Environmental Markets and Biogas: Valuing Climate Benefits

Environmental Markets and Biogas: Valuing Climate Benefits

Peter Weisberg

November 12, 2014

AgStar Webinar

Renewable

electricity

21%

Avoided methane

emissions79%

Climate Benefits 2,000 cow, 750 kw Diary Digester

Environmental Markets and Biogas

1. Carbon Markets

2. Low Carbon Fuel Standard Credits

3. Renewable Identification Numbers (RINs)

Environmental Markets for Biogas

Market Credit Biogas Use GeographicLimitation

California Cap-and-Trade

Offset Any Anywhere in the US

CaliforniaLow Carbon Fuel Standard

LCFS Credit Transportation fuel

Fuel consumed in California

US RenewableFuel Standard

RIN (Renewable Identification Number)

Transportation fuel

Anywhere in the US

California Carbon Market Key Insights

• Buyers = Large emitters in California

• Offset Project Types:

– Livestock manure

– (Post-consumer food waste = voluntary, not yet accepted by California)

• Sunset: 2020

Offsets generated and owned by the digester

$5

$6

$7

$8

$9

$10

$11

$12

$13

California Carbon Offset ($/mtCO2e)

$/mtCO2e $/cow $/DGE*

Current $8.60 $30.10 $0.21

*Assumes each cow produces 51,072 BTUs/day

Low Carbon Fuel Standard Key Insights

• Biogas must be consumed as transportation fuel in California

– Out of state: “Physical Pathway”

• Buyer = Transportation fuel refiners and importers in California

• Sunset: 2020

– (2020 target applies until legislation is modified)

0

20

40

60

80

100

2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Carb

on

In

ten

sit

y (

gC

O2e/M

J)

California’s Low Carbon Fuel Standard

Carbon Intensity of Compressed Biomethane from Dairy Farms - 13.45 gCO2e/MJ

Carbon Intensity of Crude Oil - 99.18 gCO2e/MJ

LCFS Carbon Intensity Targets

Credits

Deficits

LCFS credits generated and owned by entity injecting

biomethane.

$-

$10.00

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$80.00

$90.00 California LCFS Price ($/mtCO2e)

$/mtCO2e $/DGE

Current $25.38 $0.29

Average $45.41 $0.52

2013 LCFS Credit Value for Dairy Biogas

Renewable Identification Numbers Key Insights

• Buyer: Transportation fuel refiners and

importers

• Sunset: 2022

Non-Renewable Fuel

Renewable fuel

Advanced Biofuel, 17%

Cellulosic0.04%

Renewable Fuel Requirement

9.76%

2013 US Fuel Consumption(billions of gallons)

2013 US Renewable Fuel Standard 2(billions of gallon)

*Biomass-based diesel intentionally omitted because its volumes are not on an ethanol-equivalent gallon basis.

Renewable Fuel Standard 2

RINs can be generated and

owned by anyone in the

supply chain

Cellulosic Biofuel

• Biogas Cellulosic RIN

– Separated Mixed Solid Waste Digester

– Wastewater Treatment Facility Digesters

– Agricultural Digesters

• Cellulosic RIN Price (“D3 RIN”)

Proxy for D3 RIN Price =

Advanced Biofuel RIN (D5) + Cellulosic Waiver Credit

$-

$0.20

$0.40

$0.60

$0.80

$1.00

$1.20

$1.40

$1.60$

/D5

RIN

2011 Vintage 2012 Vintage 2013 Vintage 2014 Vintage

$/D5+CWC $/DGE

Current $0.90 $1.37

Average $0.98 $1.50

Cellulosic RIN Proxy Credit Value

Value Comparison

Average price $/diesel gallon equivalent

Carbon Offset $8.60/mtCO2e of methane reduced

$0.21

Low Carbon Fuel Standard

$45.41/mtCO2e from LCFS intensity target

$0.52

RIN $0.98/D3 RIN proxy (D5 + Cellulosic Waiver)

$1.50

Cannot sell both offset and LCFS credit

Financing

• Revenues are not bankable

– Solution: Price floor

– Solution: Green Credit Reserve

• State policy: Payment for performance > grant making

– Leverage accounting

– Catalyze private capital through government programs based on accounting at this early stage

Increasing Importance of Methane

• LCFS/Offsets = Carbon Dioxide Equivalent

• 1997 Methane Global Warming Potential:

– 21 carbon dioxide equivalent per unit of methane

• 2014 Methane Global Warming Potential:

– 34 carbon dioxide equivalent per unit of methane

Thank you!

Peter Weisberg

Program Manager

The Climate Trust

[email protected]

(503)238-1915 x207