CSG devises method to capture biodiesel carbon value
January 19, 2010
BY Susanne Retka Schill
Chicago-based Carbon Solutions Group is working towards approval for a methodology that will award biodiesel producers carbon credits. The CSG methodology uses data compiled by the U.S. DOE Energy Information Administration as well as plant-specific information.
The process of quantifying the carbon throughout the life cycle of the biodiesel begins with the feedstock, and is applied throughout the process until the biodiesel is consumed. Variables such as the distance the feedstock travels to the plant, methanol usage and recovery, and fossil fuel consumed at the production facility are used to calculate the carbon content of the fuel from a specific biodiesel plant. Finally, the producer must track how the product is transported so the energy used for trucking, rail or pipeline transport, and ultimately the destination market, can be included. The carbon value from each step is totaled and compared to a baseline to generate a carbon credit that can be sold in the voluntary carbon market.
Mark Maloney, vice president of business development for CSG, said the last step was actually the trickiest. "The challenge is to create an emission factor for every gallon in the diesel market," he explained, so the reduction in carbon emissions from waste-based biodiesel can be calculated. CSG has proposed using data compiled by the EIA in its five reporting districts, which show the amount of renewable fuel being blended into the distillate pool at any given time. The carbon assessment for biodiesel from a specific facility can then be compared to the emission factor for the reporting district where the biodiesel is destined, and the reduction in carbon calculated. The system also satisfies another requirement for carbon trading-that the carbon credit be assigned to new, additional reductions in carbon emissions.
In the CSG system, qualifying biodiesel producers must use waste feedstocks such as waste vegetable oil, animal fats or corn oil from ethanol distilleries. The company is also developing a protocol for producers using virgin oils, if they can verify the oilseeds were grown on degraded or under-utilized land.
CSG has worked with biodiesel producers to formulate the methodology, Maloney said, and anticipates helping producers walk through the data collection and validation steps. "The process requires quality data that will be audited by a third party," he explained. "We will have to identify the feedstock, the location, transportation method, and so forth." The company estimates the smallest capacity facility where it will make sense to generate carbon credits is a 1 MMgy plant, as long as the necessary records are being kept.
The initial analyses using the CSG methodology indicate a biodiesel producer will be able to generate total carbon reductions roughly equivalent to one metric ton of carbon for every 1 percent of capacity. Credits are generated over 10 years from the start of production, or until there is an increase in plant capacity. Since carbon credits can only be used once, CSG also anticipates helping biodiesel producers create a multi-year strategy to manage credits, anticipating value is likely to rise over the next several years. Current voluntary markets are valuing a ton of carbon reduction at $5 to $7, which CSG analysts estimate would amount to roughly 4.5 cents per gallon of biodiesel.
Generating an approved carbon credit is only half of the process though, since a carbon credit has no value unless it can be sold. CSG has experience working with companies and utilities selling carbon credits for their renewable power generation, and it expects many of the same investment firms and banks, as well as power utilities and other regulated carbon emitters, to be attracted to biodiesel carbon credits when anticipated regulations become law.
CSG's plan to assign carbon credits to waste-based biodiesel production has been through a round of peer reviews, which will be repeated for a revised methodology reflecting recent changes of the Clean Development Mechanism created under the Kyoto Protocol as the process to develop and approve carbon projects. The CDM framework was used by CSG in developing its methodology for voluntary U.S. carbon markets. The initial peer review affirmed the validity of the methodology, Maloney said, and he expects the required validations by two third-party organizations to be completed between April and June.
The CSG team has experience with a wide range of environmental assets including carbon credits, renewable identification numbers and renewable energy certificates, as well as brokering biofuels and glycerin. The consulting arm of CSG has helped its customers understand the implications and compliance requirements for a number of energy-related policies, including renewable fuel standards, state renewable portfolio standards and state and federal cap-and-trade schemes.
The process of quantifying the carbon throughout the life cycle of the biodiesel begins with the feedstock, and is applied throughout the process until the biodiesel is consumed. Variables such as the distance the feedstock travels to the plant, methanol usage and recovery, and fossil fuel consumed at the production facility are used to calculate the carbon content of the fuel from a specific biodiesel plant. Finally, the producer must track how the product is transported so the energy used for trucking, rail or pipeline transport, and ultimately the destination market, can be included. The carbon value from each step is totaled and compared to a baseline to generate a carbon credit that can be sold in the voluntary carbon market.
Mark Maloney, vice president of business development for CSG, said the last step was actually the trickiest. "The challenge is to create an emission factor for every gallon in the diesel market," he explained, so the reduction in carbon emissions from waste-based biodiesel can be calculated. CSG has proposed using data compiled by the EIA in its five reporting districts, which show the amount of renewable fuel being blended into the distillate pool at any given time. The carbon assessment for biodiesel from a specific facility can then be compared to the emission factor for the reporting district where the biodiesel is destined, and the reduction in carbon calculated. The system also satisfies another requirement for carbon trading-that the carbon credit be assigned to new, additional reductions in carbon emissions.
In the CSG system, qualifying biodiesel producers must use waste feedstocks such as waste vegetable oil, animal fats or corn oil from ethanol distilleries. The company is also developing a protocol for producers using virgin oils, if they can verify the oilseeds were grown on degraded or under-utilized land.
CSG has worked with biodiesel producers to formulate the methodology, Maloney said, and anticipates helping producers walk through the data collection and validation steps. "The process requires quality data that will be audited by a third party," he explained. "We will have to identify the feedstock, the location, transportation method, and so forth." The company estimates the smallest capacity facility where it will make sense to generate carbon credits is a 1 MMgy plant, as long as the necessary records are being kept.
The initial analyses using the CSG methodology indicate a biodiesel producer will be able to generate total carbon reductions roughly equivalent to one metric ton of carbon for every 1 percent of capacity. Credits are generated over 10 years from the start of production, or until there is an increase in plant capacity. Since carbon credits can only be used once, CSG also anticipates helping biodiesel producers create a multi-year strategy to manage credits, anticipating value is likely to rise over the next several years. Current voluntary markets are valuing a ton of carbon reduction at $5 to $7, which CSG analysts estimate would amount to roughly 4.5 cents per gallon of biodiesel.
Generating an approved carbon credit is only half of the process though, since a carbon credit has no value unless it can be sold. CSG has experience working with companies and utilities selling carbon credits for their renewable power generation, and it expects many of the same investment firms and banks, as well as power utilities and other regulated carbon emitters, to be attracted to biodiesel carbon credits when anticipated regulations become law.
CSG's plan to assign carbon credits to waste-based biodiesel production has been through a round of peer reviews, which will be repeated for a revised methodology reflecting recent changes of the Clean Development Mechanism created under the Kyoto Protocol as the process to develop and approve carbon projects. The CDM framework was used by CSG in developing its methodology for voluntary U.S. carbon markets. The initial peer review affirmed the validity of the methodology, Maloney said, and he expects the required validations by two third-party organizations to be completed between April and June.
The CSG team has experience with a wide range of environmental assets including carbon credits, renewable identification numbers and renewable energy certificates, as well as brokering biofuels and glycerin. The consulting arm of CSG has helped its customers understand the implications and compliance requirements for a number of energy-related policies, including renewable fuel standards, state renewable portfolio standards and state and federal cap-and-trade schemes.
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