Manure generators with digesters can earn income from selling carbon credits
March 8, 2008 by Tony Kryzanowski
Forget the odd language of text
messaging. The environmental lingo being created by the Kyoto Protocol
and global warming is a language unto its own. It’s all about CERs,
EU-ETS’s, carbon credits, carbon sinks, and so on.
Forget the odd language of text messaging. The environmental lingo being created by the Kyoto Protocol and global warming is a language unto its own. It’s all about CERs, EU-ETS’s, carbon credits, carbon sinks, and so on.
|Part of the process of preparing a lagoon for anaerobic digestion is installation of a liner. By encouraging anaerobic digestion and capturing the methane gas, greenhouse gases are not released into the atmosphere.|
For agricultural businesses that generate significant amounts of manure annually and who now operate or are interested in building anaerobic digesters to process manure into liquid and compost, getting to know the language could translate into money to offset the cost of these expensive projects.
A growing awareness of the potential harmful effects of greenhouse gases and a willingness to take action is what the retail division of AgCert International plc – called DrivingGreen.com – is hoping to capitalize on. It is a consumer carbon offset company that works with agricultural projects creating reductions in greenhouse gas emissions. The company acknowledges that a lot of its time is spent simply educating farm businesses about what carbon credit trading is all about and who can provide quality animal waste management systems.
Farm-based businesses that construct Department of Energy-approved manure digesters that produce non-fossil fuel renewable energy and prevent greenhouse gases, like methane, from entering the atmosphere can qualify for greenhouse gas emission offsets, or what are sometimes called carbon credit payments, under contract with DrivingGreen.com. All carbon credits sold by DrivingGreen.com are approved and verified by a third party to meet protocol requirements.
Offset payments are made by environmentally-conscious consumers to DrivingGreen.com. They pay offset fees based on the amount of greenhouse gases they generate through activities such as driving cars, taking flights, or hosting events. DrivingGreen.com uses the fees collected to purchase carbon credits generated by their contracted digester operators, takes a percentage of the income from credit purchases, and distributes the rest to contracted digester operators, based on the number of credits purchased and the value of the carbon credits at the time. Credits are capable of being traded on the European cap and trade system, called the European Union Emissions Trading Scheme (EU-ETS), in the case of countries that have signed the Kyoto Protocol, or on the Chicago Climate Exchange, as well as private sales in the U.S. Therefore, they have a value and based on the demand for carbon credits, the value will fluctuate.
|A new income stream for large manure producers interested in anaerobic digestion is the sale of carbon credits, once a facility has been inspected and qualifies according to U.S. Department of Energy and United Nations standards.|
Until recently, digester operators working with DrivingGreen.com were generating more credits than the offset fees collected, which has contributed to keeping the value of American credits low as compared to credits in Europe.
This has been the main sticking point for Lake Breeze Dairy, a Wisconsin-based dairy that has operated a GHD digester for the past 18 months and signed a contract with AgCert. Right now, carbon credits in Europe are trading at between $18 to $20 per ton of greenhouse gases not released into the atmosphere, while carbon credits traded in the U.S. are trading at between $3.50 and $4 per ton. This disparity is primarily because the U.S. is not a signatory to the Kyoto Protocol. Lake Breeze Dairy financial manager, Brian Gerrits says signing on to Kyoto would help to improve the financial viability of anaerobic digesters, should it result in the value of carbon credits generated in the U.S. increasing in value to the level currently traded in Europe.
“That would be a significant improvement,” he says. “I think that’s what has to happen. The baffling thing for me regarding carbon credits is the lack of value. Every time I turn on the news, it seems like global warming is an issue and we all know that a lot of it is being created by the greenhouse gases. Yet, based on what’s happening with the carbon credits, they don’t seem to be gaining in value as much as I thought they would, and I think a lot of that is politics.”
The dairy generates about 36.5 million gallons of liquid manure annually. It invested in an anaerobic digester, mainly to deal with an odor problem. By installing the digester, the dairy expected to be able to use the compost generated by the digester for bedding. However, the dairy made the difficult decision to switch back to using sand as bedding after six months. So the challenge faced by the dairy now is to find a market for its compost to offset the expenses incurred by operating their sand reclamation system. Given these circumstances, Lake Breeze Dairy is currently not able to operate its digester at a profit.
“On the positive side, at least the carbon credit revenue is another form of revenue from our digester,” says Gerrits.
Another Wisconsin-based dairy, Holsum Dairy, has nothing but praise for the program offered by AgCert. Dairy manager, Kenn Buelow says the dairy operates four GHD digesters to manage the 80 million gallons of manure generated from the 7000 head of dairy cows managed by the farm business in two separate operations.
Buelow says they are using the compost from the digesters for bedding and have not seen any significant impact on milk quality. Because of the savings derived from being able to use the compost for bedding, supplemented by the income from carbon credits and the sale of power generated from burning the methane gas produced by the digesters, this has significantly contributed to offsetting the cost of installing the digesters. “There are a lot of small parts to the digester operation that make it financially feasible,” says Buelow. “It’s difficult to do it without all these parts working together.”
Both Buelow and Gerrits say what they appreciated about signing a contract with AgCert is that they were only making a one year commitment. Other companies wanted a 10 year commitment.
“In my opinion, the carbon credit market is still in its infancy,” says Gerrits. “I didn’t want to make a 10 year commitment to anyone. I think the market is still trying to find some direction.”
Buelow says dealing with AgCert has been the most positive experience he has had in his dealings with carbon credit trading companies. He has not found it to be particularly complicated.
Greater concern about harmful greenhouse gases and greater willingness by the public to take action has reversed the trend over the past 12 months to the point where offset fees now surpass carbon credit availability, according to Duane Toenges, U.S. manager of supply aggregation for AgCert International. “The last 12 months have become very interesting in the domestic market because we have really seen the acceptance and a change in attitude,” he says. “There are people out there looking for credits, whereas 12 months ago, we had more inventory than we could sell. Today it’s the opposite. We can sell a whole lot more than we have.”
The amount of financial support that government is offering through
low interest loans to agricultural businesses to invest in digester technology is also having a positive impact on building American carbon credit generating capacity.
Toenges says AgCert International is breaking the trail within the consumer carbon offset sector in the U.S. and is rather unique with its approach of working with agriculture-based producers of greenhouse gases.
|Conversion of manure through installation of anaerobic digestion projects primarily using lagoons in warmer climates is generating carbon credits for DrivingGreen.com, the retail division of AgCert International.|
AgCert International management says agricultural sources are responsible for about 20 percent of the world’s annual greenhouse gas emissions, which is why the company works with this business sector. The company describes itself as ‘an international leader in greenhouse gas emission reduction projects that helps consumers personally contribute toward reducing global warming by translating their own greenhouse gas emissions into carbon emission reductions that, in turn, reduce pollution elsewhere in the world’.
It is a global firm, headquartered in Ireland and with operations in Brazil, Mexico, Canada and the U.S. It was founded in 2002 and operates about 1000 digesters of its own outside of the U.S. According to Kyoto Protocol regulations, the company is required to install and operate its own digesters in a developing country, whereas it can function as a broker in a developed country like the U.S.
Most of its owner/operated facilities are in Mexico and Latin America to take advantage of the natural heat, a necessary component for triggering the anaerobic digestion process and one of the factors adding to the cost of an installation in a colder climate, where heat must be added. “The average ambient temperature in Brazil is 80 degrees F,” says Toenges. “We can pretty much build a lagoon, line it, put a cover on it and Mother Nature takes care of the rest.”
The company believes providing financial support to offset greenhouse gas emissions through constructing animal waste conversion facilities, like digesters, is a much better way to combat global warming than other activities, like planting trees and producing renewable power from non-fossil fuel sources such as wind and solar. According to the company, it would take planting and growing 128 trees every year for 10 years to equal the amount of greenhouse gas offsets paid by a vehicle owner to operate one car for a year which is, in turn, invested in waste conversion projects. Even so, a digester project must make financial sense.
“Just because it is environmentally positive doesn’t necessarily mean
it’s financially feasible,” says Toenges. “We work pretty hard to consider both those issues.”
The company changed its focus to the international carbon credit market when the U.S. decided not to sign on to the Kyoto Protocol. However, greater public awareness has caused the company to rewrite its American business plan. “We believe that big opportunities are opening up here because of the new interest that has been generated,” says Toenges.