Compost and Carbon Credits - North America

Alia Lamaadar, Project Management and Consulting

An examination of the aerobic composting of wastes, summarizing and offering insights into what opportunities exist to generate carbon credit revenues.

Cover Image: LAJ2006

A l i a L a m a a d a r | a l i a @ l a m a a d a r . c o m | l i n k e d i n . c o m / i n / a l i a n o e l l e V a n c o u v e r , B C , C a n a d a

Opportunities for Carbon Credits | Compost

April 2011 CARBON CREDITS | COMPOST page 2

Alia Lamaadar | [email protected]

Introduction Frustration is often expressed about the lack of clear and accessible information available on carbon markets and carbon crediting systems. Rigorous literature reviews have found a general lack of publicly available reports detailing the broad array of mandatory and voluntary credit programs (Kollmuss, et al. 2010, 2). Even less common, is up-to-date information on how various offset programs relate to specific emission reducing activities and industries. This paper hopes to clearly summarize and offer insight into what opportunities exist to generate carbon credit revenues from various activities.i Understanding Carbon Markets

Figure 1: Projected Carbon Market Size 2005-2011 (EURbn) (Porto 2011)

Carbon credits and carbon markets are vital components of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). A carbon credit, also known as a carbon offset or carbon asset, is a generic term for any tradable certificate or permit representing the right to emit one tonne of carbon dioxide or equivalent (CO2e) gases, like methane or nitrous oxide.

Carbon trading within these markets is the application of an emissions trading approach, meaning GHGs are capped and then markets are used to allocate the emissions among the group of regulated sources. The goal is to allow the market to drive industrial and commercial processes towards reducing emissions and adopting less carbon intensive approaches. Since GHG mitigation projects generate credits with a monetary value, it is hoped that market forces will apply this value to promote the commercialization and adoption of cleaner technologies and practices.



Expectations are for the global carbon market to continue to experience steady growth (See Figure 1), reaching a projected total value of $136bn in 2011 (Porto 2011). Compost and Carbon Credits Carbon credit programs attempt to address the largest anthropogenic (human-related) GHG sources. As methane is 20 times more effective in trapping heat in the atmosphere than carbon dioxide over a 100-year period, landfills and livestock manure management have received a great deal of attention from both regulators and carbon credit programs. In the U.S., the EPA reports that landfills are the second largest human-related source of methane, accounting for 23 percent of all methane emissions in 2007. Methane is generated in landfills and open dumps as waste decomposes under anaerobic (without oxygen) conditions (U.S. EPA 2010). In the case of livestock manure management, liquid manure management systems, such as lagoons and holding tanks also produce significant methane emissions.

While methane may be

generated in some composting operations, if properly aerated and agitated, the likelihood of achieving the anaerobic conditions required to generate methane is vastly decreased (See Figure 2).

The current U.S. carbon market is primarily composed of a number of voluntary carbon credit

standards (see Figure 3), the most prominent of which reward the methane reducing potential of composting activities. The following section outlines two of the dominant U.S. carbon credit programs, VCS and CAR, as well as the regulated market in Alberta, Canada.

The Verified Carbon Standard VCS was formally launched in 2007 and its third major update was released in early 2011. At the heart of the Standard is a robust eight-point framework that defines the attributes of a quality assured Voluntary Carbon Unit (VCU). All VCUs produced under the Standard must represent GHG emission reductions that are real, measurable, additional and permanent, as well as independently verified, conservatively estimated, uniquely numbered and transparently listed (VCS 2008).

Figure 2: U.S. anthropogenic methane emissions in 2009 (U.S. EPA 2011)



Project proponents can use a methodology already approved under the VCS Program or another approved program, such as the Climate Action Reserve (CAR) or the United Nations Framework Convention on Climate Change (UNFCCC) Clean Development Mechanism (CDM). Or project proponents can use the VCS methodology approval process to develop new methodologies. Recent Composting Developments: For composting practices, the most applicable protocol would likely be CDM methodology AMS-III.F, “Avoidance of methane emissions through composting, Version 10.0.” This methodology is applicable to the composting of the organic fraction of municipal solid waste and biomass waste from agricultural or agro-industrial activities (UNFCCC 2011). Following a request for clarification from a project proponent, as of Version 8 (July 31, 2009) the UNFCCC secretariat now accepts manure as an eligible waste stream. VCS has currently issued credits to four projects under this methodology. The Climate Action Reserve The Climate Action Reserve’s (CAR) project protocols provide regulatory-quality guidelines for project development and the quantification of carbon offset credits, known as Climate Reserve Tonnes (CRT). The Climate Action Reserve only registers projects that have been independently verified as adhering to its project protocols to ensure that emission reductions associated with projects are real, permanent and additional. It also assigns unique serial numbers to all generated carbon credits. This prevents the possibility of double counting and assures buyers that when a CRT has been retired it cannot be sold or transferred again (CAR n.d.). Recent Composting Developments: In June of 2010 CAR adopted the “The Organic Waste Composting Project Protocol” to apply to GHG reductions from projects that avoid methane emissions to the atmosphere through the diversion and composting of municipal food waste and food soiled paper waste that would otherwise have been sent to a landfill. As of the completion of this paper, the protocol only applies to food waste projects in the U.S., though the Reserve Board

Figure 3: Utilization of the Various Voluntary Carbon Standards 2009 (VCS Association 2010)



is considering a Canadian compost protocol and may announce this intent by early May, 2011 (Levin 2011).ii Until June 30, 2011, the Reserve will accept submissions from projects with start dates on or after June 30, 2008. After this date, projects must be submitted within 6 months of the project start date. To date, two projects have been registered, the Wilmington Organic Recycling Center (WORC), owned and operated by Peninsula Compost in Delaware and Zanker Road Resource Management’s Z-Best Food Waste Composting facility in Gilroy, California. As the June 30th deadline approaches, there is expected to be an increase in project submissions (Levin 2011). Alberta Offsets Alberta was the first jurisdiction in North America to impose comprehensive regulations requiring large facilities in various sectors to reduce their greenhouse gas emissions. As of July 1, 2007, the Specified Gas Emitters Regulation requires Alberta facilities that emit more than 100,000 tonnes of greenhouse gases a year to reduce emissions intensity by 12 per cent and offsets are one of the mechanisms regulated entities can use to reach compliance. In addition to traditional carbon credit requirements (real, demonstrable, quantifiable, additional), offsets must be Alberta-based, originate from a voluntary action of an approved project-type, and have resulted from actions taken on or after January 1, 2002 (Climate Change Central 2009). Under the category of “Methane Management,” Alberta Environment offers the “Aerobic Composting Quantification Protocol.” This protocol covers the diversion of organic residues from landfill for safe use in land application. Composting of manure is specifically excluded from quantification under this protocol due to “a lack of scientific understanding of the nitrous oxide emissions” (Climate Change Central 2009). Projects including mixed streams with manure may still be considered, but the manure portion of the stream must be excluded from the calculations. Recent Compost Developments: To date two projects have been registered under this protocol. They are expected to generate more than 400,000 tCO2e in emissions reductions-removals over their lifetime (Alberta Emissions Offset Registry n.d.). The Future The last year has witnessed a number of unprecedented fluctuations in climate policy, regulation and operating environment. The Chicago Climate Exchange’s cap and trade experiment came to an end, while the California Air Resources Board further solidified its intent to implement the world’s second largest carbon market in January 2012. It remains unclear what, if any, role the US EPA will play in regulating carbon emissions throughout the US, or if federal emissions trading systems will emerge in either Canada or the U.S. any time soon. Despite this uncertainty, emerging trends in waste management practices, regional climate initiatives, and increasing program accountability give reason for optimism that carbon markets will continue to experience tremendous growth in North America and that there is value to be found for composters.



Waste Management Practices: The latest U.S. data on municipal solid waste (MSW) management (see Figure 4) indicates that estimated generation was 389.5 million tons in 2008, with 69 percent being landfilled, 24 percent recycled and composted, and 7 percent combusted via waste-to-energy (van Haaren, Themelis and Goldstein 2010).

Figure 4: U.S. Breakdown of MSW practices 2008 (van Haaren, Themelis and Goldstein 2010)

The principle of “additionality” is at the heart of all carbon credit programs and stipulates that reductions must be additional to what would be created under a "business as usual" scenario. A 69 percent landfill rate for wastes, makes a compelling argument in favor of composting’s additionality. Further, the amount of credits a project can earn is directly proportional to the baseline emissions set by the landfill the wastes were diverted from. According to the U.S. EPA, even if all landfills were required to install conventional gas collection systems, somewhere between a quarter and a third of the methane produced by organic wastes would be emitted to the atmosphere due to the lag time between waste disposition and onset of gas collection (BioCycle 2009), and this is without considering fugitive methane emissions. Waste Management trends in favor of landfill diversions look promising for carbon credit potential, however in cases where diversions are mandated by law, the ability to earn credits may be restricted or eliminated. For example, landfill bans on yard waste eliminate the option of earning carbon offsets for green waste composting in these areas (BioCycle 2009). Regional GHG Initiatives and Regulations: In the absence of a comprehensive national emissions trading system (ETS) in either Canada or the U.S., the expectation is that regional climate initiatives will develop. As noted by Emilie Mazzacurati with Point Carbon, “North America enjoys



federalism that allows proactive states to move forward if the federal government does not, and as we have seen with [the Regional Green House Gas Initiative] several states are ready to have a cap-and-trade system up and running now. California’s policies will be a driving force going forward in the absence of a US ETS” (Point Carbon 2010). California’s AB 32 (Global Warming Solutions Act) directs the California Air Resources Board (ARB) to develop early actions to reduce global warming. California’s cap and trade system, set to launch in January 2012, will consist of compliance instruments that can be traded, including allowances and offsets issued by ARB and other programs including CAR and the Western Climate Initiative (WCI). So far, the ARB has indicated that offsets eligible for compliance will include CRTs from forestry, livestock methane, and ozone depleting substance projects, though this list will certainly expand over time (ARB 2010). Predictions for the initial carbon prices in California range between $10-15/t in 2012 and increasing to $50/t by 2020 (Tvinnereim 2011, i).

Figure 5: Western Climate Initiative’s Partner Regions (WCI 2010)

The Western Climate Initiative (WCI) is a joint strategy to reduce greenhouse gas emissions between seven U.S. states and four Canadian provinces (see Figure 5). Together, the partner jurisdictions comprise 20 percent and 76 percent of U.S. and Canadian GDP respectively (WCI 2010). The WCI Offset committee has reviewed a viable compost protocol, CDM AM0025 “Avoided Emissions From Organic Waste Through Alternative Waste Treatment Procedures” and found that it would likely meet WCI standards for offsets once the initiative goes live in 2012 (WCI 2010). Compost projects seem well positioned to earn credits in emerging regional carbon markets.



Monitoring, Reporting & Verification (MRV): Certainly, most composters across North America have been impacted by increasing MRV requirements for local, state/provincial and federal regulations over the past several decades. An unintended benefit of these requirements is that they prepare composters for the MRV requirements that they are likely to face from carbon credit programs. As even voluntary markets push for more rigorous MRV, composters working with qualified carbon credit project developers should find that little is required of them above and beyond their existing MRV practices. The closure of the Chicago Climate Exchange, far from being the death knell for regional carbon markets in the U.S., instead marked “the triumph of the next generation of climate programs, characterized by a fundamental shift toward more robust methods and systems to measure, report, and verify GHG emissions” (Stumhofer 2010). The advantage of rigorous compliance measures is reflected in the final sale price of carbon credits; the highest market value is derived from those programs with the most stringent standards. Conclusion The trend towards developing regional cap and trade systems speaks well for the future of carbon credits. California, the world’s eighth largest economy, is home to one in nine Americans. The decision by California voters to embrace cap and trade during one of the country’s worst economic downturns demonstrates a genuine political will to limit GHG emissions and invest in a low-carbon economy. As the need for improved waste management practices across North America converges with carbon credit programs designed to reward emissions reductions, composters who enter the market early stand to gain. Ultimately, carbon credits offer more than just additional revenue, but also the validation that composting practices contribute to a sustainable climate future.



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i While an effort is made at the onset of this paper to briefly outline the premise and tools of carbon markets, a basic understanding of the related terms and concepts is assumed. For a more detailed understanding of carbon markets please see Kollmuss, et al. 2010 or Brohé, Eyre and Howarth 2009. ii UPDATE - May 9, 2011: This intent has since been confirmed by CAR, and the protocol adaptation process is expected to be complete by early 2012.

Compost and Carbon Credits - North America

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