Landfill Gas Projects Under The CDM [Sep 2008]
A global response to climate change
The climate is changing. This poses a serious threat to the world’s environment, and is expected to negatively impact on human activities. Today it is widely accepted amongst the scientific community that anthropogenic emissions of greenhouse gases are a key cause of the changes in the Earth’s climate over the last 100 years and that prompt action is necessary. Responses to climate change range from efforts made by individuals and firms to reduce their carbon footprints, to unprecedented international cooperation to reduce greenhouse gas emissions. This article looks in detail at one of these international actions - the Clean Development Mechanism (CDM) which involves the implementation of emission reducing projects in developing countries - with a focus on how landfill gas projects are being given a much-needed boost in developing countries.
The Clean Development Mechanism (CDM)
The international political response to climate change began with the United Nations Framework Convention on Climate Change (UNFCCC) adopted in 1992. Designed to raise awareness and build knowledge about the challenges and barriers faced by climate change mitigation, the UNFCCC set out a framework for action aimed at stabilising atmospheric concentrations of greenhouse gases to prevent dangerous human interference with the climate system.
The Kyoto Protocol to the Convention, which was adopted in 1997 by more than 170 countries, significantly strengthened the UNFCCC by committing many industrialised countries and economies in transition, the so-called ‘Annex 1 countries1’, to individual, legally-binding targets to limit or reduce their overall emissions of greenhouse gases by at least 5% below the 1990 levels during the period 2008-2012.
In order to achieve compliance with these targets in cost effective ways, the Protocol introduced three innovative market-based implementation mechanisms, known as the ‘flexible mechanisms’:
- Emissions trading: international transfer of national allocations of emissions rights between industrialised countries with Kyoto targets
- Clean Development Mechanism: implementation of emission reducing projects in developing countries without Kyoto targets (‘Non-Annex 1 countries’) that generate emission reductions (carbon credits) that can be used towards compliance by Annex 1 countries (See Figure 1 below)
- Joint Implementation (JI): implementation of emission-reducing projects in Annex 1 countries that generate emission reduction (carbon credits) that can be used towards compliance by other Annex 1 countries
The rationale behind these three mechanisms is that climate change is a global problem and that the location of the greenhouse gas emission reductions is irrelevant in scientific terms, and can thus be in any country.
While emission reductions generated by these three flexible mechanisms have different technical names dependant on which mechanism they arise from, (CERs under CDM and ERUs under JI) they are generally known as ‘carbon credits’. Carbon credits are measured in tonnes of carbon dioxide equivalent (tCO2eq)2. One carbon credit represents one tonne of CO2eq non-emitted or reduced. These three flexible mechanisms, along with the European Union Trading Scheme (EU ETS) put in place by the European Union in order to meet its Kyoto target, created the largest environmental market in the world for the trading of these carbon credits, called the ‘carbon market’. This market began in 2005, when the Kyoto Protocol entered into force.
How does the CDM work?
The CDM is the only flexible mechanism of the Kyoto Protocol that specifically includes developing countries. While the vast majority of developing countries are signatories to the Kyoto Protocol, they do not have legally binding emission reductions as part of the scheme, as the UNFCCC and its Protocol recognise that industrialised countries are responsible for most of the current build-up of greenhouse gases in the atmosphere and should lead reduction efforts. The purpose of the CDM is therefore twofold:
- To assist developing countries (non-Annex 1 countries) in making progress towards sustainable development and contributing to the UNFCCC’s objective to reduce emissions
- To assist developed countries and economies in transition (Annex 1 countries) in achieving their emission reduction targets
Non-Annex 1 countries gain the economic, developmental and environmental benefits from the CDM projects implemented within their country in exchange for carbon credits which are exported and sold to Annex 1 countries (see Figure 1).
Which projects are eligible as CDM projects?
In order to be eligible under the CDM, projects have to follow rules and meet requirements set by the Kyoto Protocol. The main ones are presented below.
1. The project must reduce one or several of the six greenhouse gases covered by the Protocol. They include:
- Carbon dioxide (CO2), emitted e.g. by fossil fuel power generation
- Methane (CH4)
- Nitrous oxide (N2O)
- And several fluorinated industrial gases
- Sulphur hexafluoride (SF6)
- Hydrofluorocarbons (HFCs)
- Perfluorocarbons (PFCs)
2. The project would not have happened in absence of CDM.
This is the key concept of additionality. In order to ensure the environmental integrity of the Protocol and actual emission reductions, the project must lead to emission reductions that would not have occurred anyway. This effectively means demonstrating that the project is not ‘business as usual’ - that is, would not have been the ordinary situation in the absence of the CDM.
The carbon credits created by a project are based on the difference between GHG emissions of the business as usual level (known as the ‘baseline scenario’) and the reduced level of GHG emissions occurring after the implementation of the project activity.
Emissions reductions = Emissions of the business-as-usual level – Emissions of the project activity
3. The projects must take place in a country that has ratified the Kyoto Protocol.
A list of these countries can be found on the UNFCCC website: http://unfccc.int/parties_and_observers/items/2704.php
4. The project must be approved by the government of the country where it is implemented (‘host country’).
The government is in charge of checking that the project assists the sustainable development of the country and must give its formal approval for the implementation of the CDM project.
How to develop a CDM project?
In order to generate carbon credits, eligible projects have to follow procedures and go through several project cycle steps laid down by the Kyoto Protocol. This process is supervised by an international regulatory body of the UNFCCC, called the CDM Executive Board (EB).
The CDM cycle refers to the procedure that a project must undergo in order to be considered a genuine CDM project and successfully receive CERs. The main components of this cycle are shown below:
Project Design Document
The PDD is essentially an 'application form' whereby all the relevant information concerning the project, i.e. how it qualifies as a CDM project, how it will be built, operated and funded, where it is, when it will be built etc., are all included in a concise document.
Host country approval
The CDM cycle requires that all CDM projects receive the approval of the governments where the project in question is physically located.
Validation
As part of the CDM cycle, a project wishing to receive CERs must be validated - both the site and the PDD must be inspected by an organisation designated by the CDM Executive Board to insure all relevant requirements are met.
Registration
After successfully passing validation, the project must then be submitted to the EB for a final review and registration.
Financing and Implementation
This critically important stage refers to the actual funding and building of the project. The project developer must ensure that adequate funds are secured and that the project will be built within a satisfactory timeframe and level of quality.
Monitoring
Monitoring refers to the recording of relevant raw data that will be used as proof of the project’s effectiveness in reducing emissions and form the basis upon which CERs will be issued.
Verification
The data collected and recorded during the monitoring stage will need to be 'verified' before it can be used to apply for CERs. Similar to validation, verification is conducted by an organisation designated by the EB with the task of inspecting the data collected and the monitoring system that was utilised to collect it.
Issuance of CERs
This final stage is reached once the EB is also satisfied with the monitoring data and CERs will be issued in accordance to the numbers indicated by the monitoring data collected.
The CDM cycle can be long and challenging, with considerable work going into each stage by both parties in order to achieve successful issuance of CERs.
CDM pipeline: status of landfill gas projects
The CDM pipeline currently contains 3000 projects, of which 1143 have been registered with the UN Executive Board. Renewable energy projects make up 62% of the pipeline and have been the most successful project types to date in terms of project volume - but not CER volume. The largest projects in terms of CER volume are industrial gas (N2O, PFC, HFC) projects which have a huge global warming potential. Currently these projects only make up 2.5% of the pipeline but account for 28% of CERs expected to issue until 2012. 281 of projects in the pipeline are landfill gas projects, and 97 have been successfully registered.
Carbon finance and landfill gas projects
When organic materials decompose in landfills, methane (CH4) is released. Methane has 21 times the global warming potential of CO2; however, its impacts can be mitigated if landfill methane is captured and flared or used to generate electricity. While the primary concern over methane emissions is related to its potency as a greenhouse gas (GHG), emissions of LFG can also have significant local health and safety implications. Concentrated LFG can cause asphyxiation and/or toxic effects in humans, and contains over 150 trace components that can cause other local and global environmental problems such as unpleasant odour, ozone layer depletion, and smog due to ground level ozone creation.
Today a range of technologies exist which can collect and utilise landfill gas to generate clean, renewable energy. However, despite the environmental benefits these technologies provide, they often require significant investment and expertise to implement, or they may face obstacles to their implementation, especially in the developing world.
Common barriers to implementing landfill gas projects in developing countries:
- Lack of local companies with LFG to energy expertise
- No existing LFG projects to use as basis for evaluation
- Investors and lenders view LFG as high risk
- Large capital outlays required
- Lack of private sector funding or equity
- High lending rates
However, if it can be proven that real emission reductions are achieved through the implementation of these technologies, then emission reduction credits can be claimed, and the sale of these credits can add an additional revenue stream and thus push the project through to completion. Owners or operators of landfill gas sites in developing countries such as Mexico, Brazil and China, therefore have a potential liability that can be turned into a lucrative resource. As well as receiving credits from flaring the landfill gas, some sites can generate additional income by using the gas to generate electricity which can then be sold to the grid.
Case study: Aguascalientes landfill gas to energy project
The first of its kind to be registered with the CDM in Mexico, the Aguascalientes EcoMethane Landfill Gas (LFG) project was developed to address the LFG emissions from two local landfills, San Nicolas and Cumbres. In addition to reducing greenhouse gases (GHGs) through capture and flaring of the LFG, the project has also installed 2-4 MW of electricity which reduces the use of fossil-fuelled grid energy. After initial contracts were signed in November 2005, the project began operations in June 2006 and was registered with the UN in October 2006. The project received its first issuance of 23,224 CERs in January 2007, and a second issuance of 102,367 CERs in April 2008. As such, the project provides a strong example of how the CDM can be used to address climate change while also encouraging the goals of sustainable development.
In the case of Aguascalientes, the Cumbres landfill was opened in 1986 and operated as a sanitary landfill until its closure in 1998. The San Nicolas landfill was subsequently opened in 1999, and will remain open through 2010. Both landfills are owned by the municipal government, and prior to the Aguascalientes project, no systems existed to actively capture or flare the LFG. Moreover, there was noeconomic incentive or support to develop LFG projects in Mexico, due primarily to the cost of implementation. As such, landfills in Mexico like those at Aguascalientes continued to contribute to climate change while forgoing clean energy opportunities.
Waste to energy
The Aguascalientes LFG project was developed by EcoMethane, a joint venture between EcoSecurities and Biogas Technology, to finance, construct, and operate a project that would capture and make productive use of the methane emissions from the local landfills. The project involved investing in a highly efficient gas collection system, flaring equipment, and a modular electricity generation plant with an installed capacity between 2-4 MW which combusts the LFG to produce electricity for export to the grid. The system was also designed to be flexible so that it can be easily extended to different parts of the landfill in the future.
The project reduces GHG emissions through two complimentary processes: 1) the collection and flaring of LFG, and 2) the generation and supply of electricity to the regional grid, thus displacing fossil fuels used for electricity generation. Over the 10 year lifespan of the project, 1,625,926 t CO2e are expected to be mitigated. In the absence of the CDM, the LFG project would not generate any revenue and would therefore be economically infeasible.
Social benefits
The project at Aguascalientes provides for both short and long-term employment opportunities for local people. Local contractors and labourers were required for construction, and long-term staff has been used to operate and maintain the system. In addition, by paying the local authority a royalty fee from the sale of the CERs, the project has injected much needed capital into the local economy.
There is also evidence that LFG has migrated from the Cumbres landfill in the past, causing minor explosions in the nearby sewer network. As a result, the local primary school has had to close occasionally. The LFG system has thus reduced these risks faced by the surrounding communities. The process of public comment, an important component of any CDM project, was especially rewarding in the case of Aguascalientes. Members of the community expressed their satisfaction with the Clean Development Mechanism as a tool for reducing pollution at a local level. Members of academia were also interested in using the project as an example for environmental education for the community. Stakeholders, including community, academia, industry, local NGOs and local environmental authorities congratulated the municipality and EcoMethane on the project’s implementation and the public consultation, which helped to inform the community about its operations.
Environmental sustainability
Properly collecting and destroying the flammable LFG being emitted at Aguascalientes generated a number of important environmental benefits. In addition to reducing GHG emissions, the destruction of LFG also improved the local environment by reducing noxious air pollution that had previously been responsible for considerable nuisance, odours, and health risks to the local community. The Aguascalientes project also provides a model for managing LFG, a key element in improving landfill management practices throughout Mexico. The project thus acts to demonstrate the benefits of clean technology, encouraging less dependency on grid-supplied electricity, and representing a significant technology transfer. Overall, sustainable management of the landfills at Aguascalientes will accelerate waste stabilisation such that the full decomposition of landfill waste will be largely complete within 30-50 years.
Learning from Aguascalientes
The project at Aguascalientes has helped Mexico fulfil its goals of promoting sustainable development by diversifying electricity generation sources, increasing jobs, using clean and efficient technologies, conserving natural resources, and acting as a demonstration project for improved landfill practices. The project thus shows how the CDM can be used to make GHG reductions and sustainable development both economically feasible and practically possible.
References
- Annex 1 countries include the European Union, Central and Eastern Europe countries, Japan, Canada, Norway
- The contribution of a GHG to global warming is measured by its ‘Global Warming Potential’. For example the GWP of methane is 21, which means that one tonne of methane (CH4) released in the atmosphere will have the same effect on global warming as 21 tonnes of CO2. As a result 1 tonne of CH4 reduced = 21tCO2eq reduced = 21 carbon credits.
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