Resources for the Future
Non-CO2 Gases
Risks and Merits of Offset Project
Development
May 12, 2009
Kevin Townsend
Overview
• Explore the following:
– Project Types
– Regulatory Outlook
– Market/Investment Risks & Merits
– Legislative/Regulatory Assurances & Challenges
– Technology Assurances & Challenges
• Relative to the following Gases:
– Methane (CH4)
– Nitrous Oxide (N2O)
– HFCs
– PFCs
– SF6
Project Types to Consider
• CH4
– Manure Management
– Enteric Methane
– Coal Mine Methane (Pre-Drainage)
– Coal Mine Methane (Ventilation Air Methane)
– Wastewater Treatment / Co-Digestion
– Landfill Gas
– Natural Gas Distribution Systems
• N2O
– Nitric Acid Production
– Reductions in Nitrogen Fertilizer Application
Project Types to Consider
• HFCs
– Alternative Refrigeration Systems
– Recovery & Recycling
• PFCs
– Abatement
– Substitution
– Recovery & Recycling
• SF6
– Abatement
– Substitution
– Recovery & Recycling
CH4
Project Type
Manure
Management
Enteric Methane
Coal Mine
Methane
(Pre-Drainage)
Regulatory
Outlook
Market/Investment
Offset
Established methodologies (EPA, CAR, CDM)
Well received by voluntary market
Dual income stream
High Cap-Ex / low offset volume
Operational Risk (feedstock, mgmt)
Energy conversion challenges
Proven (digestion, gasification,
pyrolysis)
Clearly defined role
Gas Clean-up costly
Need early action clarity
Doesn't address all
environmental needs
Offset
Potentially low cost
Cultural Barriers
Final product concerns/changes
Lack of methodologies
Relies fully on offset revenue
Need inclusion and
early action clarity
Offset
Dual income stream
Well received by voluntary market
Established, but inflexible methodology
(CDM)
Natural leakage baseline (AMM)
High Cap-Ex
Not core business practice
Role as offset provider or
Proven (capture, cleanup,
capped entity
compression, flaring)
uncertain, need
Requires equipment change in
baseline and financial
order to maximize
assurances
environmental benefit
BLM issues
Legislative/Regulatory
Technology
Solutions still under
development
Effectiveness unknown
CH4 (cont.)
Project Type
Coal Mine Methane
(Ventilation Air
Methane)
Wastewater Treatment
Co-Digestion
Landfill Gas
Natural Gas Distribution
Systems
Regulatory
Outlook
Market/Investment
Legislative/Regulatory
Technology
Offset
Established methodology (CDM)
Operational Risk
Relies fully on offset revenue
Difficult to assess cap-ex & op-ex
Role as offset provider or
capped entity
Positive outlook on performance
uncertain, need
Limited number of providers
baseline and financial
Relatively unproven
assurances
MSHA obstacles
Both
Established methodology (CDM)
Well received by voluntary market
Dual income stream
Cap-Ex doesn't correlate with revenue
generation
Energy conversion challenges
Additional meths needed for industrial and
municipal
Role in C&T determined
by
size and tie to
Proven (digestion, flaring, cleanup)
production facility
Gas cleanup costly
For capped facilities, need
baseline and financial
assurances
Both
Well received by voluntary market
NSPS changes can
Dual income stream (Stage 2)
eliminate offset
Established methodologies (EPA, CAR, CDM)
revenue
Correlative cap-ex
Need early action
Energy conversion challenges (limits to Stage
assurances (ramp up
1)
since 2006)
Inflexible methodologies / perverse incentives
Proven options (collection, flaring,
conversion)
Alternative options (aerobic)
Energy conversion costly for sector
Offset
Lack of methodologies
Additionality
Numerous small point sources
Simple, but unadopted technology
High personnel and mgmt needs
Relatively certain offset
role
Need early action clarity
N2O and HFCs
Project Type
Nitric Acid
Production
N2O
Reduced
Nitrogen
Fertilizer Usage
Alternative
Refrigeration
Systems
Regulatory
Outlook
Established methodology (CDM, CAR in
progress)
High additionality
Manageable cap-ex
Allowance
Low operational risk
Not well received by market
Relies fully on offset revenue
Needs meth improvements
Legislative/Regulatory
Technology
Proven technologies
Pressure from env. community
Multiple providers
Need early action and baseline
Manageable costs
assurances
Performance variance
Offset
Limited methodologies (Alberta)
Cultural barriers
Additionality
Difficult to accurately monitor
Clearly defined role
Need early action clarity
Simple conceptual solutions
Low cost of implementation
May prove difficult to sustain
Offset
Dual income streams
High Cap-Ex / low offset volume
Lack of methodologies
Additionality
Numerous small point sources
Relatively certain offset
role
Need early action clarity
Unnadopted technology
Unproven performance
Offset
Substantial existing infrastructure
Dual income streams
Low operational risk
Lack of methodologies
Title discrepancies
Growth heavily dependent on infrastructure
Relatively certain offset
role
Need early action clarity
Low technology risk
HFC
Recovery &
Recycling
Market/Investment
PFCs and SF6
Project Type
Regulatory
Outlook
Market/Investment
Legislative/Regulatory
Technology
Abatement
Substitution
PFC
Allowance
Recovery &
Recycling
Abatement
Allowance
Substitution
Allowance
Recovery &
Recycling
Both
SF6
High cap-ex and op-ex
EPA partnerships create action,
High operating risk
but reduce marketability
Low marketability of offsets Need early action and baseline
Lack of methodologies
assurances
Lack of viable solutions
High Costs
Low adoption
High cap-ex and op-ex
EPA partnerships create action,
High operating risk
but reduce marketability
Low marketability of offsets Need early action and baseline
Lack of methodologies
assurances
Low technology risk (recycling)
Lack of viable solutions
High Costs
Low adoption
Conclusions
• A key driver of investment is market
acceptance, which is a function of:
– Clarity around offset inclusion and early action
acceptance
– Methodology availability
• Legislative ambiguity incentivizes inaction,
particularly for sources that may be capped.
Thank you
Questions?