & Implementation

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12 Methane Emission ReductionsMethane Emission Reductions Established protocols Established protocols Independently audited Independently audited Formal registration Formal registration Renewable Energy Production Methane Combustion

13 2 nd Stage Effluent Storage2 nd Stage Effluent Storage 1 st Stage Heated Covered Lagoon Digester1 st Stage Heated Covered Lagoon Digester Genset & Heat ExchangeGenset & Heat Exchange Manure & Food wasteManure & Food waste Fessenden Dairy -- Anaerobic Digestion to EnergyFessenden Dairy -- Anaerobic Digestion to Energy

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

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 DigesterPlug Flow Manure Digester

17 Mixed Plug Flow Manure DigesterMixed Plug Flow Manure Digester

18 Huckabay Ridge, TexasHuckabay Ridge, Texas Centralized Complete Mix DigesterCentralized Complete Mix Digester

19 Ag Methane- General Characteristics Duration of ProjectLong years Relative Credit YieldLow k per year Total Available MarketLarge, stable Capital RequirementsHigh Associated RevenuesEnergy Sales, Manure Management Cost Savings

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

21 Ag Methane Process, Issues, and Risks General Process of an Agricultural Methane Project: 1.Identification of a candidate dairy or swine farm 2.Selection of digester technology and design 3.Electricity? Flaring? Thermal? Decision is largely dependent on the availability, on a state by state basis, of incentives, RECs, feed-in tariffs, etc. 4.Installation of the monitoring equipment necessary to comply with CAR protocol 5.Accumulation of a year of activity- CRTs are only granted to emission reductions which have already occurred 6.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

22 Ag Methane Process, Issues, and Risks Ag Methane Projects face some unique challenges: 1.The CRT value tends to be relatively smaller compared to other revenues and cost savings associated with the project 2.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

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

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

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) General Characteristics of the Project Type Utilization of the CAR protocol to date Project process, Crediting issues, and Risks Outlook for ODS Projects

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-115. 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).

27 ODS- General Characteristics ODS gases are primarily sourced from four main stockpiles: 1.Gases used as refrigerants in older (pre-1996) household appliances, commercial HVAC units, and industrial chillers 2.Gases used as coolants in older vehicle air conditioning systems 3.Gases used as blowing agents in foam appliance insulation 4.Gases used as blowing agents in building insulation ( constructions) ODS gases have extremely high Global Warming Potential (GWP): GasGWP (CO2 equivalent) R-114,750 R-1210,900 R-11410,000 R-1157,370 In other words, one pound of R-12 is has the same climate change impact as 10,900 pounds of Carbon Dioxide

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

29 ODS- General Characteristics YearCFC-11CFC-12CFC-115Total (MMTCO2e) US EPA Vintaging Model 2007 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):

30 ODS- General Characteristics Duration of ProjectShort- 0-3 months Relative Credit YieldExtremely High- 50k- 180k per destruction Total Available MarketLarge, finite, rapidly declining Capital RequirementsHigh Associated RevenuesNone

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

32 ODS Process, Issues, and Risks General Process of an ODS Destruction Project 1.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 2.Tanks are taken to one of six destruction facilities in the United States which use EPA-approved incineration methods to destroy the gases 3.Inbound and outbound weights are measured, along with chemical composition analysis of the shipment 4.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

33 ODS Process, Issues, and Risks ODS Projects face some unique challenges: 1.Declining opportunity- as stockpiles are destroyed, they will never be replaced 2.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 3.Limited destruction facilities in US- capacity constraints

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

35 Derek Six, Portfolio Manager and CFO (607)


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