The so-called ‘cap and trade’ bill narrowly passed The House of Representatives on June 26, 2009; more formally called The American Clean Energy act of 2009.
The precursor to this bill, in part, was the Environmental Protection Agency (EPA) stating that CO2 was proposed to be a hazardous greenhouse gas, and a threat to public health. Therefore, we are now on the way to legislation, if passed by the senate, which will regulate greenhouse gases; and particularly carbon dioxide.
Today, the only defined action on CO2 emissions management, from an official and tangible perspective, would be the Proposed Mandatory GHG Reporting Rule, as well as the narrowly passed House of Representatives passing of a cap and trade bill. However, many experts representing official agencies say the end result may change time and time again, before a final bill and ultimately legislation is crafted; particularly as the Congress works on this matter.
But it is widely believed that Cap and Trade will have some part to play in the final legislation. Cap and Trade, in summary, represents a government policy whereby a ‘cap’ would be established concerning a quantity of CO2 which is allowed to be emitted to the atmosphere.
This mechanism would allow the companies to trade carbon credits, so (theoretically) the market rewards those who find ways to produce less carbon dioxide. Should there be an excess of credits, the company could then sell these credits to other companies.
Where does Ethanol fit in?
Whatever the final outcome of legislation, ongoing CO2 monitoring will be required, per all understandings. It is understood that a 25,000 TPY (tons per year) threshold should apply to the reporting of certain greenhouse gases, including CO2.
On the reporting end, in the proposed mandatory EPA reporting rule, there are concerns as to corporate reporting v. individual plant reporting, from an accuracy perspective, as well as accounting for numerous plants v. total output from a corporate entity. There remain numerous proposed methodologies for reporting, including direct measurement to mass balance calculations. As to the frequency of reporting, this historically involved quarterly reporting; however annual reporting is proposed in this bill for new reporters. This means data collection will begin January 1, 2010; with first reports submitted to the EPA March 31, 2011.
As to the proposal summary, facility-based reporting for ethanol plants will likely take place v. corporate reporting as a sum total from all facilities. Facility-specific calculation methods will be used in the case of ethanol, when considering methodology or reporting. Again, it is likely that annual reporting will be the rule for the ethanol project, short of current reporting in place on a quarterly basis – this can pertain to subjects such as acid rain programs. As to verification of data and reporting, the reporter will probably self – certify the emissions data, thus submitting to the EPA; who performs QA /QC of the reports.
As to how the ethanol project could reduce their emissions, the cap and trade system is theoretically intended to do just that. Once the cap on emissions is established, then the ethanol or allied CO2 emitter would technically need to find ways to reduce emissions, and then be rewarded via credits when less CO2 is produced.
Each year, so many permits or allowances will be provided to the ethanol producers. One could think of these permits as currency – these permits will allow a defined level of emissions established at the inception point of cap and trade. At the end of the year, if the emissions recorded are less than the start of the year, there would be a tradable or currency-like value to be established, on a per ton basis – thus an economic reward.
If the level of emissions is greater than the beginning of the year, the result would be a charge against this currency like system. So in reducing emissions, if an over-the-fence merchant facility happens to purchase the product, and if the product should not reenter the atmosphere, such as in a chemical process, a form of true sequestration, etc; then less CO2 is ultimately emitted to the atmosphere – this is the theoretical consideration; that being what is not released again, whether this be in a primary manner (exhausting from the fermentation plant) to a secondary or tertiary application in industry (such as certain food and beverage applications); the ultimate goal is evaluating net emissions of CO2 to the atmosphere – and either profiting or paying for such credits.
As to reducing the emissions into the atmosphere, an ‘over the fence’, captive, or niche market which is consuming CO2 in the process v. simply displacing the product once again is a net reduction. The net reduction or consumption of CO2 could be via select applications in industry which combine via a chemical process or perhaps a biological process the carbon dioxide – thus not returning to the atmosphere.
Perhaps markets such as methanol, urea, and sodium bicarbonate could fit such definitions. Using the product in a wide variety of specific applications in industry could represent this reduction in emissions.
In the end, knowledge is essential on a plant by plant basis for the existing, potential, and emerging CO2 markets; particularly seeking possible niche levels where CO2 is actually contained, combined, or consumed; thus representing a net reduction in annual output from an emissions perspective.
As to the gas companies who may offer to buy the raw stream, it is also important to well understand the CO2 markets before consummating an arrangement with such a firm, in order to best understand where emissions gains or liabilities may exist. The goal is profits, and protection on the part of the ethanol producer. The so-called currency in the form of CO2 allowances defined at the beginning and end of each year will represent monetary value, when all is said and done.
The exception to the cap and trade-or like program to go through the house, and passed as law, could be utilising this in the merchant markets, or other options. Be certain that markets are well known for the CO2, and it is not advised to accept the opinion of the gas suppliers, but to independently investigate the markets, exceptions, and advantages well before negotiating with any gas company; or if the ethanol firm is to market directly to the consumers or site of utilisation, given the right circumstances, this option may offer significantly more revenue and protection from the cap and trade perspective.
Sam A. Rushing is president of Advanced Cryogenics, Ltd, and is a chemist and professional consultant with decades of expertise in all phases of the CO2 business from the merchant and independent consultant sectors. Phone 305 852 2597, e-mail: rushing@terranova.net ; web: http://www.carbondioxideconsultants.com