Trade-Based Carbon Sequestration Accounting

This article describes and illustrates an accounting method to assess and compare early carbon sequestration investments and trades on the basis of the number of standardized CO₂ emission offset credits they will provide. The gold standard for such credits is assumed to be a relatively riskless credit based on a CO₂ emission reduction that provides offsets against CO₂ emissions on a one-for-one basis. The number of credits associated with carbon sequestration needs to account for time, risk, durability, permanence, additionality, and other factors that future trade regulators will most certainly use to assign official credits to sequestration projects. The method that is presented here uses established principles of natural resource accounting and conventional rules of asset valuation to score projects. A review of 20 early voluntary United States based CO₂ offset trades that involve carbon sequestration reveals that the assumptions that buyers, sellers, brokers, and traders are using to characterize the economic potential of their investments and trades vary enormously. The article develops a universal carbon sequestration credit scoring equation and uses two of these trades to illustrate the sensitivity of trade outcomes to various assumptions about how future trade auditors are likely to score carbon sequestration projects in terms of their equivalency with CO₂ emission reductions. The article emphasizes the importance of using a standard credit scoring method that accounts for time and risk to assess and compare even unofficial prototype carbon sequestration trades. The scoring method illustrated in this article is a tool that can protect the integrity of carbon sequestration credit trading and can assist buyers and sellers in evaluating the real economic potential of prospective trades. Published online     

Air pollution control by economic incentives in the U.S.: Policy,problems, and progress

This paper deals with cost-effectiveness of the economic incentive policies of the bubble concept and offset credits relative to the policy of direct regulations of air emissions. The second section discusses single- and multi-plant bubbles, their adoption across regions and industries, the methods used to control emissions and the extent of savings in costs. We conclude that despite the delay resulting from duplication of review of state implementation plans by both the state and the Environmental Protection Agency, the required technological commands, the requirement to model air quality and the restrictions to permit bubbling only in the attainment areas, the policy is progressing successfully and should be encouraged by eliminating the restrictions. The third section analyzes the policy of emission offset credit, trading, and banking which can permit economic growth in nonattainment areas. It reviews the available literature, which deals only with aggregation of offsets across cities instead of individual offset trades. Progress by individual offset trades is analyzed in terms of the number of offsets, their acceptance across regions, the extent of reductions in emissions, and the classification of the offsets into internal and external trades. Comparison of estimated capital costs and prices of individual offsets with direct regulation costs reveals that the former are economical. We conclude that despite the problems of high tradeoff ratios, the short and uncertain life of the emission offset credits and the technological commands, the policy is progressing successfully and should be encouraged further by relaxing restrictions.This paper represents the author's personal views. Neither the Commission nor any member of its staff is in any way responsible for these views.     

PROFILE: Wetland Mitigation Banking: A Framework for Crediting and Debiting

Biological Report 88(41):1–103), assessment of credits and determination of a compensation ratio that reflects existing and/or potential functional condition in a mitigation bank has been a formidable task. This study presents a framework for a systematic approach for determination of credits and debits and subsequently the compensation ratio. A model for riparian systems is developed based on this framework that evaluates credits and debits for spatial and structural diversity, contiguity of habitats, invasive vegetation, hydrology, topographic complexity, characteristics of flood-prone areas, and biogeochemical processes. The goal of developing this crediting and debiting framework is to provide an alternative to the current methods of determining credits and debits in a mitigation bank and assigning mitigation ratios, such as best professional judgement or use of preset ratios. The purpose of this crediting and debiting framework is to develop a method that (1) can be tailored to evaluate ecological condition based on the target resources of a specific mitigation bank, (2) is flexible enough to be used for evaluation of existing or potential ecologic condition at a mitigation bank, (3) is a structured and systematic way to apply data and professional judgment to the decision-making process, (4) has an ecologically defensible basis, (5) has ease of use such that the level of expertise and time required to employ the method is not a deterrent to its application, and (6) provides a semiquantitative measure of the condition of aquatic resources that can be translated to a mitigation ratio.     

Water Quality Trading with Lumpy Investments,Credit Stacking,and Ancillary Benefits

This paper studies the economics of a water quality trading market in a predominantly agricultural watershed, and explores the effects of credit stacking in such a market when buyers and sellers of pollution credits can only reduce pollution with large, discrete investments that yield discontinuous supply and demand. The research simulates hypothetical water quality trading markets in the corn‐belt area of Illinois, where wastewater treatment plants (WWTPs) can pay farmers to reduce nutrients by installing wetlands and farmers may or may not be allowed to earn payments for multiple services from one wetland. We find that wetlands are a more cost‐effective way to mitigate nitrogen pollution than abatement by WWTPs. Stacking credits may improve social welfare while providing more ecosystem services if there is enough demand for the primary credit in the market (nitrogen) to cover most of the cost of installing the wetland but the supply of nitrogen credits is not exhausted. However, in the presence of lumpy pollution reduction activities, the effects of allowing stacked credit sales are idiosyncratic and not necessarily positive; stacked payments may or may not satisfy additionality. The results imply that credit trading for nitrogen is likely to make society better off, but the effects of allowing farmers to receive multiple payments from a single wetland depend on details of the situation.     

Economic feasibility of no-tillage and manure for soil carbon sequestration in corn production in northeastern Kansas

This study examined the economic potential of no-tillage versus conventional tillage to sequester soil carbon by using two rates of commercial N fertilizer or beef cattle manure for continuous corn (Zea mays L.) production. Yields, input rates, field operations, and prices from an experiment were used to simulate a distribution of net returns for eight production systems. Carbon release values from direct, embodied, and feedstock energies were estimated for each system, and were used with soil carbon sequestration rates from soil tests to determine the amount of net carbon sequestered by each system. The values of carbon credits that provide an incentive for managers to adopt production systems that sequester carbon at greater rates were derived. No-till systems had greater annual soil carbon gains, net carbon gains, and net returns than conventional tillage systems. Systems that used beef cattle manure had greater soil carbon gains and net carbon gains, but lower net returns, than systems that used commercial N fertilizer. Carbon credits would be needed to encourage the use of manure-fertilized cropping systems.     

Optimal Advanced Credit Releases in Ecosystem Service Markets

Ecosystem service markets are popular policy tools for ecosystem protection. Advanced credit releases are an important factor affecting the supply side of ecosystem markets. Under an advanced credit release policy, regulators give ecosystem suppliers a fraction of the total ecosystem credits generated by a restoration project before it is verified that the project actually achieves the required ecological thresholds. In spite of their prominent role in ecosystem markets, there is virtually no regulatory or research literature on the proper design of advanced credit release policies. Using U.S. aquatic ecosystem markets as an example, we develop a principal–agent model of the behavior of regulators and wetland/stream mitigation bankers to determine and explore the optimal degree of advance credit release. The model highlights the tension between regulators’ desire to induce market participation, while at the same time ensuring that bankers successfully complete ecological restoration. Our findings suggest several simple guidelines for strengthening advanced credit release policy.     

Comparing Costs of Onsite Best Management Practices to Nutrient Credits for Stormwater Management: A Case Study in Virginia

Best management practices (BMPs) are widely used to mitigate impacts of increased impervious surfaces on stormwater runoff. However, there is limited detailed and up‐to‐date information available on the cost of designing, constructing, and maintaining BMPs over their lifetime. The objective of this study is to analyze BMPs recently constructed by the Virginia Department of Transportation (VDOT) to quantify their total cost per pound of phosphorus removed annually. A motivating factor for the study is recent changes to regulatory guidelines in Virginia which allow for full or partial substitution of purchased nutrient credits in lieu of constructing onsite BMPs to achieve compliance with stormwater quality regulations. Results of the analysis of nine BMPs found their cost ranged from $20,100 to $74,900, in 2014 dollars, per pound ($44,313‐$165,126 per kg) of phosphorus removed. Based on these results and assuming current credit prices procured by VDOT, purchasing nutrient credits is a cost‐effective option for the agency, especially when factoring in the cost of additional right of way for the BMP. Based on this finding, we expect compliance with stormwater quality regulations through credit purchases to become more widely used in Virginia. Moving forward, we suggest more direct tracking of BMP costs to support comparisons between BMP costs across a range of types and conditions to credit purchases for meeting stormwater regulations.     

Greenhouse gas balance for composting operations

The greenhouse gas (GHG) impact of composting a range of potential feedstocks was evaluated through a review of the existing literature with a focus on methane (CH(4)) avoidance by composting and GHG emissions during composting. The primary carbon credits associated with composting are through CH(4) avoidance when feedstocks are composted instead of landfilled (municipal solid waste and biosolids) or lagooned (animal manures). Methane generation potential is given based on total volatile solids, expected volatile solids destruction, and CH(4) generation from lab and field incubations. For example, a facility that composts an equal mixture of manure, newsprint, and food waste could conserve the equivalent of 3.1 Mg CO(2) per 1 dry Mg of feedstocks composted if feedstocks were diverted from anaerobic storage lagoons and landfills with no gas collection mechanisms. The composting process is a source of GHG emissions from the use of electricity and fossil fuels and through GHG emissions during composting. Greenhouse gas emissions during composting are highest for high-nitrogen materials with high moisture contents. These debits are minimal in comparison to avoidance credits and can be further minimized through the use of higher carbon:nitrogen feedstock mixtures and lower-moisture-content mixtures. Compost end use has the potential to generate carbon credits through avoidance and sequestration of carbon; however, these are highly project specific and need to be quantified on an individual project basis.     

Potential contribution of the forestry sector in Bangladesh to carbon sequestration

The Kyoto Protocol provides for the involvement of developing countries in an atmospheric greenhouse gas reduction regime under its Clean Development Mechanism (CDM). Carbon credits are gained from reforestation and afforestation activities in developing countries. Bangladesh, a densely populated tropical country in South Asia, has a huge degraded forestland which can be reforested by CDM projects. To realize the potential of the forestry sector in developing countries for full-scale emission mitigation, the carbon sequestration potential of different species in different types of plantations should be integrated with the carbon trading system under the CDM of the Kyoto Protocol. This paper discusses the prospects and problems of carbon trading in Bangladesh, in relation to the CDM, in the context of global warming and the potential associated consequences. The paper analyzes the effects of reforestation projects on carbon sequestration in Bangladesh, in general, and in the hilly Chittagong region, in particular, and concludes by demonstrating the carbon trading opportunities. Results showed that tree tissue in the forests of Bangladesh stored 92tons of carbon per hectare (tC/ha), on average. The results also revealed a gross stock of 190tC/ha in the plantations of 13 tree species, ranging in age from 6 to 23 years. The paper confirms the huge atmospheric CO(2) offset by the forests if the degraded forestlands are reforested by CDM projects, indicating the potential of Bangladesh to participate in carbon trading for both its economic and environmental benefit. Within the forestry sector itself, some constraints are identified; nevertheless, the results of the study can expedite policy decisions regarding Bangladesh's participation in carbon trading through the CDM.     

An integrated assessment model of carbon sequestration benefits: a case study of Liping county, China

This research attempts to model the complexity of planting trees to increase China's CO(2) sequestration potential by using a GIS-based integrated assessment (IA) approach. We use the IA model to assess the impact of China's Grain for Green reforestation and afforestation program on farmer and state incomes as well as CO(2) sequestration in Liping County, Guizhou Province. The IA model consists of five sub-models for carbon sequestration, crop income, timber income, Grain for Green, and carbon credits. It also includes a complementary qualitative module for assessing program impacts by gender and ethnicity. Using four scenarios with various assumptions about types of trees planted, crop incomes by township, CO(2) credit prices, state subsidies, methods for estimating carbon sequestered, and harvesting of trees, we find great variation in the impact of the Grain for Green program on incomes and on carbon sequestered over a 48 year period at both the county and township levels.     

自愿减排项目碳泄漏：内涵、类别及应对

自愿减排项目是碳排放交易市场抵消机制的运行载体,灵活的自愿减排抵消机制是碳排放交易市场的补充,对应对全球气候变化问题具有重要意义。碳泄漏,作为严重影响抵消项目减排效率的热点问题值得关注。目前,中国已形成较大规模的自愿减排市场,截至2018年底,国家发展改革委共签发了约7200万tCO_2当量减排量,我国在建立健全自愿减排抵消市场机制的过程中,需要把握项目碳泄漏的负外部性这一实质,厘清其运行机理并积极应对。本文旨在系统阐述该问题,并为进一步实现抵消项目减排潜力提供思路和方向:从自愿减排项目碳泄漏的内涵与定义出发,首先对项目碳泄漏的分类进行梳理,并依据产生途径的不同重点分析了活动转移排放、生命周期、市场路径、生态以及技术泄漏的作用机制、影响因素及其相应的研究方法;其次从具体项目应用、系统项目应用和宏观应用三个层面讨论了应对自愿减排项目碳泄漏问题的管理对策;最后结合我国自愿减排抵消市场的实际情况,建议未来抵消项目碳泄漏的应对和管理应在分门别类对其概念进行精准定义的基础上将解决措施的成本效益考虑在内,此外,在评估泄漏量时需要同时测算不同类型的碳泄漏,探究其协同效应以免高估其泄漏程度。     

National policies for biosphere greenhouse gas management: issues and opportunities

Biosphere greenhouse gas (GHG) management consists of preserving and enhancing terrestrial carbon pools and producing biomass as a fossil fuel substitute. The discussion of this topic has focused primarily on carbon-accounting and project-level issues, particularly relating to carbon sequestration as a source of emissions credits under the Kyoto Protocol. While international consensus on these matters is needed, this paper argues that an important domestic policy agenda also deserves attention. National policies for biosphere GHG management are necessary to bring about large-scale changes in land-use, forestry, and agricultural practices and can address some of the technical and policy issues that have proven to be particularly problematic from carbon-accounting and project-level perspectives. These policies should minimize land-use and resource-management conflicts, account for collateral benefits, and ensure institutional compatibility with existing resource-management regimes. Issues relating to project permanence, leakage, and transaction costs should also be addressed. A range of policy instruments should be used and biosphere GHG management should be one component of an integrated approach to environmental and resource management. Countries promoting biosphere GHG management as an important element of their climate change strategies should be developing these domestic policies to complement international negotiations and to demonstrate that carbon sequestration and biomass production can make an effective contribution to the stabilization of atmospheric GHG concentrations.     

Evaluating the impact of water conservation on fate of outdoor water use: a study in an arid region

In this research, the impact of several water conservation policies and return flow credits on the fate of water used outdoors in an arid region is evaluated using system dynamics modeling approach. Return flow credits is a strategy where flow credits are obtained for treated wastewater returned to a water body, allowing for the withdrawal of additional water equal to the amount returned as treated wastewater. In the return credit strategy, treated wastewater becomes a resource. This strategy creates a conundrum in which conservation may lead to an apparent decrease in water supply because less wastewater is generated and returned to water body. The water system of the arid Las Vegas Valley in Nevada, USA is used as basis for the dynamic model. The model explores various conservation scenarios to attain the daily per capita demand target of 752 l by 2035: (i) status quo situation where conservation is not implemented, (ii) conserving water only on the outdoor side, (iii) conserving water 67% outdoor and 33% indoor, (iv) conserving equal water both in the indoor and outdoor use (v) conserving water only on the indoor side. The model is validated on data from 1993 to 2008 and future simulations are carried out up to 2035. The results show that a substantial portion of the water used outdoor either evapo-transpires (ET) or infiltrates to shallow groundwater (SGW). Sensitivity analysis indicated that seepage to groundwater is more susceptible to ET compared to any other variable. The all outdoor conservation scenario resulted in the highest return flow credits and the least ET and SGW. A major contribution of this paper is in addressing the water management issues that arise when wastewater is considered as a resource and developing appropriate conservation policies in this backdrop. The results obtained can be a guide in developing outdoor water conservation policies in arid regions.     

Managing carbon emissions in China through building energy efficiency

This paper attempts to analyse the role of building energy efficiency (BEE) in China in addressing climate change mitigation. It provides an analysis of the current situation and future prospects for the adoption of BEE technologies in Chinese cities. It outlines the economic and institutional barriers to large-scale deployment of the sustainable, low-carbon, and even carbon-free construction techniques. Based on a comprehensive overview of energy demand characteristics and development trends driven by economic and demographic growth, different policy tools for cost-effective CO₂ emission reduction in the Chinese construction sector are described. We propose a comprehensive approach combining building design and construction, and the urban planning and building material industries, in order to drastically improve BEE during this period of rapid urban development. A coherent institutional framework needs to be established to ensure the implementation of efficiency policies. Regulatory and incentive options should be integrated into the policy portfolios of BEE to minimise the efficiency gap and to realise sizeable carbon emissions cuts in the next decades. We analyse in detail several policies and instruments, and formulate relevant policy proposals fostering low-carbon construction technology in China. Specifically, Our analysis shows that improving building energy efficiency can generate considerable carbon emissions reduction credits with competitive price under the CDM framework.     

The prospects of tropical timber plantation investment funds

As financial markets start to acknowledge the significance of environmental issues, it is interesting to analyse how they combine finance and sustainable development. Dutch investment funds participating in tropical forest plantations project high expected returns. However, they carry huge financial risks, in particular country risk, currency risk, price risk and credit risk. The environmental and developmental returns appear to be positive but rather small. In addition, the environmental and developmental risks do not appear to be very large, as most plantations are established on former farmland and the quantitative impact of the plantations is still limited.     

Family Forest Landowners’ Interest in Forest Carbon Offset Programs: Focus Group Findings from the Lake States,USA

In 2012, focus groups were organized with individuals owning 20+ acres in the Lake States region of the United States (Michigan, Minnesota, and Wisconsin) to discuss various issues related to forest carbon offsetting. Focus group participants consisted of landowners who had responded to an earlier mail-back survey (2010) on forest carbon offsets. Two focus groups were held per state with an average of eight participants each (49 total). While landowner participant types varied, overall convergence was reached on several key issues. In general, discussion results found that the current payment amounts offered for carbon credits are not likely, on their own, to encourage participation in carbon markets. Landowners are most interested in other benefits they can attain through carbon management (e.g., improved stand species mix, wildlife, and trails). Interestingly, landowner perceptions about the condition of their own forest land were most indicative of prospective interest in carbon management. Landowners who felt that their forest was currently in poor condition, or did not meet their forest ownership objectives, were most interested in participating. While the initial survey sought landowner opinions about carbon markets, a majority of focus group participants expressed interest in general carbon management as a means to achieve reduced property taxes.     

碳市场和电力市场耦合研究

低碳化、清洁化是我国电力行业未来发展的方向。碳市场启动,电力作为试点行业,碳市场和电力市场面临着协调和融合问题。为研究碳市场和电力市场的耦合关系,本文首先分析了碳市场机制的成本节约效应以及与电力市场改革的互动效应;然后给出考虑碳排放价格的电力市场发电电能成本模型——LCOEe;最后以广东省为例,对广东碳市场碳价传导至电价设定情景并进行模拟分析。结果显示,碳市场和电力市场存在相互制约的关系,碳排放外部成本内部化影响电力市场出清电价,而电力市场能够缓解碳市场的减排压力,抑制碳市场的活跃度。两市场的耦合研究对于优化电源结构、促进新能源市场的发展,以及启发政策制定者重视两大市场的协同发展具有非常重要的现实意义。     

碳排放交易体系的政策灵活性:国际经验及启示

在《联合国气候变化框架公约》和《京都议定书》的背景下,越来越多的国家开始关注全球气候变暖的问题。考虑到碳排放交易体系比碳税更具有政治可行性,不少国家或地区开始实施碳排放交易体系,以最低的减排成本来达到温室气体减排目标。然而,采用碳排放交易体系,其排放总量是固定的,而减排成本是不确定的,可能会出现由于政策或外部冲击而产生的配额价格异常波动的现象。因此,为确保碳排放交易体系的成本有效性,政策灵活性十分重要。在理想情况下,碳排放市场具有完全的时间灵活性(包括长期的履约期、自由的配额储存与预借)和空间灵活性(即建立全球碳市场),这将对增强市场流动性、降低减排成本、缓解价格波动起到重要的作用。然而,由于政策设计需要考虑更多因素,实际上理想状态很难达到。本文将对国外碳排放交易体系的政策灵活性设计进行较为系统的分析和比较,尤其关注履约期的长短、配额的跨期使用、配额的抵消、区域碳市场连接等方面的具体政策设计,这对我国在7个省市进行碳排放交易试点以及今后建立全国性的碳排放交易体系有较强的借鉴意义。     

Cracking the Achilles’ heel of energy performance contracting projects: the credit risk identification method for clients

ABSTRACT

A credit risk identification model is established to examine the credit status of Energy performance contracting (EPC) project clients (i.e., energy-using companies) in China based on rough set theory. The model is verified with data from 120 listed companies at different times. Study shows that lack of credit is one of the main obstacles to the implementation of EPC projects, and information asymmetry is the main reason for this lack of credit among potential clients in China. The credit risk identification method based on rough set theory can make up for the shortcomings of existing EPC projects in terms of credit risk identification, including redundant information and indicators, and unclear decision rules. Credit risk identification indicators of clients are dynamic. The research results can help energy service companies (ESCOs) determine the credit status of clients, facilitate cooperation between ESCOs and clients, and help explain the various dynamics of clients’ credit risk identification indicators over time.     

考虑不同合作模式和多方奖惩的绿色信贷风险优化控制研究

绿色信贷风险的优化控制,有利于推动绿色信贷的稳定、可持续发展,实现环境效益、经济效益和社会效益的共赢。本研究将政府部门、环保部门、金融机构和企业的行为纳入同一个理论体系中,充分考虑影响参与主体最优努力水平和绿色信贷风险最优轨迹的环境因素、经济因素和社会因素。在此基础上,构建不同合作模式下的绿色信贷风险优化控制模型,分析不同情境下参与主体的努力水平,比较绿色信贷风险的最优轨迹,找出绿色信贷风险优化控制存在的问题及原因。研究结果表明：第一,四方合作模式对绿色信贷风险的优化控制具有明显的优势。第二,政府的参与能够有效带动其余合作者的积极性。第三,金融机构和企业之间,存在明显的利益共存和投入互动关系。第四,补贴和惩罚措施在合作过程中能够产生激励和约束作用,但在非合作模式下发挥的作用比较有限。第五,参与主体的协同水平越高,越有利于绿色信贷风险的优化控制。因此,需要灵活运用行政、经济或法律等多种干预手段,并对补贴用途进行考评和增强舆论监督,防止金融机构和企业将绿色补贴挪作他用。同时,建立符合国内绿色信贷发展特点的风险标准,统一绿色信贷风险的评判和管控依据。