Market prepares for entry of mine methane capture offset project type

June 21, 2014 by CaliforniaCarbon.info

CaliforniaCarbon.info, June 21, 2014: It was confirmed via an Air Resources Board (ARB) vote, which took place at the end of April, that the capture of methane from coal mines would be admitted into the cap-and-trade offset program as the fifth project type eligible to earn offset credits, which can be used instead of allowances in fulfilment of obligations for up to eight percent.

This confirmation brought to an end a period of slight controversy relating to the admission of the project type. While many touted it as both a way to reduce GHG emissions at an unregulated sector and a good fit for the program’s expected volumetric needs, environmentalists criticized it as a way in which funds from cap and trade would be channeled back to coal mine operators.

ARB’s Mine Methane Capture (MMC) project type is expected to be formally included in cap and trade starting Jul 1. Last week, the Climate Action Reserve (CAR), one of three registries participating in the early action and/or compliance offset programs, held an informational webinar to outline the specifics of conducting and crediting MMC projects.

Eligible project activities

The Protocol includes four mine methane capture activities from coal and/or trona mines (*only coal mines):

• Active Underground Ventilation Air Methane (VAM)
• Active Underground Methane Drainage
• Active Surface Mine Methane Drainage (SMM)
• *Abandoned Underground Mine Methane Recovery (AMM)

It excludes any Coal Bed Methane projects, or ones involving mines that use fluid/gases to enhance methane drainage.

In order to encourage the offset market to get a running start, ARB devised the Early Action Offset Credit (EAOC), which can be converted to a full ARBOC after it has first been earned through a voluntary project that qualifies under an approved Early Action Offset Program. The following early action protocols will be able to generate MMC ARBOCs:

• Climate Action Reserve Coal Mine Methane Projects Protocol (versions 1.0 and 1.1): Applicable for drainage and ventilation of methane at active underground mines
• Verified Carbon Standard: VMR0001, with revisions to ACM0008 that include pre-drainage of methane from an active open cast mine; VMR0002, with revisions to ACM0008 that include methane capture and destruction from Abandoned Coal Mines Methodology version 1.0.

Projects with EAOCs generated for fossil fuel reductions under either VCS methodology may require revision for conversion to compliance, since ARB does not credit for reduced fossil fuel emissions.

Project activity periods

For the compliance protocol, the project can commence after the methane capture and destruction equipment is operational, upon completing an initial start-up period of up to 9 months. The CAR protocol allows the operator to define their own project start date, which should nevertheless be no later than 3 months after the methane is first destroyed.

The crediting period for the compliance protocol includes 10 reporting periods, with the initial reporting period possibly spanning from 6 to 24 months and subsequent reporting periods no longer than 12 months; crediting periods can be renewed once. The crediting period must start after 31 December 2006.

For the CAR protocol, the crediting period is 10 years and can be renewed once. CAR’s Early Action mine methane projects must be listed under its Early Action Offset Program prior to 1 January 2015; listed as a compliance project by 28 February 2015; be verified under the Early Action program by 30 September 2015; and convert to ARBOCs by 31 August 2016. Early Action offset credits may be generated for emission reductions that take place between 1 January 2005 and 31 December 2014. The conversion process entails a desktop re-verification by an ARB-accredited verifier.

Project eligibility and reductions

The performance standard and legal requirements for additionality of the projects are assessed once at the beginning of the crediting period. If a project is deemed additional at its inception, it will be allowed to complete its crediting period even if subsequent policy changes may negate its additionality.

Emission reductions are quantified by comparing the actual project emissions to the baseline emissions at the mine. The protocol provides four sets of activity type-specific calculation methods to determine the baseline and project GHG emissions and reductions.

Credits

There are presently five mine methane projects in CAR’s early action database, three of which have been registered and have collectively generated 529,843 Climate Reserve Tonnes (CRTs). These projects have been credited for an average of 2.9 years of operations. The other two projects were listed in 2012. Market participants, including CAR themselves, have previously indicated they expect the first mine methane credits to hit the market in 2016.

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