VOLUNTARY REPORTING OF GREENHOUSE GASES PROGRAM

In 1993 the United States initiated the Climate Challenge Program pursuant to the Rio Treaty with a commitment to reduce emissions of greenhouse gases in the nation to their 1990 levels by the year 2000. Almost all major electric utilities in the nation have committed to voluntary goals under the Climate Challenge Program to individually reduce, avoid, or sequester certain quantities of greenhouse gas emissions by the year 2000, it being understood that if a voluntary program achieves the needed reductions, then a mandatory program will not be necessary. Under the program utilities (or any company or individual) submit reports to DOE documenting the action being taken and the tons of greenhouse gases (usually reported in equivalent tons of carbon dioxide) being reduced, avoided or sequestered, sometimes referred to as "carbon dioxide credits." It became obvious to government officials that the voluntary program was not working and that the United States would not meet emission reductions promised in the Rio Treaty. Tougher steps to reduce carbon dioxide emissions were considered. After subsequent international meetings, the agreement was modified and became known as the Kyoto Protocol and the U.S. Climate Challenge Program, both of which are in remission, but reporting continues under the Voluntary Reporting of Greenhouse Gases Program. Although the Bush administration did not support the Kyoto Protocol, it did implemente the Green Power Partnership to encourage the use of green power and renewables to, among other things, reduce the emission of global warming gases. The Obama administration promises to do much more. See Stimulus Money

REPORTABLE CREDITS FROM COAL MINE METHANE PROJECT

Methane is a greenhouse gas which is significantly worse than carbon dioxide. The Intergovernmental Panel on Climate Change (formed to administer the Rio Treaty) currently values the radiative forcing of methane 23 times that of carbon dioxide, meaning that a 1-ton reduction in methane released into the atmosphere is worth a 23-ton reduction in carbon dioxide released into the atmosphere. Some experts are of the opinion that this factor should be significantly greater than the currently accepted 23.

Although existing mines from which methane is being extracted are sealed and are no longer active, through the processes of subsidence of the mines and desorption of the coal, methane is being released from the coal remaining in the mines which increases the gas pressures in the mines to the point that the methane is released into the atmosphere. (The gas pressure in one well increased from 29 PSI in 1990 to 40 PSI in 1995.) The mines actually produce gas from the coal remaining in the mines.

The following example illustrates the reduction in greenhouse gases as a result of burning methane which would otherwise be released into the atmosphere:

Pure Methane Heat Content = 1,000 Btu/CF
Methane Density = 19.2 gram/CF or 0.04238 lb/CF
Engine-Generator Heat Rate = 10,300 btu/kWh

Methane Consumed (lb per kWh):
((Heat Rate)/(Heat Content)) x (Density) = (10,300/1,000) x 0.04238 = 0.4365

Carbon Dioxide Produced (empirical) = 110 lb per million btu of Methane
(10,300 btu/kWh x 110 lb/mmbtu)/1 mm = 1.13 lb per kWh

(Note: The carbon dioxide produced will be ignored since the energy generated would displace other generation producing a similar amount of carbon dioxide.)

Approved Methane to Carbon Dioxide Multiplier = 23

Carbon Dioxide Credit (lb per kWh):
(Methane Consumed) x (Multiplier) = 10.04 lb CO2 per kWh

Thus a coalbed methane project will generate approximately 37,000 tons of equivalent CO2 reduction per year per megawatt of installed generation.

REPORTABLE CREDITS FROM BIOMASS PROJECTS

Because wood is created through the absorption of atmospheric carbon dioxide, its combustion results in no net increase in carbon dioxide in the atmosphere; as opposed to the combustion of gas, coal, or oil which results in a net increase in atmospheric carbon dioxide. In addition, the combustion of wood wastes results in a net decrease in greenhouse gases by avoiding the release of methane (23 times worse than carbon dioxide as previously noted) from decomposing wood wastes in sawdust piles, landfills, and other oxygen limited conditions. One study indicates that for every pound of dry wood wastes burned, a release of 0.13 pound of methane into the atmosphere is avoided. Since the burning of wood is greenhouse gas neutral in regard to the release of carbon dioxide into the atmosphere, the net improvement (without considering displacing fossil fuels) can be evaluated as a reduction of 0.13 pound of methane for each dry pound of wood wastes burned.

Biomass generation would also avoid net atmospheric increases in carbon dioxide by displacing electricity which would otherwise be generated by fuels such as natural gas (110 lb carbon dioxide per mmbtu), coal (210 lb carbon dioxide per mmbtu), or oil (170 lb carbon dioxide per mmbtu). On a typical utility (such as Carolina Power & Light Company) this reduction in carbon dioxide emissions would average 1.35 lb per kWh, and would be in addition to that associated with the avoidance in methane releases from the decomposing wood wastes. A biomass plant will typically consume 2 lb of wood for each kWh generated.

(2 lb wood/kWh) x (0.13 lb CH4/lb wood) x (23) + (1.35 lb CO2/kWh) = 7.33 lb CO2 per kWh

Thus this would result in a typical reduction in greenhouse gas emissions by an equivalent of approximately 27,000 tons of carbon dioxide credits per year per megawatt of generation.

VALUE OF CARBON DIOXIDE CREDITS

In a March 2009 auction by Regional Greenhouse Gas Initiative, Inc. (RGGI) vintage 2009 carbon dioxide credits sold for $3.51 per ton (an "allowance") and vintage 2012 allowances sold for $3.05. The 10 Northeast and Mid-Atlantic states participating in RGGI (Connecticut, Delaware, Maine, Maryland, Massachusetts, New Jersey, New Hampshire, New York, Rhode Island and Vermont) have designed the first market-based, mandatory cap-and-trade program in the U.S. to reduce greenhouse gas emissions. The participating states have regulations in place to cap and then reduce the amount of CO2 that power plants in their region are allowed to emit, limiting the region’s total contribution to atmospheric greenhouse gas levels. Power sector CO2 emissions are capped at current levels through 2014. The cap will then be reduced by 2.5 percent in each of the four years 2015 through 2018, for a total reduction of 10 percent. A CO2 allowance represents a permit to emit one ton of CO2, as issued by a respective participating state. A regulated power plant must hold CO2 allowances equal to its emissions to demonstrate compliance at the end of each compliance period. Because CO2 allowances issued by any participating state will be usable across all state programs, the ten individual state CO2 Budget Trading Programs, in aggregate, will form one regional compliance market for CO2 emissions. The RGGI auction was run on an on-line platform provided by World Energy Solutions, Inc (TSX: XWE), which operates online exchanges for energy and green commodities. RGGI allowance transactions are recorded on the Carbon Dioxide Allowance Tracking System (COATS) developed by Perrin Quarles Associates, which designs and builds emissions database tracking systems. All RGGI auctions are overseen by RGGI, Inc.’s independent market monitor, Potomac Economics, a leader in the field of monitoring and competitive assessment of wholesale electricity markets in the U.S.

Another way to value carbon dioxide credits would be to simply look at the cost of actually reducing, avoiding, or sequestering the emissions of greenhouse gases. The cost of planting trees in a third world country may be in the range of $0.50 per ton of carbon dioxide credits claimed, with a good deal of arm waving concerning the growth rate and survivability of the trees. Certain efficiency improvements such as the replacement of existing transformers with new low loss transformers would be in the $100 per ton range. Efficiency improvements with no cost which are claimed as generating carbon dioxide credits have a hollow ring in that such improvements should have already been made, and is probably why the Climate Challenge Program did not achieve the desired results.

Similar to sulfur dioxide allowances, the purchase or sale of power does not automatically carry with it the carbon dioxide credits which may be associated with the generation of the power being sold and purchased. Based on $3.00 per carbon dioxide allowance, for power generated from coal mine methane projects this would add value of approximately $111,000 per year per MW of generation (approximately $15/MWh) and for power generated from biomass projects this would add value of approximately $81,000 per year per MW of generation (approximately $11/MWh).

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