National Academies Press: OpenBook

The Carbon Market: A Primer for Airports (2011)

Chapter: Chapter 2 - Carbon Offset and Value Opportunities for Airports

« Previous: Chapter 1 - Introduction and Background
Page 14
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 14
Page 15
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 15
Page 16
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 16
Page 17
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 17
Page 18
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 18
Page 19
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 19
Page 20
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 20
Page 21
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 21
Page 22
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 22
Page 23
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 23
Page 24
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 24
Page 25
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 25
Page 26
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 26
Page 27
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 27
Page 28
Suggested Citation:"Chapter 2 - Carbon Offset and Value Opportunities for Airports." National Academies of Sciences, Engineering, and Medicine. 2011. The Carbon Market: A Primer for Airports. Washington, DC: The National Academies Press. doi: 10.17226/14607.
×
Page 28

Below is the uncorrected machine-read text of this chapter, intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text of each book. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

14 2.1 Offset Credit Origination C H A P T E R 2 Carbon Offset and Value Opportunities for Airports Key Takeaways for Airports • There are a handful of airport projects with offset credit potential but not all GHG emission reducing activities at an airport will result in offset credits that have value in carbon markets. • Typically, offset credit buyers will want the offset projects to have been regis- tered with an offset standard body. • As new types of carbon offset projects become eligible for offset origination, air- port sponsors should assess whether to retain the rights to each project’s offset credits or to instead allow tenants to retain them. A carbon offset project describes an activity that reduces, avoids, or sequesters GHGs in order to compensate for emissions occurring elsewhere. Offset projects can cover a wide variety of activities and installations. Theoretically, an airport sponsor could claim any activity that results in a net decrease in carbon emissions as an offset; however, not all offset activities carry mone- tary value in carbon markets. Buyers in the carbon market often want assurances that the offset credit they are buying is of a certain quality or type. Offset standards bodies serve an important role in the offset market by developing, verifying, and quantifying GHG emission reductions from various activities. An overview of offset standards bodies is contained in Section 2.2.1. Without the backing of an offset standard body, it may be difficult to create revenue from some projects that reduce GHG emissions. Regardless of the offset project type or standards body, there are generally five common cri- teria that all offset projects must meet in order to ensure crediting for reducing GHG emissions (World Resources and World Business Council for Sustainable Development 2004): 1. Real—An actual unit of GHG must have been reduced, avoided, or sequestered. 2. Permanent—The activity must result in a reduction, avoidance, or sequestration that will not be reversed. 3. Additional—The project must have been undertaken in response to an incentive created by a carbon offset market. For example, the activity cannot have been required by law or cost effective not accounting for value of the offset credit. 4. Verifiable—The project sponsor has to be auditable to show that an actual reduction took place. 5. Enforceable—Projects generally have to be backed by legal contracts or other legal instru- ments that define their creation and ensure exclusive ownership.

In the United States, generally recognized project types can be broken into three main cate- gories: (1) methane capture and destruction; (2) land use changes to sequester carbon dioxide; and (3) the destruction of industrial pollutants which are high global warming potential GHGs. Each project type presents unique challenges to airports, making feasibility of many of the most common offset project types unlikely as viable options for airports. The following is a descrip- tion of the types of projects that generally fall into these categories and an exploration of an air- port’s potential to participate. 2.1.1 Airport Offset Project Applicability Despite the growing categories of recognized offset projects, an airport’s ability to participate in activities recognized by the leading offset standard bodies is currently limited. The types of GHG emission reduction projects that airports typically engage in do not align with many of the traditional offset program types recognized by U.S. offset protocols. Table 4 describes some potential project types that may be applicable to airports, based on typical airport operations. The following sections summarize common offset project types. 2.1.2 Methane Destruction Methane (CH4) gas capture and destruction is a recognized project type by most offset stan- dard bodies. The requirements vary to some degree, but are generally two-fold: (1) capture of landfill gas (made up largely of methane gas) and (2) destroy through combustion the methane in landfill gas (De la Cruz 2010). Carbon Offset and Value Opportunities for Airports 15 Table 4. Offset projects and airport applicability. Project Type Project Description Airport Feasibility Notes Landfill Gas Install equipment to capture methane gas from a landfill; destruction could yield a usable energy source. Potentially viable if airport landfill is currently in operation. Closed landfills can produce gas for approximately 10 to 30 years. New landfills pose a safety risk at airports and are prohibited, as specified in FAA Advisory Circular 150-5200-34. Enhanced Wastewater Treatment Install equipment at airport wastewater treatment plant to capture methane gas from wastewater. Subject to an airport having a wastewater treatment facility on-site. Organic Waste Composting Collect food waste in airport terminal and send to a composting site for methane capture. Examples of airports diverting organic waste from landfills to composting facilities have included Los Angeles, Oakland, Portland, and Seattle International Airports. Forestry Restore vegetation, avoid conversion of vegetation to commercial development, or add vegetation to airport property. Forest that attracts wildlife is a risk to airport operations and safety. On-airport wildlife issues could be potentially avoided through careful selection of the appropriate type (grass, bush, or tree) and location (landside, remote airport property) of vegetation. To be creditable, a reforestation project would likely need to be additional to environmental mitigation requirements stemming from a regulatory decision. Refrigerants Switch to less GHG-intense refrigerants. GHGs from refrigerants likely make up only a small fraction of airport emissions.

In its Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2008 study, the EPA es- timates that methane emissions make up about 9% of all GHG emissions in the United States (EPA 2010). There are a variety of methane emitting sources in the United States; however, the leading sources are enteric fermentation (digestion from livestock), landfills, natural gas systems, coal mining, manure management (from livestock), petroleum systems, and wastewater treat- ment. Figure 2 presents more information on the relative contribution of these methane sources. Operators of these various sources of methane gas have developed methods for capturing the gas by installing a system of wells, pipes, blowers, caps, and other technologies. After capture, methane is combusted and destroyed, usually by a flare or a boiler which combusts the gas in order to create heat for other processes such as electricity generation. When methane is com- busted, the gas is destroyed and the byproduct of combustion emitted is carbon dioxide (CO2) which has a much lower GWP. The result is a lower impact to GHG concentrations in the atmo- sphere compared to methane seeping into the atmosphere directly from the landfill or other methane source. The following are sources of methane emissions that are recognized by U.S. off- set standards bodies to generate offset credits. Landfills—Landfills remain the most common method for disposing of waste in the United States and a potential, albeit unlikely, methane capture and destruction project source for air- ports. The bacterial decomposition of solid waste in a landfill creates a landfill gas, which is pri- marily comprised of two GHGs: methane and carbon dioxide. With time—and if not collected, captured, and/or destroyed—landfill gas can be released into the atmosphere, adding to the over- all concentration of GHGs. If captured, landfill gas can potentially serve as an energy source. 16 The Carbon Market: A Primer for Airports Key Takeaways for Airports • The primary opportunity for a methane destruction offset project would be from an existing landfill on airport grounds. • New landfills are prohibited at airports, limiting the applicability of this offset project type moving forward. Figure 2. U.S. methane emissions by source (average 1990–2008). Source: US EPA. Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2008. Washington, D.C., 2010. Manure Management 8% Coal Mining 12% Landfills 22% Other 7% Petroleum Systems 5% Wastewater Treatment 4% Enteric Fermentation (Livestock Digestion) 25% Natural Gas Systems 17%

Safety regulations prevent airports from placing new landfills on airport grounds, limiting proj- ects in this offset project category to airports with existing landfills. Composting Organic Waste—Aerobic composting operations are recognized by some offset standard bodies and represent a potential offset project type for airport sponsors. Research has shown that in most landfill gas collection systems, for rapidly decaying organic waste such as food, a greater proportion of the methane will go un-captured in comparison to slower degrad- ing waste. By diverting rapidly degrading food waste to aerobic composting operations and away from landfills, airport sponsors can avoid large amounts of methane emissions. Wastewater Treatment—Wastewater from domestic and industrial sources is treated at wastewater facilities to remove certain organic and chemical matters. These processes produce and release methane. Some offset standard bodies are beginning to develop protocols for cap- turing and destroying methane from wastewater facilities. There are other methane capture and destruction offset project types that likely have less ap- plicability to airports. Most of the leading United States–based offset standard bodies allow methane destruction for coal mining to qualify for offset credit origination. Farmers and other managers of livestock often manage the waste produced from their livestock in tanks or ponds specifically designed for holding manure. These holding systems are often liquid-based systems that, with time and under anaerobic conditions, decompose and produce methane. Owners of manure management systems who install biogas control systems that capture and destroy the methane gas are often eligible for offset credits. 2.1.3 Land Use Changes Carbon Offset and Value Opportunities for Airports 17 Key Takeaways for Airports • Forest land is a natural carbon sink. The protection or enhancement of forest lands are common forms of recognized offset projects. • Although no offset forestry projects at airports in the United States have been developed to date, the Montreal-Mirabel International Airport in Mirabel, Canada, is participating in a forestry project. • Airport participation in forestry projects is limited due to the safety concerns associated with attracting wildlife to or near airports. Forest land represents one of the largest natural carbon sinks on the planet. The maintenance, protection, and promotion of forestry is seen as a critical element in reducing carbon dioxide concentrations in the atmosphere. Forests are complicated, constantly changing, integrated sys- tems of living organisms, in which carbon is continually absorbed and released by trees, soil, and other organic material. A 2009 study funded by the Royal Society and the Natural Environment Research Council showed that tropical forests absorb about 18% of the carbon dioxide added to the atmosphere each year from burning fossil fuels (Lewis 2009). When forests or trees are disturbed by natural events like disease, pests, or fire, or when they are disturbed by manmade events such as harvests, the stored carbon dioxide can be released into the atmosphere. While new forests have the potential to absorb and store additional carbon dioxide, creating a net decrease in carbon dioxide in the atmosphere, existing forests, if they are cut down, have the potential to release the carbon dioxide already stored resulting in a net increase in carbon

dioxide in the atmosphere. For this reason, many offset standard bodies recognize both projects that create new forests, composed of tree and vegetation species that rapidly sequester carbon, and those that help ensure that existing forests remain in a form that continues to store carbon dioxide. Airports face a number of hurdles in participating in these types of forestry offset projects. First, many airports do not have the acreage to plant a large number of trees or to convert non-forest land into forest land. Secondly, and perhaps more restrictive, FAA has safety concerns with attract- ing wildlife to the airfield or even close to the airport. Trees provide habitats to wildlife and there- fore planting of any vegetation is carefully considered and often restricted by airport sponsors. For these reasons, airport participation in large forestry offset projects may be difficult, unless the land holdings of the airport were such that new forestry would not create any new safety concerns. Case Study 1 examines a proposed reforestation project at the Montreal-Mirabel International Airport in Mirabel, Canada. The airport was approached by a forestry offset credit project developer to plant approximately 96,000 trees, which are expected to sequester more than 18 The Carbon Market: A Primer for Airports Case Study 1: Montreal-Mirabel International Airport, Mirabel, Canada The Montreal-Mirabel International Airport in Mirabel, Canada, is a non-hub air- port serving the needs of cargo carriers flying into and out of the province of Que- bec. The airport is located 34 miles northwest of downtown Montreal. In 2009 Mirabel handled about 100,000 tons of cargo. Aéroports de Montréal (ADM), a not-for-profit corporation responsible for the man- agement, operation and development of Montreal-Mirabel Airport, was approached by CO2 Environnement (the developer) to partner in a tree plantation/reforestation project that will result in the generation of reforestation offset credits. Reforesta- tion offset credits are generated from projects that restore forests on land that was once forested. The developer specializes in reforestation by planting trees on land owned by its partners, which in this case is ADM. The reforestation project between ADM and the developer will begin when 96,000 saplings—jack pine, black spruce and white spruce, all of which are native to Quebec—are planted away from air- field activity between Montreal-Mirabel’s east and west access roads, which con- nect the airport terminal building to the local highway. Over the lifetime of the project, the trees will create what is called a carbon sink where atmospheric CO2 is sequestered through the natural process of tree growth. By this carbon seques- tration, the developer will generate reforestation offset credits and sell them in the voluntary carbon market. The project is expected to begin in July 2011 and is the first example in North Amer- ica of an offset credit reforestation project at an airport. The developer estimates that 16,382 tonnes of CO2 will be sequestered over a crediting period of 50 years, accord- ing to the quantification methodology ISO 14064-2. The project will be verified by Skoven Inc., a third-party carbon verifier, according to ISO 14064-3. The 16,382 refor- estation offset credits will be issued to the developer when the trees are in the ground and Skoven Inc., has completed the verification audit. While the developer expects to sell the 16,382 offset credits on the voluntary market, ADM will not receive any finan- cial benefit from the sale of the voluntary credits. ADM is largely interested in the environmental and community benefits associated with the project—namely aiding in the reduction of greenhouse gases and improved air quality. There can be great dis-

Carbon Offset and Value Opportunities for Airports 19 crepancy in what offset credits can be sold for. In the United States, a reforestation offset credit might sell between US$3 and $15 on the voluntary carbon market. Therefore, the developer could expect to take in a one-time revenue between US$49,146 and $245,730 (ForestTrend n.d.). All preparation, planting, and mainte- nance service costs, as well as quantification, verification, and certification fees, are borne by the developer. In the past, the developer has sold voluntary reforestation credits to paper mills, refineries, and financial institutions looking to retire the voluntary credits and claim the green benefit or resell the voluntary credits for profit. It is worth noting that while ADM can claim environmental goodwill by partnering with the devel- oper and hosting forest growth, ADM cannot claim the carbon reduction—this goes to the end buyer of the voluntary credits. The 79-acre project site at Mirabel airport is well suited for a reforestation project. The area was unused before the project and met reforestation project standards, and future tree growth will not conflict with airport operations. In order for the credits to be certified by CarbonFix, a leading carbon standards body for reforestation proj- ects which is certifying the credits, ADM and the developer must state that neither the trees nor the project land is intended to be developed in the foreseeable future. However, in the event that ADM must remove some of the trees or a percentage of the trees die prematurely, surplus offset credits built into CarbonFix’s portfolio of projects—required by the ISO 14064-2—will cover any reduction at the Mirabel site. For an airport in the United States looking to host a reforestation project, there are many eligibility preconditions the project must meet. As well as meeting the eligi- bility preconditions, U.S. airports looking to host a reforestation project might not be permitted if it has accepted federal airport grants because these airports are regulated by federal statutes, policies, and Airport Improvement Program (AIP) grant assurances. The following issues might create challenges: • Both federal law and the grant assurances strictly limit the use of airport revenue for non-airport purposes. “Airport revenue” is defined broadly and includes, by way of analogy, proceeds from timber sales, mineral extractions, and agricultural use on airport property, which is similar to this situation. Therefore, the airport might need to be compensated by the developer for the sale of the offset cred- its, minus the cost to the developer to generate the sale proceeds. • Airports are not permitted to donate land for “goodwill” purposes, not even to their parent city, county, or state owner. Airport owners must charge a minimum of fair market value to lease property for non-aeronautical use, with the excep- tion that subsidies may be offered in certain circumstances such as for community purposes to maintain positive airport-community relations, subject to restrictions. In the case of this tree plantation project, ADM is neither donating land nor leas- ing land to the developer. The project land will remain owned by the government even though the developer will plant trees and generate offset credits. Provided U.S. airports can successfully navigate federal statues and policies, there exists wide potential for non-revenue and revenue earning reforestation projects on airport property that do not interfere with airport operations. Case Study 1: (Continued).

16,000 tonnes of CO2. This case study could serve as a model for United States–based airports interested in hosting a similar project. Case Study 1 is an example of a reforestation project. The following are examples of other forestry project types: Urban Forestry—Some offset standard bodies have developed, or are developing, protocols for urban forestry. These protocols allow entities that plant trees along streets, near buildings, or on other property to be eligible to originate offset credits. An airport implementing an urban forestry offset program might line access roads or airport parking lots with trees to sequester GHGs. In terms of revenue opportunities, such a project is probably limited as the number of tonnes of CO2e sequestered from such a project is likely to be minimal. The value of such a proj- ect would rest more in “green” branding than revenue opportunities. Reforestation—A reforestation project generally involves restoring tree cover to an area that has been in a non-forest state for an extended period of time. Generally reforestation projects involve planting new trees and/or removing any impediments to natural reforestation. Impediments often include non-native species, pests, or manmade impediments preventing forest growth. Improved Forest Management—Improved forest management (IFM) projects generally involve managing forests in such a way as to either maintain or increase the forest land’s carbon stock. Eligible forest management activities often include removing diseased trees, managing competing brush and short-lived forest species, or increasing the stocking of trees on under- stocked areas. Avoided Conversion—Finally, some landowners are eligible to claim offset credits simply by committing to keep their land in forestry. The justification for this type of project is that the land has more value to a landowner in a non-forest state than it does in forestry and without incentive, will eventually convert into a more profitable, non-forest state. Offset credits provide an incen- tive for the landowner to keep the land in forestry. IFM and avoided conversion projects would only be viable at airports with large forest holdings, a feature not common at most airports. 2.1.4 Industrial Pollutants 20 The Carbon Market: A Primer for Airports ODSs have historically been used in a variety of applications including refrigerants, solvents, and fire extinguishing devices. As a pollutant, ODSs are more familiarly associated with their contribution to the depletion of the earth’s ozone layer. However, many ODSs have extremely high GWP, and thus the prevention of their release can have substantial impacts on atmospheric GHG concentration levels. Many offset standard bodies recognize the destruction of ODSs, in order to prevent their release into the atmosphere as a viable carbon offset activity, eligible to originate offset credits. ODS Destruction—Largely due to an increased awareness of the impact ODSs have on the depletion of the ozone layer, the use of ODSs has largely been phased out. At airports, some equipment, such as refrigeration units, still contain ODSs which can be released into the atmo- sphere as units are serviced, recycled, or disposed. Some ODSs have been replaced with hydrofluo- rocarbons (HFCs), which are ozone-friendly but have high GWPs. Key Takeaways for Airports • Old equipment in airport facilities may contain ozone depleting substances (ODS), the destruction of which is a commonly recognized offset project.

For most airports, reducing energy use or increasing energy efficiency onsite will be the low- est cost option for reducing their carbon footprint. Energy efficiency measures can include: switching fuels for boilers, heaters, and other fuel-burning equipment to fuels with lower GHG emissions; replacing older inefficient appliances with newer equipment that operate more effi- ciently; and improving insulation of terminals and other structures. At the international level, there has been some acceptance of energy efficiency measures as viable offset projects, allowing the sponsors of these projects to earn revenue from sale of offset credits. Projects that have suc- cessfully implemented energy efficiency measures and sold the associated offset credits have most often taken place in developing countries. However, there have been some examples of offset projects for energy efficiency in developed nations. In the United States there is currently a limited market for energy efficiency offset credits. The majority of the major offset standards bodies do not recognize energy efficiency projects as an eligible offset project type. Project sponsors registering a project under an offset standards body that does recognize energy efficiency as a project category will likely find limited demand for the credits in the marketplace. Part of the lack of demand for energy efficiency offset credits is the expectation that these types of activities will not be recognized in future compliance mar- kets. The major federal legislative proposals establishing a cap-and-trade have not recognized energy efficiency as an eligible project type. The same is true in California’s emerging cap-and- trade program, expected to be the largest demand driver for compliance offset credits in the United States in the near future. In the Regional Greenhouse Gas Initiative’s (RGGI) forming doc- ument, energy efficiency offset projects are contemplated; however, at this time there exists essen- tially no demand for offset credits in RGGI. An explanation of the RGGI program is included in Chapter 3. Case Study 2 examines various projects that the Austin Bergstrom Airport has undertaken as part of a City Council resolution to reduce the city’s carbon footprint. The case study examines both actual projects that the airport has invested in and the applicability of hosting an organic waste composting offset project. Additionally, the case study reviews the potential revenue opportunities from selling the credits associated with the various project types. Carbon Offset and Value Opportunities for Airports 21 2.1.5 Energy Efficiency Key Takeaways for Airports • Improved energy efficiency is generally a low cost method for lowering an airport’s carbon footprint; however, limited opportunities exist for monetizing offset credits. Case Study 2: Austin Bergstrom International Airport, Austin, Texas The City of Austin’s Department of Aviation (DoA) owns and operates Austin Bergstrom International Airport (ABIA), a medium-hub airport serving the Austin metropolis in central Texas. Having opened for passenger service in May 1999, ABIA is one of the newest airports in the United States and is a relatively energy-efficient, modern facility. (continued on next page)

22 The Carbon Market: A Primer for Airports Despite the absence of federal and state regulation governing carbon, the City of Austin has taken positive steps to initiate programs to tackle climate change. In February 2007, the City Council passed a resolution that directed its depart- ments to begin taking action in a variety of areas. The four main components of Resolution No. 2007215-023 include: (1) a carbon neutrality goal for all city facil- ities by 2020, (2) increased conservation efforts, (3) new energy efficiency initiatives, and (4) renewable energy programs. To implement carbon reduction initiatives, the DoA has capitalized on funding available from Austin Energy, the local util- ity provider. While the DoA has undertaken a number of projects that reduce carbon emissions over the past ten years—specifically energy efficiency improvements and the instal- lation of solar panels to reduce electricity demand—they have not yet pursued rev- enue opportunities associated with selling energy and environmental commodities such as voluntary carbon offset credits, solar renewable energy credits (RECs), and energy efficiency credits. From the DoA’s perspective, the monetary value of selling away their claim to “going green” must be compared with the goal of reducing the ABIA carbon footprint. The following sections estimate potential DOA revenues resulting from (1) eligible carbon offset projects, (2) REC generation, and (3) energy efficiency improvements. Carbon Offset Credits—Offset credits can be generated by composting organic waste that is normally sent to the landfill. Such waste is produced at airports by concession- aires (food scraps) and grounds maintenance operations (yard trimmings). Assuming that 1.25 tonnes of mixed organics are generated daily at ABIA, the DoA could reduce carbon output by an estimated 233 tonnes (EPA—Climate Change Waste n.d.) per year if organic waste was composted instead of sent to the landfill. The average price of a voluntary carbon offset credit in the United States, as measured by the transac- tions from projects registered in the Climate Action Reserve, is between $3 per tonne of CO2e and $10 per tonne of CO2e. Offset credits that are expected to be eligible in California’s cap-and-trade program, scheduled to begin in 2013, are trading at the higher end of that spread while other offset credits are trading closer to $3 per tonne. Organic waste offset projects are not currently one of the accepted methodologies in California’s proposed cap-and-trade. With these expectations, the DoA could earn up to $699 annually from the sale of voluntary carbon offset credits from composting mixed organics instead of sending the organics to a landfill. Renewable Energy Credits—By the end of 2011, the City will have three solar ar- rays in operation at ABIA. The arrays of 40 kW, 80 kW, and 115 kW output will all be owned by the community-owned electric utility company Austin Energy. The 40 kW and 80 kW solar arrays were funded through Austin Energy’s “Solar Explorer Program” launched in 1997. The newest array, 115 kW in size, is part of a $4.2 mil- lion dollar Leadership in Energy and Environmental Design (LEED) certification proj- ect for the ground transportation service area at ABIA. Mounting and electrical connecting fees of $500,000 were covered by the DoA. The DoA pursued all three photovoltaic projects for public relations reasons and did not seek to maintain the SRECs (SRECs are a class of RECs produced using solar energy) or enter into a Power Purchase Agreement (PPA) with Austin Energy to secure reduced energy rates. Case Study 2: (Continued).

Carbon Offset and Value Opportunities for Airports 23 Had the DoA had the option to maintain the SRECs associated with the solar arrays, potential revenue could be generated by selling the SRECs (as opposed to a generic renewable mix) directly to Texas electricity suppliers who need to meet the state’s Renewable Portfolio Standards (RPS). Combined, all three arrays are projected to produce 337 MWh yearly. 1 MWh of renewable energy production earns one SREC, giving the DoA the potential right to sell 337 SRECs. The 2010 mean price for one REC in Texas was $1.00, with the spread between $.85 and $1.15. If prices for SRECs in Texas remained at $1, as expected, the potential revenue generated for the DoA would be $337 yearly. However, in the Northeast and Mid-Atlantic region of the United States, SRECs are traded between $140 per MWh and $650 per MWh offer- ing a much greater financial incentive for airports. For instance, a Northeast airport hosting an equivalent solar array output has the potential to earn $198,830 yearly given the regional average of $590 per MWh SREC price. There are two major factors contributing to the high disparity in SREC price between the Northeast region and Texas. First, electricity suppliers in the Northeast region are currently under an obligation via the state RPS—to incorporate a higher per- centage of solar generated electricity compared to electricity suppliers in Texas. As a result, there is a greater demand for SRECs in the Northeast region which drives up the price of SRECs. Second, in the Northeast region it is relatively more expen- sive to supply SRECs to the marketplace due to lower solar radiation in the North- east region than compared to Texas; equivalent output of electricity from a solar array in the Northeast region and Texas would require a much larger solar array in the Northeast to compensate for the lower solar radiation. The relative lack of sup- ply drives up the price of SRECs as well. Energy Efficiency Credits—The market for energy efficiency credits, or “white tags,” is still immature in the United States and no market currently exists in Texas. The value associated with implementing energy efficiency projects is primarily lim- ited to costs savings by reduced energy expenditures. An energy company carried out a detailed assessment of the ABIA facilities and identified potential for a $258,724 reduction in annual energy costs by reducing energy consumption by 2,169,970 kWh. This equates to a 12% reduction in electric and gas bills at ABIA (based on the period of September 2006 through August 2007). The estimated installation cost of the upgrades is $1,453,170, equaling a 5.62-year payback before eligible rebates are applied. Case Study 2: (Continued). Key Takeaways for Airports • Offset projects must align with credible standards and be verified and sold. • Voluntary offset markets in the United States offer limited liquidity and value at this time. 2.2 Voluntary Carbon Markets and Initiatives

The voluntary carbon market is composed of (1) Buyers—generally entities that are not re- quired by law to make GHG reductions but wish to purchase offset credits to “offset” an emitting activity; and (2) Sellers—entities that reduce GHG emissions directly and wish to sell the benefits of that reduction. Airports that sponsor offset projects onsite will find offset credit buyers in the voluntary market driven primarily by the following two factors: 1. Purchasing offset credits that are expected to be used in a future compliance market, in advance of regulation, can be a strategy to mitigate future regulatory risk. However, there is some risk that the regulatory structure will not be implemented as expected, in which case the offset credits would likely have less value. 2. Entities may be interested in enhancing their brand and acting as environmental stewards by purchasing offset credits to claim a lower carbon footprint. Due to certain capital restrictions discussed previously in the Primer, airports sponsors are unlikely to be purchasers in the vol- untary carbon market for stewardship purposes. The following sections provide examples of programs and initiatives operating in the volun- tary carbon market. 2.2.1 Offset-Based Programs 24 The Carbon Market: A Primer for Airports While an offset credit can represent any reduction in GHG emissions, only some GHG reduc- tion activities are likely to create opportunities for additional revenue. In the United States’ vol- untary market, offset standards bodies have specific project types and procedures that project developers can follow in order to originate an offset credit. The specific project-type rules are often called “offset protocols.” Buyers in the voluntary market generally prefer to purchase an offset credit from one of these recognized and credible bodies to ensure the validity of the offset credit. Some offset projects, certified under one of the leading standards bodies, may provide project owners a fast track to being certified under a future regulatory program. The leading stan- dards bodies using industry accepted offset protocols include the following: • The Verified Carbon Standard (VCS) is the most widely used quality assurance program to account for GHG reductions and credits in the voluntary carbon market worldwide. The pro- gram sets out processes for approving new project methodologies, approving independent auditing bodies, and issuing and listing GHG credits in a registry system. VCS-approved carbon offset credits are registered and traded as Verified Carbon Units (VCUs), with one VCU rep- resenting emission reductions of one metric tonne of carbon dioxide. • The American Carbon Registry (ACR) is the first private voluntary GHG registry in the United States. ACR has numerous functions and responsibilities including extensive experi- ence in carbon offset issuance and development of carbon offset protocols as well as online transaction and retirement reporting. ACR has issued over 30 million offset credits and is one of the most widely used voluntary carbon market registries in the world. • The Climate Action Reserve (CAR) is a national offsets program that is focused on the United States carbon market. CAR is known for establishing standards for quantifying and tracking GHG emissions reduction projects, providing oversight to third-party verification bodies, and tracking carbon credits called Climate Reserve Tonnes (CRTs). Key Takeaways for Airports • Offset standards bodies establish criteria and protocols for developing, quantify- ing, and verifying GHG inventories. • Each offset standards body has its own process for registering a project and issuing offset credits.

There are a number of common steps that an airport project developer must go through in order to get a project registered with any of the standard bodies. There will need to be a review of the proj- ect plan details, which include things such as a project description, ownership title, etc. It may often include a review of the project-type eligibility to make sure the project complies with the standard criteria. The eligibility criteria specify characteristics a project must have in order to register with the standard, as well as the conditions under which it will issue offset credits to a project. There will then be project validation and verification by a third party, which will consist of an assessment of the project for validation as well as the GHG emission reduction/removal method- ology for verification. The validation and verification process can take anywhere from two weeks to three months, as the level of detail is very project-specific. Once the project has been validated and verified, the project developer will receive a report and statement which will be submitted to the standards body. If the project is approved, the standards body will officially register the project and then issue the offset credits, assigning title assurance and a unique serial number identifier to ensure that each metric tonne is validated and traceable to its source. Each of the standards bodies have their own specific process of assessment that a project must go through in order to become registered. Additionally, there is no set timeline or timeframe for the registration process, being that it is on a very project-specific basis. Figure 3 highlights the process for registering a project under some of the most widely used offset standard bodies. An airport will likely incur some administrative and transaction costs associated with regis- tering with offset standards bodies and being issued offset credits. Each offset standard body has a unique fee structure but generally assesses fees for setting up an account, submitting a project and issuing offset credits. Table 5 displays CAR’s fee structure; similar fees can be expected from registering a project with other offset standard bodies. 2.2.2 Legally Binding Voluntary Programs The Chicago Climate Exchange (CCX) was established in 2003 and represented North Amer- ica’s only legally binding, voluntary GHG reduction system. Participants of the program were Carbon Offset and Value Opportunities for Airports 25 Figure 3. Prominent U.S. offset program registration process.

generally companies or other organizations that voluntarily committed to reducing their aggre- gate emissions by 6% by 2010. Participants committed to reductions were issued allowances in accordance with their emission baseline and reduction schedule planned for the length of the commitment period—through 2010. Municipalities that were CCX members and own air- ports include the City of Boulder, CO (Boulder Municipal Airport), and the City of Fargo, ND (Hector International Airport). The CCX had its own offset registry program that allowed qualifying offset project owners to register their projects and generate offset credits that could be used by participating companies toward their reduction commitments. The program was not continued beyond 2010. With the prospects of a federal cap-and-trade program seriously in doubt, at least in the near term, and almost no activity on the exchange for much of 2010, the exchange closed. 2.3 Role of the GHG Inventory in Airport Carbon Management 26 The Carbon Market: A Primer for Airports Climate Action Reserve (CAR) Fee Structure Account Setup Fee…………………………………………………………………………………………………….$500 Account Maintenance Fee (annual)………………………………………………………………..$500 Project Submittal Fee (per project)…………………………………………………………………$500 Climate Reserve Tonne Issuance Fee (per offset credit issued)………………………...…….$0.20 Source: Climate Action Reserve. Operating Procedures, January 28, 2011. Table 5. Climate action reserve fee structure. Key Takeaways for Airports • GHG inventories allow airports to calculate emissions and measure reductions from certain activities. • Inventories are a useful tool for airports wishing to reduce their carbon footprint. They provide a standardized method for measuring emissions and reduction activities. • Establishing an airport-wide inventory is not a prerequisite to sponsoring an offset project but knowing the emissions associated with the project source is required for project verification. Except for a few airports reporting under EPA’s mandatory GHG Reporting Rule, there is cur- rently no federal regulatory requirement for airport operators to track, measure, and inventory their GHG emissions from stationary sources. Documenting GHG emissions in order to receive credit for reductions in the future—also known as establishing or protecting the baseline—is an important concept for airport owners to understand. A baseline expresses what emissions would be in a business-as-usual scenario or were at a defined period of time. GHG inventories are not carbon markets, but are nevertheless important to understand in the context of carbon markets. Accounting for carbon emissions is a prerequisite first step to defin- ing reductions. Further, in the event that airports come under the compliance umbrella of a carbon cap-and-trade system, the ability to show historical reductions in GHG emissions may

result in early action credits or lower compliance requirements. Many of the carbon offset activ- ities herein will require the establishment of baseline emissions. An airport operator interested in measuring and reducing their carbon footprint may wish to measure GHG emissions in order to quantify the reduction in emissions resulting from their ini- tiatives. In some instances an inventory may be required by a regulatory body in order to get approval for airport construction projects. Often these requirements are limited to considering the potential GHG emission impacts of a proposed project. In some cases, airports will be required to report their GHG emissions under EPA’s GHG Reporting Rule. These airports are required to account for the collective emissions from most GHG emitting sources. Standardized registries have been developed by a number of organizations in order to aid the development of GHG inventories. ACRP Report 11: Guidebook on Preparing Airport GHG Emis- sion Inventories provides considerable guidance to airport operators on developing GHG inven- tories (Kim 2009). In developing an inventory, airport operators should consider following the methodologies provided by some of the leading registry bodies in order to maximize the credi- bility and accuracy of the inventory. The Climate Registry (The Registry) is a nonprofit organization formed to create consistent GHG emissions standards and reporting methods for businesses, municipalities, and other orga- nizations. Participation in The Registry is completely voluntary but the data from each of the entities must be independently verified to ensure accuracy. As of April 1, 2011, The Registry had 430 members nationwide (The Climate Registry n.d.). The Port of Portland participates in The Registry and emissions from Portland International Airport, along with their other facilities and business activities, are reported and independently verified on an annual basis. A number of other transportation companies also participate in The Registry including the Utah Transit Authority, Amtrak, and Virgin Airlines. The Carbon Disclosure Project (CDP) is an international organization based in the United Kingdom, which works with shareholders and corporations to disclose the GHG emissions of major corporations. In 2008, the CDP reported emissions data for 1,550 of the world’s largest corporations, accounting for nearly 26% of global emissions and representing, in total, over 3,000 organizations in 60 different counties (Carbon Disclosure Project n.d.). The organizations measure and disclose their GHG emissions and climate change strategies in order to set reduc- tion targets and make environmental performance improvements. The CDP represents 534 insti- tutional investors with a combined $64 trillion under management. Internationally there are quite a few airports that participate in the CDP, including Copenhagen Airport, Manchester Air- port, Airport of Thailand, and several others. In June 2008, the annual assembly of the Airports Council International—Europe (ACI Europe) adopted a resolution on climate change when its member airports committed to reduce carbon emissions from their operations, with the ultimate goal of becoming carbon neutral. One year later, at the 2009 annual assembly, ACI Europe launched Airport Carbon Accreditation, allowing the assessment and recognition of participating airports’ efforts to manage and reduce their CO2 emissions. Airport Carbon Accreditation is an independent program to enforce the accreditation criteria for airports on an annual basis. The administration of the scheme is overseen by an advisory board. Airports must have carbon footprints independently verified in accordance with ISO 14064 (ISO n.d.). Evidence of this must be provided to the administrator together with all claims regard- ing carbon management processes, which must also be independently verified. Table 6 lists airports that have all become Airport Carbon Accredited since the launch of the pro- gram in June 2009. These airports currently account for over 34% of European passenger traffic. Carbon Offset and Value Opportunities for Airports 27

Table 6. ACI Europe carbon accredited airports. 28 The Carbon Market: A Primer for Airports Carbon Accredited Airports Paris-Charles de Gaulle tropriAadnalrA-mlohkcotStropriAnilbuDtropriA Paris-Orly Airport Cork Airport Stockholm-Bromma Airport Amsterdam Airport Schiphol Shannon Airport Umeå City Airport Athens International Airport Dubrovnik Airport Göteborg Landvetter Airport Oslo Airport Frankfurt Airport TAG Farnborough Airport Trondheim Airport, Værnes Antalya Airport Istanbul Atatürk International Airport Kristiansand Airport, Kjevik Manchester Airport Ankara Esenboğa International Airport London-Heathrow Airport Prague Airport Izmir Adnan Menderes International Airport Bologna Airport Milan-Malpensa Airport Zürich Airport Brussels Airport Milan-Linate Airport Source: Airport Carbon Accreditation. Airport Carbon Accreditation. http://www.airportcarbonaccreditation.org/ (accessed April 12, 2011).

Next: Chapter 3 - North American Compliance Carbon Markets »
The Carbon Market: A Primer for Airports Get This Book
×
 The Carbon Market: A Primer for Airports
Buy Paperback | $49.00
MyNAP members save 10% online.
Login or Register to save!
Download Free PDF

TRB’s Airport Cooperative Research Program (ACRP) Report 57: The Carbon Market: A Primer for Airports provides information on carbon and other environmental credit trading markets, and highlights the potential opportunities and challenges to an airport's participation in these markets.

The primer also addresses the new terms and concepts related to the carbon and other environmental markets.

READ FREE ONLINE

  1. ×

    Welcome to OpenBook!

    You're looking at OpenBook, NAP.edu's online reading room since 1999. Based on feedback from you, our users, we've made some improvements that make it easier than ever to read thousands of publications on our website.

    Do you want to take a quick tour of the OpenBook's features?

    No Thanks Take a Tour »
  2. ×

    Show this book's table of contents, where you can jump to any chapter by name.

    « Back Next »
  3. ×

    ...or use these buttons to go back to the previous chapter or skip to the next one.

    « Back Next »
  4. ×

    Jump up to the previous page or down to the next one. Also, you can type in a page number and press Enter to go directly to that page in the book.

    « Back Next »
  5. ×

    To search the entire text of this book, type in your search term here and press Enter.

    « Back Next »
  6. ×

    Share a link to this book page on your preferred social network or via email.

    « Back Next »
  7. ×

    View our suggested citation for this chapter.

    « Back Next »
  8. ×

    Ready to take your reading offline? Click here to buy this book in print or download it as a free PDF, if available.

    « Back Next »
Stay Connected!