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Opportunities for Carbon Credits | Compost

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

Alia Lam aadar | alia@lamaa dar.com | linkedin.com/in/alianoelle


Vancouver, BC, Canada
April 2011 CARBON CREDITS | COMPOST
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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.

   
Alia Lamaadar | alia@lamaadar.com
   
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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.
Figure 2: U.S. anthropogenic methane emissions in 2009 (U.S. EPA 2011)
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).

   
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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 Figure 3: Utilization of the Various Voluntary Carbon Standards 2009
for clarification from a project (VCS Association 2010)
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

   
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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.

   
Alia Lamaadar | alia@lamaadar.com
   
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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
   
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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.

   
Alia Lamaadar | alia@lamaadar.com
   
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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.

   
Alia Lamaadar | alia@lamaadar.com
   
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Bibliography
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(accessed 03 24, 2011).
—. Methane. 06 22, 2010. http://www.epa.gov/methane/sources.html (accessed 03 22, 2011).
U.S. EPA. Methane and Nitrous Oxide Emissions From Natural Sources. Report, Washington: Office of
Atmospheric Programs, 2010.
UNFCCC. "UNFCCC - CDM." AMS-III.F.: Avoidance of methane emissions through composting --- Version
10.0 . 02 18, 2011.
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05, 2011).
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http://www.westernclimateinitiative.org/component/remository/func-startdown/256/ (accessed 03 18, 2011).
—. "WCI Review of Existing Offset Protocols." The Western Climate Initiative. Task Group 3 WCI Offset
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(accessed 03 18, 2011).
van Haaren, Rob, Nickolas Themelis, and Nora Goldstein. "The State of Garbage in America." BioCycle 51,
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Alia Lamaadar | alia@lamaadar.com
   
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Stumhofer, Tim. "The Chicago Climate Exchange closure, a vote for robust GHG MRV?" The GHG
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Tvinnereim, E. et al. Carbon 2011. Oslo: Thomson Reuters Point Carbon, 2011, 48.

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.

   
Alia Lamaadar | alia@lamaadar.com
   

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