US project developers push for change to climate bill

Project developers are fighting a section of the House climate bill that could cut offset supply.

According to an analysis of the Waxman-Markey bill by the Environmental Protection Agency (EPA), methane emissions from landfills, coal mines and natural gas systems would be regulated under the “new source performance standard,” making it much harder for developers to generate offset credits by capturing those emissions.

The bill, which cleared a House energy committee vote last week, will now be reviewed by other House committees before an expected full House vote in late June.

If the bill's language goes unchanged, it would knock out 45 per cent of potential domestic offset supply and increase allowance prices by 9 per cent, said Roger Williams, vice president of BlueSource, a major US project developer.

“There’s definitely a push in the offsets community to pick up this issue and advocate for a different outcome here,” Williams said.

Williams said the best opportunity for a change will come either when the bill is reviewed by the House agriculture committee next month, or in the Senate companion to the bill, which has yet to be introduced.

Confident

He said that the offset community is fairly confident they’ll prevail in getting the language changed, but said the longer it stays in, the more market uncertainty it creates.

“Unfortunately, it will end up stifling investment from private sector sources to get some of these projects done if there isn’t clarity that they’ll have enough run time to get a payback,” Williams said.

On the other hand, it could create an “early action gold rush” as developers rush to quickly implement projects, according to Aimee Barnes, senior manager of US regulatory affairs for Ecosecurities, a major offset project developer and aggregator.

Williams said that while the language is a concern, he also doesn't think people should overreact.

"There are still many steps along the way until we have signed legislation,” Williams said.

If the bill becomes law, the cap-and-trade system would begin in 2012.

Popular

Methane reduction projects from landfill, coal mines and natural gas systems are popular because of the huge volume of credits they can generate.

Because the methane from those projects is often of a low quality, the offset projects mostly destroy the emissions, as opposed to using the gas for energy purposes.

Methane accounted for roughly 8 per cent of US greenhouse gas emissions in 2007, around 585 million tonnes of CO2e. A significant portion of those emissions stemmed from landfills, coal mines and natural gas systems.

Short supply

The current pipeline of domestic offset credits is already unlikely to be able to meet the demand expected to be generated under the Waxman-Markey bill.

The bill allows for 1 billion offset credits per year to be used by covered entities, but the US is only expected to produce 15 million credits in 2012, according to Point Carbon Research’s Carbon Project Manager North America.