Landfills and Greenhouse Gas Emissions Trading

Mike McLaughlin

There are a number of reasons to recover and utilize landfill gas. The list now has another – the reduction of methane emissions from landfills will help reduce "greenhouse gases." Under some circumstances, reducing methane emissions from landfills can be converted into cash, through the use of greenhouse gas emissions trading. Landfill owners and their advisors should be aware of the potential value of methane emissions reductions, and should take potential credits into account when drafting documents regarding landfill gas rights.

Methane is considered a potent greenhouse gas, with 21 times the heat-trapping potential of carbon dioxide on a molecule-per-molecule basis. Landfills are the largest source of human-caused methane in the United States, contributing about 8% of total annual greenhouse gas emissions in the United States.

Global warming – the greenhouse gas effect – remains controversial in many quarters. Under the 1997 Kyoto Protocol, the United States agreed in principle to reduce its emissions of greenhouse gases to 7% below 1990 levels by the period 2008-2012. However, the U.S. Senate has refused to ratify the treaty, and has gone on record that it would not consider a climate treaty that did not include "meaningful participation" by developing countries.

Not all American businesses are waiting for the Senate. Many companies have concluded that while current climate change science is imperfect, rising global mean temperatures may warrant serious action. Some companies have voluntarily pledged to reduce greenhouse emissions by fuel switching, efficiency improvements, or other means. These leaders include companies as diverse as energy producer BP Amoco, chemical producer DuPont, and equipment manufacturer United Technologies. An interesting point to note is that although solid waste companies make up a significant portion of U.S. greenhouse gas emissions, they have not yet played a role in the climate change debate.

BP Amoco and other companies have focused on two points that they would like to see in any future greenhouse gas reduction program. The first is receiving credit for voluntary early action. This would provide a means for future credit based on present action to meet future regulatory requirements. The second is emissions trading for greenhouse gas reductions, similar to the successful program now used for acid rain pollutants. Both have received some federal executive and legislative branch support.

In addition to federal support, several states have developed Climate Change Action Plans that include aggressive goals for achieving greenhouse gas reductions. These plans often include emissions trading as a way to achieve low-cost greenhouse gas reductions. Canada, Japan and some European nations also are getting serious about taking action on climate change. For its part, Canada has begun a pilot emissions trading program, and actively encourages landfill methane utilization as a key components of its national climate action plan.

Landfill gas control and utilization are two of the most attractive near-term solutions to the climate change problem, for several reasons:

• There is proven technology for effective landfill gas utilization, with over 250 operational projects in the U.S. today.
• Landfill methane is 21 times more potent a greenhouse gas than carbon dioxide. This means that landfill gas projects deliver more greenhouse gas "bang for the buck," compared to alternatives such as energy efficiency and renewable energy projects.
• It is easy to verify and report landfill gas emissions reductions, typically through metering the flare or energy recovery equipment.
• EPA’s New Source Performance Standards already require large landfills to initiate gas control; therefore, landfills are not likely to be subject to further regulation for greenhouse gas compliance reasons.

This last point is important. This means that in a future greenhouse gas emissions trading regime, landfills should be allowed to claim credit for the implementation of relatively low-cost reductions that utilities and other large greenhouse gas emitters can use to meet their reduction obligations.

Some landfill owners and landfill gas project developers are already trading landfill gas reductions in the emerging market for greenhouse gas emissions reductions. To date, there have been a handful of landfill gas-related greenhouse gas trades. This is an emerging private market, without the strictures (or guidance) of a government program, driven primarily by the desire of forward-thinking companies to purchase voluntary greenhouse gas reductions as a type of insurance against a future greenhouse gas regulatory regime.

• In the current market, landfill gas-based greenhouse gas reductions are marketable if they meet a few initial criteria:
• The reductions must be surplus to regulatory requirements. In the solid waste arena, this means that a landfill must not fall under the federal NSPS regulations, state regulations, or local requirements for gas collection and control.
• The seller must demonstrate clear ownership to the emissions credits. The best situation is where the seller retains title to all emissions credits arising from the landfill gas. If the seller does not have clear title, the buyer may require them to obtain documentation that proves their title to the credits.
• The reductions must be evaluated, monitored and reported by a qualified third-party entity. Landfill gas quality and quantity are easy to measure with simple flare meters or energy sales data. However, buyers will likely require that the seller hire an independent third party to assess the actual amount of greenhouse gas reductions at a particular site on a regular basis.

If a landfill owner has been operating a flare or gas-to-energy system any time after 1990 (the first year for greenhouse gas credits), they should investigate whether their projects meet the above criteria. If they do, the projects may have value in the greenhouse gas credit market.

The question is how much value do the credits represent? A good-sized landfill (say, 2.1 million tons of waste) with a landfill gas-to-energy facility or other controls installed might be able to reduce greenhouse gas emissions on the order of 50 metric tons of CO₂ equivalent each year. At $1.50 per metric ton of CO₂ equivalent reductions, the credits would be worth about $75,000 per year. This represents significant dollars over the course of 10 or 20 years.

Regardless of how the market evolves, however, landfill owners, landfill gas developers, and their advisors should be aware of the criteria listed above for participation in the emerging greenhouse gas credit market, and include clear provisions for the potential greenhouse gas credits in project documentation.

Michael McLaughlin is SCSW Technolgy vice chair, and with SCS Engineers in Reston, Virginia.