OVERVIEW OF DAIRY DIGESTER GREENHOUSE GAS REDUCTION COST-BENEFIT ANALYSIS

Transcription

1 OVERVIEW OF DAIRY DIGESTER GREENHOUSE GAS REDUCTION COST-BENEFIT ANALYSIS At the request of Dairy Cares, Ramboll Environ, formerly known as ENVIRON, has prepared this analysis of the projects identified by the California Air Resources Board (ARB) to receive funds from the cap-and-trade auction proceeds. California s Assembly Bill 32 (AB 32) commits California to reducing state greenhouse gas (GHG) emissions to 1990 levels by the year A key aspect of AB 32 is the Cap-and-Trade Regulation (Cap-and-Trade), which allows entities to sell and purchase allowances and offset credits to meet their requirements under the cap. The proceeds from the auction are used to fund programs that support the goals of AB 32, including projects that further reduce GHG emissions. A three-year investment plan, which was released on May 14, 2013, outlined the priority investments for the auction proceeds for fiscal years through These priority investments range from high-speed rail, to energy efficiency retrofits, to agricultural management (including anaerobic digesters). Anaerobic digesters are expensive to build, but are a proven and highly effective method of reducing GHGs, particularly methane, from agriculture. As such, digesters are a smart investment of auction proceeds (i.e., provide a low cost per amount of GHG reductions), particularly in light of their ability to substantially reduce short-lived climate pollutants (SLCPs) and their potential to provide significant criteria pollutant reductions and benefits to disadvantaged communities. This study compares projects considering both economics and emissions to provide helpful information for future investment of auction proceeds in California. Date December 16, 2015 Dr. Julia Lester Dr. Dawn S. Chianese Ramboll Environ 707 Wilshire Boulevard Suite 4950 Los Angeles, CA USA T F Return on Investment The metric chosen for comparison is total funding provided divided by total lifetime greenhouse gas (GHG) reductions realized by the project. 1 The best return on investment in this context is the lowest funding dollar for a given amount of carbon dioxide equivalents (CO 2e) reductions. The projects that received auction proceeds funds provide a return on investment ranging from as low as $2 to as much as $1,250 per metric ton (MT) of carbon dioxide equivalents (CO 2e) reduced (Table 1). Dairy digesters are one of the most effective funding investments with a calculated metric of $7/MT CO 2e. 2 Equally important, because dairy digesters destroy methane, a short-lived climate pollutant, the value to the state s efforts to address climate change is much greater because climate-forcing emissions reductions can be realized sooner. 1 Metric = Total funding ($) / GHG reductions achieved by project over its lifetime (MT CO2e) = $/MT CO2e 2 If the cost is calculated using a 20-year project lifetime 2 and 20-year GWP 2, the metric becomes $1/MT CO2e. 1/3

2 California Statewide Goals In addition to providing a high return on investment (i.e., low cost per emissions reduced), dairy digesters also further two statewide goals related to GHGs as described below. California s GHG Reduction Targets Two executive orders have been signed that establish the statewide GHG reduction targets through 2050: Executive Orders S-3-05 and B Executive Order S-3-05, which was signed by Governor Arnold Schwarzenegger on June 1, 2005, established the following targets: By 2010, reduce GHG emissions to 2000 levels; By 2020, reduce GHG emissions to 1990 levels; and By 2050, reduce GHG emissions to 80 percent below 1990 levels. Executive Order B-30-15, which was signed by Governor Edmund G. Brown, Jr. on April 29, 2015, established an interim benchmark to maintain California s reduction efforts on the path to achieving the 2050 goal originally established by the previous executive order. Executive Order B established the following GHG reduction target for the state: By 2030, reduce GHG emissions to 40 percent below 1990 levels. California s Short-Lived Climate Pollutant Reduction Strategy On September 30, 2015, ARB published its draft Short-Lived Climate Pollutant Reduction strategy describing the need and draft approach to reduce short-lived climate pollutant (SLCP) emissions to achieve the future GHG targets for the state. SLCPs include methane, ozone, black carbon, and fluorinated gases. The draft strategy states that reduc[ing] these emissions is the only practical way to immediately slow global warming. 3,4 Encouraging the use of anaerobic digesters on dairy farms is highlighted as a key strategy to reduce SLCP emissions. 5 In particular, digesters can reduce large amounts of methane per dollar invested relative to other projects. Role of Digesters The majority of projects receiving proceeds Cap-and-Trade funding reduce carbon dioxide emissions; in contrast, digesters primarily reduce emissions of methane, an SLCP. Thus, digesters are one of the only types of projects fundable via auction proceeds that help the state meet both the overall goal of reducing GHGs and the important near-term goals of reducing SLCPs. In addition, many digester projects, including all five projects funded in 2015 via the California Department of Food and Agriculture-administered Dairy Digester Research and Development Program, will be constructed in disadvantaged communities and provide economic and environmental benefits to those communities. Digester-specific Metric The emissions reductions reported herein are based on parameters selected by ARB for the purpose of calculating reductions related to GGRF allocations; the ARB has used other parameters to calculate reductions from digesters for other purposes. Specifically, the calculations for GGRF reductions use the GWP for 100 years, i.e., GWP of 25 MT CO 2e/MT CH 4. However, in the ARB s Draft Short-Lived Climate Pollutant 3 ARB Short-lived climate pollutant reduction strategy. September 30, Available at: Accessed October Ibid. Page 4. 5 Ibid. Page 21. p:\d\dairy cares\ i dairy digester analysis\report\memo\draft\digester memo docx 2/3

3 Reduction Strategy, the ARB used the 20-year GWP, rather than 100-year GWP, for methane. 6,7 Also, the California Public Utilities Commission (CPUC) allows a maximum length of 20 years for electricity purchase contracts due to Senate Bill 1122 (SB1122); 8 calculating reductions using a 20-year project lifetime for digesters would thus be consistent with SB1122. As a result, the $7/MT CO 2e metric reported above is likely an overly conservative estimate. To account for additional dairy digester-specific ARB initiatives, it is recommended that the future calculations of emissions reductions achievable by anaerobic digesters include parameters consistent with other ARB documents and initiatives, as well as state policies. Specifically, anaerobic digester emissions reductions calculations should assume 20-year project lifetimes and the 20-year GWP, subject to future updates to the science. If a 20- year project lifetime and 20-year GWP are used in the calculation, the metric becomes $1/MT CO 2e. Conclusion Anaerobic digesters on dairies are one of the best investments of auction proceed funds, provide immediate reductions of GHGs upon completion of construction, and further vitally important statewide goals that will allow California to comply with the overall goal of reducing GHG emissions 80 percent below 1990 levels by Additional allocation of funds to incentivize the construction of more digesters in the state will enable California to reach its climate change goals sooner. 6 ARB Draft. Short-Lived Climate Pollutant Reduction Strategy. Available at: Accessed October ARB Draft. Short-Lived Climate Pollutant Reduction Strategy. Appendix A. California SLCP Emissions. Available at: Accessed October Senate Bill Bioenergy Feed-in Tariff. Available at: Accessed October p:\d\dairy cares\ i dairy digester analysis\report\memo\draft\digester memo docx 3/3

4 TABLE

5 Table 1. Summary of GHG Return on Investment Agency Program Project Type Metric: Funding divided by Total Lifetime GHG [1], [2] Reductions ($/MT CO 2 e) Department of Food and Agriculture High Speed Rail Department of Transportation Strategic Growth Council Air Resources Board Department of Community Services and Development Department of General Services Department of Fish and Wildlife Agricultural Energy and Operational Efficiency Dairy Digesters [3],[4] $7 State Water Efficiency and Enhancement Program [3] $84 Nitrogen/fertilizer research [5] NA [5] Biofuels standards [5] NA [5] High Speed Rail Initial Project Planning [6] Section [4],[6] Construction/right of way acquisition [6] $17 Rail Modernization Capital Projects (intercity and commuter rail) [3] Network Integration [3] Increased access to transit [3] $395 - $2250 Active transportation [3] Sustainable Communities Affordable housing near transit [3] Mixed use development [3] $700 - $1050 Agricultural land preservation [3] Clean Vehicle Rebate Project: Zero-emission and plugin hybrid vehicle rebates [6] $28 Hybrid & Zero Emission Truck and Bus Voucher Low Carbon Incentive Project (HVIP) [6] $139 Transportation Advanced freight technology demonstrations [6] $351 - $1053 Zero-emission truck/bus pilots [6] $417 Low-income passenger vehicle pilots [5],[6] NA [5] Single-family weatherization [3] $45 - $170 Weatherization Multi-family weatherization [3] $53 - $210 Upgrades/Renewable Energy Photovoltaic solar [3] $202 - $288 Solar water heating [3] $350 - $1050 Retrofits [3] $156 - $313 Green State Buildings Renewable energy [3] $2 Zero net energy [3] $300 Wetlands Restoration Wetlands - tidal (Delta) [3] Wetlands - mountain meadows [3] Water conservation/efficiency [3] $9 - $27

6 Table 1. Summary of GHG Return on Investment Agency Program Project Type Metric: Funding divided by Total Lifetime GHG [1], [2] Reductions ($/MT CO 2 e) Department of Forestry and Fire Protection Department of Resources Recycling and Recovery Department of Water Resources Forests Waste Diversion Water- Energy Efficiency Projects Urban forests [3] $127 - $325 Reforestation [3] $10 - $111 Demonstration forests [3] $7 - $78 Fuels Reduction [3] $26 - $75 Forest conservation via Forest Legacy Program [3] $7 - $28 Forest pest control [3] $8 - $68 Forest practice program [5] NA [5] Organics Grant Program [6] $9 Loans for organics and recycling infrastructure [3] $4 - $6 Recycled Fiber, Plastic, and Glass Grant Program [6] $11 Thermalito Power Plant Unit 1 Turbine Replacement [6] $81 Hyatt Power Plant Unit 1 Turbine Replacement [6] $26 1. CARB provided preliminary estimates for funding allocations and GHG emissions reductions. CARB then updated a subset of the estimates. The most recent data were used. In addition, the most recent ongoing allocations for FY15-16 were included in the relevant categories. The specific reference used is noted for each project. The Annual Report to the Legislature on Investments of Cap-and-Trade Auction Proceeds, Appendix B, March Available at: Accessed: March The data and analysis underlying the metric are based on information directly from CARB, with few, if any, modifications. If modifications have been made, they are noted in the supporting calculation tables. The comparison metric is calculated as the total funding divided by the total GHG reductions attributable to the project over its entire lifetime. Funding may be for all or only part of the total capital cost of the project. 3. Information obtained directly from Appendix B of Annual Report to the Legislature on Investments of Cap-and-Trade Auction Proceeds, March Since these numbers were initially developed, several of the agencies, programs, appropriation amounts, and quantification methods have changed. Available at: Accessed: March The comparison metric for dairy digesters would be $1/MT CO2e if a 20 year project lifetime and 20-year GWP were used. 5. CARB did not provide sufficient data about estimated GHG reductions or incentive levels to allow the metrics to be calculated. 6. Information obtained from Annual Report to the Legislature on Investments of Cap-and-Trade Auction Proceeds, March Available at: Accessed: March 2015.