04 Mar 2011 09:03:25
New carbon credit trading platform
ADBA, the trade association for the anaerobic digestion (AD) and biogas industry, has today announced a proposal to create a biomethane based carbon credit trading platform which can also serve as a green gas certification scheme to support the development of the AD industry.
The proposal is to establish a new company which will seek to list and trade a biomethane carbon credit product, the "biomethane credit", or BMC. Whilst ADBA will not have any direct interest in the new company, it believes that this will be of benefit particularly to biomethane producers by offering them an additional revenue stream to help support the development of the industry's gas to grid capability and deliver the "huge increase in energy from waste through anaerobic digestion" the Government committed to in its Coalition Agreement.
The Government is due to announce the Renewable Heat Incentive (RHI) later this month. Part of the RHI is to incentivise the building of AD plants that can produce biomethane for grid injection. To date, only three such plants have been built with the benefit of substantial grants. ADBA believes that the proposed scheme has the potential eventually to serve as an effective way for the Government to de-socialise the biomethane element of the cost of the RHI by creating a tradable product which will have an external value to grid-injecting biomethane producers, thus over time transferring the cost of providing subsidy for the renewable industry from the consumer to the private sector.
The intention behind the proposal is to gain regulatory or statutory carbon status for BMCs, allowing them to be delivered as an offset under mandatory trading schemes. It is believed that BMCs would be welcomed by the voluntary carbon market and that now is the right time to establish such a scheme to boost investment in biomethane production.
It is also likely that the gas supply companies will want to purchase BMCs so that they can offer a certified "green gas tariff" to their consumers, similar to a basic green gas certification scheme. Furthermore, whilst the green gas certification aspect of the BMC is a benefit, it is believed that greater value can be gained by monetizing the low carbon credentials of biomethane rather than solely seeking to sell origin certification on to the consumer.
At the point of injection to the grid, it is proposed that a regulating entity will allocate to the gas producer electronically one biomethane credit for every 5 cubic metres of biomethane gas injected. It is believed that the company can create a continuously traded market in these credits, which will provide a liquid, low denomination and easy to access product to carbon credit buyers. These buyers are likely to be UK and foreign voluntary carbon off-setters as well as entities who would seek to deliver BMCs as an offset under mandatory trading schemes.
For the avoidance of doubt there is no intention to trade in the physical gas, only the carbon credit which will be allocated to the producers of biomethane once it has been injected into the gas grid.
• Anaerobic digestion (AD) is a natural process which converts organic matter such as household food and garden waste, farm slurry, waste from food processing plants and supermarkets, and break/energy crops into biogas and digestate, a biofertiliser.
• Biogas can be utilised to generate electricity, heat, or, upgraded to bio-methane, be either used as a transport fuel or fed directly into the UK's gas grids.
• According to the Carbon Trust, the generation of biomethane would save twice as much carbon dioxide as producing electricity by 2020.
• AD is the only renewable that can be scaled up fast enough to enable the UK to reach its 2020 renewable energy target
• AD reduces greenhouse gas emissions.
• AD preserves critical natural resources such as nitrates and phosphorus. Phosphorous is a finite resource for which there is no known alternative. It is critical for plant growth and world resources are already running out.
• The digestate replaces commercial fertilisers, which are hugely energy intensive.
• AD reduces our use of fossil fuels.
• Biomethane is "green" because it replaces natural gas, a fossil fuel. The demand for natural gas from underground reserves is displaced by "environmental carbon" in the form of biomethane, making biomethane a zero new carbon fuel.
• AD significantly improves Britain's energy security.