Carbon Credit Basics University of Minnesota West Central Research and Outreach Center Advanced Biomass Energy Workshop November 15, 2007 Steve Wagner United States Department of Agriculture Agricultural Research Service North Central Soil Conservation Research Lab. Morris, MN
Summary Why Carbon Credits? Carbon Credits Defined Carbon Credits vs. Renewable Energy Credits (RECs( RECs) Potential for Economic Benefit Current value Future value? Conclusions
Why Carbon Credits? Carbon Dioxide CO 2 is a Greenhouse Gas Other Greenhouse Gases: Methane CH 4 Nitrous Oxide N 2 0 Chlorofluorocarbons CFCs Per fluorocarbons Sulfur hexafluoride
Carbon Credits Defined One Carbon Credit is equivalent to one metric tonne of Carbon Dioxide CO 2 Referred to as t CO 2 e Other Greenhouse Gases based on standard multiples of carbon: Methane about 20x potency or global warming potential of CO 2 Nitrous Oxide about 300x Provide a way to reduce greenhouse gas emissions The market assigns the monetary value Carbon credits can be traded at prevailing market prices
Renewable Energy Credits (RECs( RECs) ) Defined RECs are the property rights to the environmental benefits from generating electricy from renewable energy sources One REC certificate is created for every 1,000 kwh of electricity produced Electricity could be produced from biomass, wind, solar, biodiesel RECs are certified by Green-e and The Climate Neutral Network and tracked with regional systems like M-RETS RECs incentivize carbon-neutral neutral renewable electrical generation
Carbon Credits Opportunities Welcome to the Farmers Union Carbon Credit Program Forest CRP CRP Forest Dale Enerson, Director denerson@ndfu.org 701-952-0116 2.5 million acres 2400 contracts.32 ton/acre.4 ton/acre.6 ton/acre.2 ton/acre
Chicago Climate Exchange Chicago Climate Exchange (CCX) is North America's only and the world's first global marketplace for integrating voluntary legally binding emissions reductions with emissions trading and offsets for all six greenhouse gases. (learn more) CCX CFI Vintage 2007 (180 day price history) ECX CFI Dec08 (180 day price history) $4.00 EUR25.00 $3.50 $3.00 EUR20.00 $2.50 $2.00 EUR15.00 3/8 4/13 5/19 6/24 7/30 9/4 10/10 3/8 4/13 5/19 6/24 7/30 9/4 10/10 1 Euro = $1.46 US, 21 EUR ~ $31 USD
Why do Companies Voluntarily Purchase Carbon Credits or RECs? Private corporations or individuals purchase to reduce their carbon footprint They may have a genuine desire to do their part in reducing greenhouse gas emissions They may want to green their image
Why Do Companies Voluntarily Purchase Carbon Credits or RECs? Do you want to be the green bear or the brown bear?
Carbon Offsetters Carbon Offsetting is closely related to emissions trading Carbon offsetting: Voluntary Un-regulated Mitigates greenhouse gas emissions for those aware and concerned about their energy intensive lifestyle Carbon offsets could be created by increasing efficiency of a building, generating power from renewables or cogeneration, planting trees Commercial or non-profit firms invest in offsetting projects with carbon offset sales
Why do Individuals Voluntarily Purchase Carbon Offsets?
Value of Carbon Credits The Chicago Climate Change (CCX) facilitates trading of carbon emissions on a voluntary basis, at about $2 per metric ton as of November, 2007 Offset providers sell to individuals and companies to reduce carbon footprints including emissions for travel to attend conferences or events. Prices average about $12 per ton, depending largely on the types of projects implemented to derive the offsets. Prices for the 2008-2012 European Union Emission Trading Scheme (EU ETS) validity period are currently $30 dollars per metric ton. (A metric ton or tonne is equivalent to 2,205 pounds).
Example 2 MW Wind Turbine AWEA web site - based on US mix of energy - 1.5 lbs CO 2 per kwhr generated lbs kwhr lbs/turbine metric tons 1.5 6,800,000 10,200,000 4626 Price/ton CCX Offset provider EU - 2007-2012 metric tons $2.00 $12.00 $31.00 per turbine 4626 $9,252.00 $55,512.00 $143,406.00 $/kw-hr $0.0014 $0.0082 $0.0211 cents/kw-hr 0.14 0.82 2.11
Future of Carbon Credits Kyoto Kyoto II Will the US become a green bear? Greenhouse Gas Caps and Trades? A similar cap and trade market developed regarding sulfur dioxide emissions in the acid rain debate a number of years ago. Over time, the cost of credits or offsets became high enough to force companies to place scrubbers on smokestacks, replace the highest emission plants and build newer low-emission facilities. Lowered emissions resulted from the market-based sulfur dioxide allowances trading, and acid rain and its damage were lessened. ND Farmers Union That may hold true for carbon emissions as well.
Conclusions May want to establish base line carbon footprint for your farm or business Put Lieberman-Warner Cap and Trade Bill on your watch list May want to avoid long term contracts
Thank You Joel Tallaksen, Biomass Coordinator WCROC Mike Reese, Director of Renewable Energy Center, WCROC Lowell Rasmussen, Associate Vice Chancellor, UMM Plant Services Abdullah Jaradat, Research Leader, USDA-ARS Soils Lab
Questions? Joel Tallaksen, Biomass Coordinator WCROC Mike Reese, Director of Renewable Energy Center, WCROC Lowell Rasmussen, Associate Vice Chancellor, UMM Plant Services