TreeHugger Looks Into The Carbon Offset Project At The Tontitown Landfill
by John Laumer, Philadelphia on 03.24.07
As summarized in the TerraPass website: "Waste Management Inc. runs a landfill near Tontitown, Arkansas that provides some of the carbon credits in TerraPass' portfolio. The carbon credits are generated by a methane flaring project. Essentially, methane from decomposing garbage is captured and burned, preventing it from reaching the atmosphere. Such projects are generally considered to be very good sources of carbon offsets, because there is no financial incentive to burn landfill methane other than to generate carbon offsets...However, a BusinessWeek article raised questions about whether the methane flaring project would have taken place even in the absence of offsets." Because carbon offsetting is novel, abstract, and engages up to seven distinct stakeholders...project employees, project neighbors, regulatory authorities (State of Arkansas in this case), corporate project owner (Waste Management in this case), the broker (CCX in this case), the commercial buyer (TerraPass in this case), and the offset purchasers (TerraPass customers in this case), each of which has limited understanding of the other's respective circumstances and interests...we thought it might be helpful for our readers to look at an actual carbon emissions project up close, to meet one of the most distant stakeholders, a carbon credit seller. Wes Muir, a representative of Waste Management, Inc., owner and operator of the Tontitown, Arkansas facility, kindly agreed to answer some TreeHugger questions. Note that links are provided to the TerraPass website where Tontitown project regulatory information is conveniently summarized.
TH:- The gas collection and control system at the Tontitown, Arkansas landfill uses approximately 75 gas extraction wells (as pictured) to collect landfill gases generated by decomposing waste. Thermal destruction of collected gases occurs at a central, high-temperature flare. Why was this necessary?
WM:-In 2001, we began addressing issues related to methane gas seeping into and impacting the groundwater in areas around the Tontitown landfill. We voluntarily installed this system because it was the most effective option, one that went beyond standard Federal and State regulatory requirements. Further, we worked with the Arkansas Department of Environmental Quality to ensure the landfill gas system was installed faster than would have been required by standard administrative procedures. (See detailed discussion of this matter here.) In fact, the majority of the gas collected from the landfill comes from areas that are not related to the remediation of the groundwater problem. These areas, which are above and beyond regulatory requirements, are what have generated the carbon offsets that have been certified, independently audited, registered on the Chicago Climate Exchange (CCX), and sold to Terrapass.
TH:- We read that since 2005 Waste Management, Inc. (the credit seller) has sold over 15,000 tons of carbon offset credits related to the Tontitown to Chicago Climate Exchange (the broker) from which TerraPass (the customer) purchased them. Is that correct?
WM: There are two ways to buy and sell credits through CCX.
CCX members can use the CCX trading platform to buy and sell credits. These trades are anonymous as they are not tied to specific projects.
Members can also conduct bi-lateral trades with each other. The bi-lateral trade is a separate contract between two member parties to deliver credits and take payment. These transactions may designate from which projects credits are being traded. The transaction is registered through CCX but is not conducted on the CCX trading platform. The Tontitown credits were traded through a bi-lateral agreement between Waste Management and TerraPass. CCX collects an administrative fee on bi-lateral transactions.
TH:- Because TerraPass came along after the site was configured in it’s present form, it seems that neither CCX nor TerraPass had any role in shaping design or operating scope for the methane collection system per se. Is that correct?
WM:- That’s correct. The landfill gas collection system was installed prior to the founding of the CCX and establishment of protocols for trading carbon offsets. This project was not about possible future revenues but in fact a long-term commitment to protecting the environment in and around the site.
TH:- Did the purchase of credits by TerraPass directly increase the environmental performance of Waste Management operations at Tontitown?
WM: The revenue derived from credits sold from Tontitown was not directly routed back to the facility. It was used by Waste Management to invest in additional environmental projects at other facilities, so that these facilities could also improve their performance over and above regulatory requirements. These voluntary improvements would not have occurred without the funding provided from offset sales. In this way, the credits helped to perpetuate these types of environmental investments. Separate from these payments, Tontitown has continued to make improvements to its own systems by installing new wells and upgrading the recording system so that we have more accurate readings on gas flow and increased gas collection efficiency and methane reductions over and above regulatory requirements.
TH:- As a greenhouse gas, methane is 20 times more potent than C02, but CO2 also has a climate forcing impact. Can WM manage methane gas more efficiently than just burning it?
WM:- Many landfills collect the gas and burn it through a flare system to destroy it. Instead of simply flaring the gas, the methane gas can be used to create clean, renewable energy for electricity and alternative gas uses. We have developed 103-landfill gas to energy projects over the past 20 years, which generate nearly 500 megawatts of power - the equivalent of providing energy for over 400,000 homes or replacing nearly seven million barrels of oil each year. (TH note: see photo at end of post showing landfill methane filters and compressors used at a different Waste Management site to prepare the methane gas for piping, under pressure, to electricity generating turbines.)
TH:- Do you think carbon trading in general genuinely encourages companies to take added steps to reduce their greenhouse gas emissions? I mean beyond what the regulations require.
WM:- Absolutely. The BusinessWeek article in effect highlights a “grey area” in the issue of what constitutes a carbon credit that policymakers are grappling with. Both of WM’s actions – installing the landfill gas collection systems and selling the carbon offsets to TerraPass – benefited the environment beyond just the Tontitown locale.
Image credits: Waste Managment; See also: TerraPass interview on TreeHugger
Closing remark by TreeHugger:- With so many stakeholders it's easy to see why a management system is needed to clarify roles, responsibilities, and performance metrics for carbon offsetting projects. Third party verification may well be needed to make offset regimes sustainable - consider that the design life of a solid waste facility like the one discussed here is measured in centuries instead of years - and to establish and maintain public trust that spans generations! A voluntary standard is currently under development for this objective; and TreeHugger will keep you posted on the progress. We also hope to post an interview with a representative of CCX in the near future.
"However, a BusinessWeek article raised questions about whether the methane flaring project would have taken place even in the absence of offsets"
As a note, just because a forward-thinking driver decides to purchase a Prius on the basis of wanting to emit less CO2, doesn't mean that they should be disqualified from the tax credit available to them.
In general, rebates, tax credits, offset revenue and the like are not realistically expected to singlehandedly create an industry where none existed before. It's an incentive for those doing a desirable thing to keep doing it and for a marginal number of those doing the undesirable thing to consider switching. A company that is already profitable that adds a revenue stream from offsets creates other advantages that make credits/offsets worthwhile -- familiarity with the idea, adeptness at measuring, monetizing, and administrating such a program from the corporate side, and willingness to look beyond just one program to find offsets and credits across the whole spectrum of their business.
Never underestimate the lack of trained personnel as a barrier to sociocorporate change.
Umm, haven't you guys made a big deal about "Shutdown Day", which is today. Obviously, you guys are not setting any kind of good example.
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editor note: Posts for today were scheduled yesterday. As for me, I have no excuse... At least my electricity comes from hydro :)
Fair enough, I don't really have one either
As a note, just because a forward-thinking driver decides to purchase a Prius on the basis of wanting to emit less CO2, doesn't mean that they should be disqualified from the tax credit available to them.
No, they shouldn't be given tax breaks in the first place. As it is, people who go farther than buying a hybrid (by taking public transit, walking, or biking) are punished by the tax system.
There are really only two questions to ask when it comes to additionality and RECs.
1) What definition of additionality should we use?
a) Additionality is going beyond "business as usual."
b) Additionality is when the sale of carbon offsets makes or breaks a project.
2) What definition of RECs should we use?
a) RECs are simply the environmental attributes of a renewable energy project. The owner of the RECs owns the environmental attributes.
b) RECs are designed to make projects viable by making up the gap between clean and dirty technology.
One could make a cool matrix with these four options, but I don't exactly have that kind of time. It's pretty clear that the a's go together and the b's go together.
If you see additionality as going beyond business as usual, then pretty much any non-government mandated project falls into this category and if RECs are the environmental attributes of the project, then the owner of the RECs owns the resulting environmental benefits.
If you see the intention to sell carbon offsets as the driver behind additionality, then the RECs HAVE to mean life or death for the project.
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So, now it's scenario time. If a wind project is in a high-wind area and is done very efficiently and it actually makes money without the RECs, can an offset provider sell those offsets as carbon reductions?
If you use the a-a paradigm, then the answer is maybe. If you choose the b-b paradigm, the answer is no.
The big question in this scenario is if the project makes money, isn't that business as usual?? That would make any project that doesn't NEED RECs to be functional non-additional. I think that is the 800 ton
gorilla in all of this. Someone needs to decide if all non-government mandated renewable energy projects are business as usual or not.
Here's an incredible real-life conundrum for you though: The DOE funds Alaskans to replace diesel generators with windmills. This makes perfect financial sense because the wind energy is actually cheaper
than the diesel. Is it financially additional? No, because it makes money. But the project IS additional since it falls into the"technical barriers" category. "Business as usual" in this case would mean the Alaskans would never be able to build the windmill given their know-how and financial resources, etc. So, the project is clearly additional, however, the RECs really don't make a difference because of the DOE grants. This is where question two kicks in. If you
think RECs are the environmental attributes, then you can sell the RECs as carbon offsets since the project is additional, but if you believe a REC has to be make or break to be additional, then these RECs are not carbon offsets.
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Why is Terrapass only concerned about the landfill project and the groundwater issue? Because if it's a government mandated project, there's no doubt that it isn't additional. But for all of their wind projects where the projects developers claim the RECs didn't make a difference, people can argue all day about it without coming to an answer because the additionality matrix isn't black and white on the financing question. There really isn't going to be an answer as long as financials are kept secret and the role of RECs may be so small a swaying factor that overall additionality is a matter of personal opinion. Buying RECs from projects is really convenient and if we start down the road of make-or-break RECs, then the whole industry is
going to be more muddled and inefficient without a governing body to make the tough calls and keep things on a level playing field.
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The big questions could all go back to the original purpose of a REC: to provide companies with a way to meet State Renewable Energy Portfolio requirements without a super complex trading scheme for power brokers. The most ironic REC fact is that the concept was heavily supported by Enron. RECs were designed to allow utilities to sell renewable energy without pumping it directly to a company...it unbundles the envrionmental attributes from the energy. A REC was
never meant to be a make-or-break kind of financing instrument. The only way to determine this would be on a project-by-project basis and would require green-e to set up a whole separate REC-offset category of certification, which will be quite a feat to do adequately.
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But what it comes down to is are consumers really offsetting carbon with their purchase? The truth is, it depends on a lot of factors. A guarantee is inefficient and an efficient market has fuzzier guarantees. It's too early in the game to really know that any offset
purchase where offsets do not make up the majority of the financing are really additional until a robust additionality test comes along, or a body like Center for Resource Solutions decides the answers to the above questions for once and for all. It won't end the academic debate, but will at least set an industry standard that will establish a real market.
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Furthermore, REC-offsets will probably be more valuable than regular RECs, which would do far more to increase wind energy by dividing the industry between projects that are financially viable on their own and ones that really need help, which would prevent financially viable projects from receiving the "icing on the cake," so to speak. It would have an overall effect of using offset-dollars more efficiently to truly drive a market transformation from coal to wind energy sources.
Instead of being rewarded for emitting less than otherwise the landfill should be penalised for ANY emissions on a CO2 equivalence basis. That way it works out cheaper to flare methane but they should still pay the carbon tax on CO2 instead. Better still re-inject it underground and pay zilch. This is part of their operating cost for lumping all that garbage together to create an anaerobic reaction. They can pass that carbon tax on via customer charges.
Therefore it is plain wrong to reward methane flaring. I normally avoid vulgarity but let me give another example; someone in a crowded elevator yelling out 'everybody pay me $10 or I'll fart'. The correct answer it that it shouldn't happen and paying for it not to happen is extortion.
There is no conceivable limit to what could be claimed as an 'offset', for example in Australia someone has suggested including yellowcake exports. Obviously the best answer is to emit less in the first place.
Instead of being rewarded for emitting less than otherwise the landfill should be penalised for ANY emissions on a CO2 equivalence basis. That way it works out cheaper to flare methane but they should still pay the carbon tax on CO2 instead. Better still re-inject it underground and pay zilch. This is part of their operating cost for lumping all that garbage together to create an anaerobic reaction. They can pass that carbon tax on via customer charges.
Therefore it is plain wrong to reward methane flaring. I normally avoid vulgarity but let me give another example; someone in a crowded elevator yelling out 'everybody pay me $10 or I'll fart'. The correct answer it that it shouldn't happen and paying for it not to happen is extortion.
There is no conceivable limit to what could be claimed as an 'offset', for example in Australia someone has suggested including yellowcake exports. Obviously the best answer is to emit less in the first place.
You know, the problem with a carbon tax is that a) it will be so politically unpopular that there isn't much hope of it happening and b) it probably won't encourage a reduction in CO2.
If anyone remembers, when gas shot up to 3 bucks a gallon, economists were baffled that it really had no effect on consumption at all. What's more, it seemed the only people affected by it were the lowest income Americans who contribute the least to climate change as it is.
What it will do is create a windfall of cash for the government. What they'll do with it is hard to say. The responsible thing would be to use the money to invest in renewable energy, cap landfills, and subsidize fuel efficiency projects. In short, they'd be buying carbon offsets. Seems like a bold move with too many downsides that would probably come full circle back to offsets anyway and double the bureaucracy around it.
Let me take this one paragraph by paragraph:
"You know, the problem with a carbon tax is that a) it will be so politically unpopular that there isn't much hope of it happening and b) it probably won't encourage a reduction in CO2. "
a) That depends how it is explained and implemented. If it is revenue neutral, meaning that the government reduces taxes by the same amount as what the carbon tax is bringing in, it just gives people more choices (use that tax break to pay for the carbon tax and live the same way as before, or pocket the extra money and live a less energy intensive life).
b) Yes it would, see below.
"If anyone remembers, when gas shot up to 3 bucks a gallon, economists were baffled that it really had no effect on consumption at all. What's more, it seemed the only people affected by it were the lowest income Americans who contribute the least to climate change as it is. "
$3/gallon isn't a lot when compared to the rest of the world, and people in the US are so used to cheap gas that they expected that to be a temporary thing. It also would need to be more permanent and stay around longer for other things to catch up (automakers releasing better fuel efficient cars, public transit infrastructures to be built, etc).
Still, even with that, GM had to slash prices of SUVs to keep them selling, and small cars were flying off the lots faster than ever before. It did have an impact, it just didn't last long enough and wasn't high enough (look at gas prices in Europe).
"What it will do is create a windfall of cash for the government. What they'll do with it is hard to say. The responsible thing would be to use the money to invest in renewable energy, cap landfills, and subsidize fuel efficiency projects. In short, they'd be buying carbon offsets. Seems like a bold move with too many downsides that would probably come full circle back to offsets anyway and double the bureaucracy around it."
Not if it's revenue neutral as I said above. And even if it isn't, it's a lot better for the country to invest inside the country than to buy carbon offsets elesewhere. Money spent in clean energy, R&D and high tech stuff can actually make the economy a lot stronger...
Scott,
We at TerraPass certainly are concerned with the additionality of RECs. But most of the accusations in the article were vague and unsourced, so there's nothing really for us to respond to. The Tontitown criticism, on the other hand, was quite specific, so it merited further investigation.
More generally, as you note, there is a good deal of controversy regarding the proper way to measure the additionality of RECs, and TerraPass alone certainly isn't going to settle the issue, although we obviously have our opinion. I do want to note, though, that the financial additionality test that you focus on has received a lot of criticism for rewarding financially questionable projects.
Johnno, you say:
Instead of being rewarded for emitting less than otherwise the landfill should be penalised for ANY emissions on a CO2 equivalence basis.
I hear this sort of thing all the time: instead of A, we should be doing B. We can all agree that a carbon tax would be a very fine thing indeed. But we don't have carbon tax. And we're not very likely to get a carbon tax. So issuing statements like "it is plain wrong to reward methane flaring" is about as useful as, well, farting in an elevator.
Scott said:
Here's an incredible real-life conundrum for you though: The DOE funds Alaskans to replace diesel generators with windmills. This makes perfect financial sense because the wind energy is actually cheaper
than the diesel. Is it financially additional? No, because it makes money. But the project IS additional since it falls into the"technical barriers" category. "Business as usual" in this case would mean the Alaskans would never be able to build the windmill given their know-how and financial resources, etc.
By and large, I agree with Scott, but I think some clarification would be helpful. We're talking about teeny-tiny towns of a few hundred people, surrounded by miles and miles of tundra, serviced by boats and 3-seat airplanes. There are people in the state who can build this windmill, but they're 300 miles away in Anchorage or Fairbanks. The upfront costs of getting the parts to the village and installing them are ridiculous. That's where offsets bridge the gap, by getting the windmill to the village in the first place, so that it can operate cheaper and cleaner than the gas-powered generators.
In my experience, these power plants (diesel and wind alike) are run by local not-for-profit Native Corporations who are there more to provide necessary services than to make a profit, since the villagers are also the Native Corporation owners. These local Native Corporations are way too small to put up (or even borrow) enough money to erect a modern windmill. Without government and offset funding, I rather doubt that the project would be feasible, let alone profitable.
-- A.