Landfill Gas Method Crediting Period Review Report - EMISSIONS REDUCTION ASSURANCE COMMITTEE
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
EMISSIONS REDUCTION ASSURANCE COMMITTEE
Landfill Gas Method Crediting Period
Review Report
28 March 2018Contents
1 Executive summary ........................................................................................................... 1
2 Background ....................................................................................................................... 4
2.1 Committee to undertake crediting period extension reviews ....................................... 4
2.2 Approach to the crediting period review of the landfill gas method ............................. 5
3 Findings ............................................................................................................................ 5
3.1 Activity overview......................................................................................................... 5
3.1.1 The waste industry is large and widely dispersed ................................................ 5
3.1.2 Most waste sector emissions are generated by landfills ...................................... 7
3.1.3 Landfills reduce emissions by capturing and combusting methane...................... 8
3.1.4 Many ERF landfill gas projects were supported by previous Commonwealth and
state schemes ................................................................................................................... 9
3.1.5 ACCUs generated and contracted under the method ........................................ 11
3.2 Drivers of landfill gas capture activities ..................................................................... 15
3.2.1 Regulatory requirements for landfill gas capture................................................ 15
3.2.2 Reputation and social reasons to reduce emissions .......................................... 17
3.2.3 Financial reasons to reduce emissions .............................................................. 18
4 Recommendations .......................................................................................................... 21ABBREVIATIONS ACCU Australian Carbon Credit Unit ERF Emissions Reduction Fund RET Renewable Energy Target LGC Large-scale Generation Certificate GGAS Greenhouse Gas Reduction Scheme Mt megatonnes (million tonnes) NGERS National Greenhouse and Energy Reporting CO2-e carbon dioxide equivalent CFI Carbon Farming Initiative
1 EXECUTIVE SUMMARY
The Emissions Reduction Assurance Committee (the Committee) has undertaken a review of
the crediting period of the Carbon Credits (Carbon Farming Initiative—Landfill Gas)
Methodology Determination 2015 (the landfill gas method). The method allows businesses and
others to earn carbon credits by preventing the release of methane generated by the
degradation of organic matter in landfill. Existing projects capture the gas and combust it in a
flare or internal combustion engine.
The review focussed on whether the period over which projects can earn credits (the ‘crediting
period’) should be extended. The current crediting period for landfill gas projects is seven
years.
The Committee’s findings and recommendations were informed by the following.
• An analysis of existing projects and industry trends.
• Consultations with industry and interested stakeholders.
- The Committee received 16 submissions on an issues paper made available to the
public for four weeks from 13 June to 11 July 2017.
- A meeting of the landfill gas technical working group including waste management
and landfill gas companies, waste industry peak bodies, technical experts and state
and territory governments.
- Conversations with, and information supplied by, state and territory regulators.
• A study of Australian landfill gas projects undertaken by consultants SMEC.
• A financial assessment of landfill gas projects, undertaken by RM Consulting Group
(RMCG) using data provided by industry participants.
• Members of the Committee visited landfills in Queensland and the Australian Capital
Territory to see landfill gas projects and discuss operational matters with project
managers.
In undertaking the crediting period extension review, the Committee focused on two main
issues:
• the extent to which the extension of the crediting period would result in the issuance of
credits to existing projects that would have continued in the ordinary course of events; and
• the extent to which the extension of the crediting period would result in new project
activities (new projects and extensions of existing projects) that would not occur in the
ordinary course of events.
In performing its functions, the Committee seeks to balance environmental integrity with the
need to encourage abatement activities. Excessive conservatism in the attempt to ensure
environmental integrity will obstruct project uptake and exclude the cheapest forms of
abatement. Insufficient conservatism will result in the issuance of credits of questionable
1integrity. While a balance must be struck, where there is uncertainty, the Committee errs on
the side of conservatism. This is consistent with the offsets integrity standards, which require
all estimates, projections and assumptions in methods to be conservative1.
To inform the review, the Committee sought information on registered projects from landfill gas
operators. Information was provided for only 18 projects—eight electricity generation projects
and 10 flaring projects. Cost and revenue data for two of the generation projects could not be
verified. Where the Committee felt there was insufficient information to make a definitive
judgment on a material issue, it adopted a conservative position to avoid the issuance of
credits of low environmental integrity.
As a result of its review, the Committee made the following nine findings.
1. There are approximately 665 operating landfills in Australia, which receive around
27 million tonnes of solid waste each year. These landfill sites are widely dispersed across
Australia, and sites vary significantly in size, age, design and operational conditions.
2. The landfill gas method has 101 registered projects. The Australian Government has
entered into contracts with 87 projects to purchase Australian Carbon Credit Units
(ACCUs) representing over 20 million tonnes of abatement. Crediting periods of 95
projects (94 per cent) expire during or after 2021. The Emissions Reduction Fund register
shows 76 projects transitioned from the former Carbon Farming Initiative methods. Fifty of
these projects had previously transitioned from the former NSW Greenhouse Gas
Reduction Scheme (GGAS) or Greenhouse Friendly schemes into the Carbon Farming
Initiative.
3. Despite increasing generation of methane from landfill, net emissions from the waste
sector have decreased since 1990 largely as a result of landfill gas capture and
combustion activities. Landfill gas capture is more prevalent at larger sites.
4. There are three main potential drivers of landfill gas capture activities: state and territory
waste regulations; reputational and social factors; and financial returns from the sale of
tradeable permits (ACCUs and Large-scale Generation Certificates (LGCs)) and electricity.
5. While most state regulations and guidance for landfills reference mitigation of greenhouse
gases, they typically set standards for safety and odour management. Reflecting this, the
regulations usually require landfill gas project operators to meet odour and safety
standards rather than capture and combust defined quantities of landfill gas. The practical
effect of the regulations is that landfill gas usually needs to be captured and combusted to
some extent. However, the stringency of the regulatory requirements varies significantly
between and within jurisdictions. The method accounts for the regulatory requirements by
imposing a discount on calculated abatement. For new projects, the discount is the larger
of a calculated amount based on the state and territory regulations that apply to the site or
a default of 30 per cent of the methane destroyed in the combustion device, unless the
proponent can establish the site is subject to no regulatory requirements (in which case the
discount is zero). Different discounts are used for projects that transitioned from other
schemes: a 24 per cent discount is applied to projects from the New South Wales
1 See section 133(1)(g) of the Carbon Credits (Carbon Farming Initiative) Act 2011.
2Greenhouse Gas Abatement Scheme (NSW GGAS); and no discount is applied to projects
from the Greenhouse Friendly program.
6. There are reputational and social factors that could potentially prompt landfill operators to
reduce landfill gas emissions. However, there is no evidence to suggest these factors have
had, or are likely to have, a material impact on operators’ decisions to establish or continue
landfill gas capture and combustion activities.
7. The primary reasons operators undertake projects are regulatory and financial. Capture
and combustion of landfill gas beyond the levels required to meet state and territory
regulations is driven largely by the financial returns associated with the sale of ACCUs,
LGCs and electricity. The magnitude and timing of the revenues and expenses associated
with landfill gas projects differs between the two eligible project types: flaring and electricity
generation. The initial capital costs associated with installing a flare and the associated
infrastructure are significantly less than those associated with an electricity generation
project, as are the operating and maintenance costs. Both project types have to continually
install new pipes and other infrastructure to capture landfill gas and transport it to the
combustion device as new cells are created at landfills. Both flares and generators also
require ongoing maintenance, much of which is attributable to the ‘dirty’ nature of landfill
gas. However, unlike flares, electricity generators must undergo expensive overhauls
every 4-8 years. While the costs associated with the installation and operation of electricity
generation projects are substantially higher than those associated with flaring projects, so
too are the revenues. Both types of projects receive revenue from the sale of ACCUs.
However, unlike flaring projects, electricity generation projects receive revenue from the
sale of electricity and LGCs issued under the Renewable Energy Target (RET).
8. Extending the crediting period for flaring projects is unlikely to result in the issuance of
ACCUs for emissions reductions that would occur in the ordinary course of events. The
only source of revenue from the operation of flaring-only projects is the sale of ACCUs.
The capture and combustion of landfill gas with flares involves ongoing capital expenditure
for piping infrastructure, and maintenance and operational costs associated with the flares
and associated equipment. For existing flaring projects, if they are no longer able to
access and sell ACCUs, they are unlikely to be able to cover the costs associated with the
operation of the project. As a consequence, in the absence of applicable regulatory
obligations, the capture and combustion activities are likely to stop. The same applies to
new project activities: extension of the crediting period is unlikely to result in the issuance
of ACCUs for emissions reductions that would otherwise occur in the ordinary course of
events.
9. Extending the crediting period for electricity generation projects is likely to result in the
issuance of ACCUs for emissions reductions that would occur in the ordinary course of
events. For existing electricity generation projects, in most cases, the revenues from the
sale of electricity and LGCs are likely to cover the ongoing capital, operational and
maintenance costs of the projects, including engine refurbishment costs. Due to this, it is
likely that, in most instances, existing electricity generation projects will continue in the
absence of the incentive provided by the Emissions Reduction Fund (ERF). Similarly, the
available evidence indicates the extension of the crediting period is unlikely to promote
new electricity generation projects that would not have otherwise occurred. The
Committee’s ability to reach definitive conclusions on these issues was affected by data
3limitations and uncertainties associated with policy settings and the electricity market.
However, on the basis of the available information and having regard to the need for
conservativism, the Committee concluded that extending the crediting period for electricity
generation projects is likely to result in the issuance of ACCUs for emissions reductions
that would occur in the ordinary course of events.
On the basis of the above findings, the Committee’s recommendations are as follows.
• The crediting period for flaring-only projects should be extended for no more than five
years. Any extension to the crediting period would be in addition to existing crediting
periods, which typically run until 2021, but up to 2025 for some recently registered
projects. There is a risk that extending crediting periods by more than five years would
overlap with future regulations or other mandatory action.
• On balance, and having regard to the need for conservatism, the crediting period for
electricity generation projects should not be extended. Extending the crediting period for
electricity generation projects carries too great a risk of crediting abatement that is likely to
occur in the ordinary course of events.
The Committee is aware that, if the crediting period is extended for flaring-only projects but not
for electricity generation projects, it could potentially prompt proponents to switch between the
project types. The Committee is also aware that not extending the crediting period for
electricity generation projects could undermine the incentive for these projects to capture and
combust ‘surplus methane’ (methane unable to be used for electricity generation) through the
installation and operation of flares. These issues will be considered in the full review of the
method. The Committee will also give further consideration in the full review to the application
of the method to small and medium landfills.
2 BACKGROUND
2.1 Committee to undertake crediting period extension reviews
The Committee’s functions include conducting crediting period extension reviews under s255A
of the Carbon Credits (Carbon Farming Initiative) Act 2011 (the Act). These reviews require
the Committee to advise the Minister for the Environment and Energy whether a method
should be varied to extend the period for which emissions reductions projects can earn
ACCUs. Crediting period extension reviews are required to be undertaken for each method
before an eligible offsets project covered by the determination enters the last 12 months of its
crediting period.
The crediting period extension advice provided by the Committee does not automatically lead
to changes to the method. It is up to the Minister to decide whether the method is varied to
give effect to the Committee’s advice. If the Minister decides to vary the method, the Minister
must obtain the Committee’s advice on whether the proposed variation meets the offsets
integrity standards. As part of the variation process, the Committee must seek public comment
on the proposed variation.
In conducting crediting period extension reviews, the Committee must consider whether the
method would still meet the ‘additionality standard’ in paragraph 133(1)(a) of the Act if the
4crediting period was extended 2. The additionality standard requires the application of the
relevant methodology determination to result in carbon abatement that is unlikely to occur in
the ordinary course of events. While the Committee must consider the additionality standard, it
can also have regard to other factors, including the other offsets integrity standards in
subsection 133(1) of the Act.
2.2 Approach to the crediting period review of the landfill gas method
In undertaking the crediting period extension review of the landfill gas method, the Committee
focused on two main issues:
• the extent to which the extension of the crediting period would result in the issuance of
ACCUs to existing projects that would have continued in the ordinary course of events;
and
• the extent to which the extension of the crediting period would result in new project
activities (new projects and extensions of existing projects) that would not occur in the
ordinary course of events.
In analysing these issues, the Committee inquired into the reasons why landfill managers
capture and combust landfill gas, including:
• state and territory landfill gas regulations;
• financial costs and revenue from the operation of landfill gas capture and combustion
projects; and
• other motivators to undertake landfill gas projects such as reputational benefits.
This report reviews the context for landfill gas projects, including trends in solid waste
management and industry activity, then examines in detail the factors that influence decisions
to commence new projects and continue existing landfill gas projects.
3 FINDINGS
3.1 Activity overview
3.1.1 The waste industry is large and widely dispersed
There are approximately 665 operating landfills in Australia3, which receive around 27 million
tonnes (Mt) of solid waste each year4. This amount equates to around 42 per cent of the
estimated total solid waste generated in Australia (64 Mt)5. The remainder of the waste (58 per
cent, 37 Mt) is recycled, reprocessed (including biological treatment/composting) or
incinerated6. Landfills and other solid waste management facilities are clustered around the
large population centres near Australia’s coastline (Figure 1).
2 See subsection 255A(2) of the Act.
3 Department of Environment, Water, Heritage and the Arts (2009), National Waste Overview.
4 Blue Environment (2017), Australian National Waste Report 2016.
5 Blue Environment (2017), Australian National Waste Report 2016.
6 Department of the Environment and Energy (2017), National Inventory Report 2015.
5Figure 1: Locations of waste management facilities, including recycling facilities and transfer
stations. Source: Geoscience Australia.
Figure 2 shows a distribution of landfills by size (tonnes of waste received per year) for 498
landfills. The data are from 2008-10. Landfills in the unknown tonnage category are likely to
receive less than 20,000 tonnes of waste per year7. Although large landfills represent a
relatively small proportion of all sites, the top eight per cent of landfills process over 55 per
cent of the total waste received. Almost 90 per cent of landfilled waste is processed by 20 per
cent of landfills (133 landfills)8.
7 Blue Environment (2013), Analysis of Landfill Survey Data.
8 Commonwealth of Australia (2016), National Inventory Report 2014 (revised) vol. 2.
6180
163
160
140
Number of landfills
120 114
105
100
78
80
60
38
40
20
0
Unknown < 1000 1000-20,000 20,000-100,000 > 100,000
Tonnes of waste received per year
Figure 2: Landfill size distribution. Source: Blue Environment (2013) Analysis of Landfill Survey
Data. Data set comprised of 498 landfills responding to surveys in 2008 and 2010.
The Australian Bureau of Statistics 2009-10 yearbook found landfills tended to be largely
government operated, though the analysis was based on a relatively small sample. Of 349
sampled sites, only 54 were private. More recent data were not available. Many local
governments outsource landfill management to private specialists9, and there is a trend
towards increased private sector management of landfills, particularly in metropolitan areas
and major cities where landfills tend to be larger10.
Finding 1: There are approximately 665 operating landfills in Australia, which receive around
27 million tonnes of solid waste each year. These landfill sites are widely dispersed across
Australia, and sites vary significantly in size, age, design and operational conditions.
3.1.2 Most waste sector emissions are generated by landfills
Landfills generate methane, a potent greenhouse gas, when organic waste decays in
anaerobic conditions. The anaerobic decomposition of organic matter in a landfill is a complex
process that requires several groups of microorganisms to act in a synergistic manner under
favourable conditions. Emissions emanate over a long period from deposited waste, typically
over 50 years in Australia. Other gases, mostly carbon dioxide, are also produced and the mix
of emitted gases is known as landfill gas. Methane typically makes up around half of landfill
gas11. Emissions of carbon dioxide generated by the decay of waste and from the secondary
combustion of methane are considered to be from biomass sources and are not included in
the waste sector inventory12.
In 2015, the waste sector emitted 11.4 Mt of carbon dioxide equivalent (CO2-e) to the
atmosphere (net emissions), around 2.2 per cent of Australia’s total emissions (excluding land
9 Department of the Environment, Water Heritage and the Arts, National Waste Reporting 2013.
10 Hyder Consulting (2011). Role and performance of local government: waste and recycling related
data and information.
11 Intergovernmental Panel on Climate Change (2000). Good Practice Guidance and Uncertainty
Management in National Greenhouse Gas Inventories.
12 Generally, biomass-related CO emissions and removals are accounted for in the ‘Land use, land-use
2
change and forestry’ (LULUCF) section of the National Inventory Report.
7use emissions)13. The majority of these emissions were from solid waste disposal in landfills,
which contributed 8.4 Mt CO2-e (74 per cent) of waste emissions14.
3.1.3 Landfills reduce emissions by capturing and combusting methane
Landfill emissions can be reduced by capturing and combusting landfill gas. In a landfill gas
project, pipes embedded in the landfill collect landfill gas before it escapes to the atmosphere.
Landfill gas flows through the pipes to a device which combusts the gas, converting the
methane component to carbon dioxide. Emissions are reduced because carbon dioxide is a
significantly less potent greenhouse gas than methane. While landfills generated a total of
16.5 Mt CO2-e emissions in 2015, they also captured and combusted methane equivalent to
8.1 Mt CO2-e, reducing emissions to the atmosphere by half (net emissions 8.4 Mt CO2-e)15.
Annual totals of methane capture have increased steadily since 1990, when negligible
methane was captured or combusted by landfills. The most recent data available from the
National Greenhouse Gas Inventory show that an additional 0.6 Mt CO2-e was captured and
combusted in 2015 (8.3 Mt CO2-e) compared to 2014 (7.7 Mt CO2-e)16. The success of landfill
gas capture and combustion since 1990 in reducing net landfill emissions is illustrated by
National Greenhouse Gas Inventory data, shown in Figure 3.
18,000
16,000
14,000
Emissions (Gg CO2-e)
12,000
10,000 Generated
8,000 Captured
6,000 Net
4,000
2,000
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Figure 3: Emissions from solid waste disposal in landfill. Source: Australian Greenhouse
Emissions Information System.
Under the ERF, landfill gas projects can earn ACCUs for every tonne of CO2-e prevented from
entering the atmosphere over a seven year period (the ‘crediting period’). ACCUs may be sold
to the government through a competitive reverse auction process or in the secondary market.
Projects may be registered under the method as one of four types (Figure 4):
13 Commonwealth of Australia (2016), National Inventory Report 2014 (revised) vol. 2.
14 Commonwealth of Australia (2016), National Inventory Report 2014 (revised) vol. 2.
15 Commonwealth of Australia (2016), National Inventory Report 2014 (revised) vol. 2.
16 Commonwealth of Australia (2016), National Inventory Report 2014 (revised) vol. 2.
8• new projects must have had no gas capture occurring before the beginning of the project.
18 new projects are registered under the ERF, representing 18 per cent of the 101 landfill
gas projects currently registered;
• recommencing projects must show that no gas collection system was operating in the
three years before the project application was made. No recommencing projects have
registered under the ERF;
• upgrade projects must provide records showing evidence of gas capture efficiency before
and after the project. Seven upgrade projects are registered under the ERF, representing
seven per cent of all projects; and
• transitioning projects moved across to the landfill gas method from methods under the
Carbon Farming Initiative. 76 projects—three-quarters of all projects—registered under
ERF transitioned from the CFI methods.
17.8%
6.9%
75.2%
New Upgrade Transitioning
Figure 4: Registered landfill gas projects by type.
3.1.4 Many ERF landfill gas projects were supported by previous Commonwealth and
state schemes
The existing landfill gas method builds on two earlier, now revoked, methods in operation
during the former Carbon Farming Initiative (CFI) scheme:
• Carbon Farming (Capture and Combustion of Methane in Landfill Gas from Legacy Waste)
Methodology Determination 2012; and
• Carbon Credits (Carbon Farming Initiative) (Capture and Combustion of Methane in
Landfill Gas from Legacy Waste: Upgrade Projects) Methodology Determination 2012.
Projects under the two CFI methods were eligible to transition to the ERF method and
commence a new seven year crediting period. A number of projects that transitioned from the
CFI to the ERF had commenced under earlier emissions reduction schemes: the Australian
Government Greenhouse Friendly scheme (14 projects) and the New South Wales
Greenhouse Gas Reduction Scheme (GGAS; 36 projects). The Greenhouse Friendly scheme
9operated from 2001 to 2010 and allowed the creation of carbon credits for approved
abatement activities. Greenhouse Friendly carbon credits could be traded in voluntary and
international carbon markets. The emissions trading scheme GGAS ran from 1 January 2003
to 30 June 2012.
A full table summarising registered projects is provided at Appendix B. Timing of the various
schemes is shown against solid waste emissions data in Figure 5.
18,000
Ability to sell electricity
16,000
ERF LFG method
14,000 made
Emissions (Gg CO2-e)
12,000
10,000
Generated
8,000
Captured
6,000 Net
4,000 Carbon Farming Initiative 2012-2014
NSW Greenhouse Gas Reduction Scheme2003-2012
2,000
Greenhouse Friendly 2001-2010
0
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
Year
Figure 5: Emissions from solid waste disposal (as shown in Figure 3) and timing of operation
of various emissions reduction schemes. Source: Australian Greenhouse Emissions
Information System.
Projects transitioning from earlier programs were assessed as valid according to the criteria of
their original program. Four projects remain registered under a CFI method.
Landfill gas projects are also able to claim Large-scale Generation Certificates (LGCs) under
the Renewable Energy Target scheme (RET) for electricity generated from the combustion of
methane.
The baseline abatement for a landfill gas project is the abatement that would have occurred in
the absence of the project. Baseline abatement is calculated by multiplying the methane
combusted by the proportion required to be combusted as a result of state and territory
regulations and licence requirements.
Proponents of new projects must calculate the methane required to be combusted as a result
of state and territory regulations using one of several methods set out in schedule one of the
method. This calculated regulatory proportion is then compared to a default regulatory
proportion. The default regulatory proportion is 30 per cent if the site has a regulatory
10requirement to capture landfill gas, or zero if there is no regulatory requirement. The proponent
must use the larger of the calculated and default regulatory proportions to calculate the
baseline abatement of the project, unless there is no regulatory requirement.
Projects that transitioned from the CFI use the proportion as determined under the former
relevant CFI determination. These proportions are as follows.
• For projects registered under the CFI—whichever is the larger of the calculated regulatory
baseline or the default regulatory baseline (30 per cent if there are qualitative requirements
to manage landfill gas or zero if no regulatory requirements apply).
• For projects transitioning from NSW GGAS—24 per cent.
• For projects transitioning from Greenhouse Friendly—zero per cent.
The net abatement amount for a project under the landfill gas method is calculated as the
difference between the baseline abatement and the project abatement for the reporting period.
Project abatement is calculated as the amount of methane combusted by the combustion
device. The amount of methane combusted by the device is adjusted to account for oxidation
of methane that would have occurred if the methane had not been combusted.
3.1.5 ACCUs generated and contracted under the method
The Australian Government has contracted to purchase carbon credits equivalent to 20.4
million tonnes of carbon dioxide abatement from 87 projects. Over 14.4 million ACCUs have
already been issued to landfill gas projects. The end date for crediting periods of landfill gas
projects ranges between 2017 and 2025, though the crediting period for the majority of
projects (72 per cent) will expire in 2021 (Figure 6).
80 73
70
Number of projects
60
50
40
30
20
6 8
10 3 5
1 1 1
0
2017 2018 2019 2020 2021 2022 2023 2024 2025
Year
Figure 6: Distribution of crediting period end dates. One proponent registering a project in
2017 elected to delay commencement of the project’s crediting period, resulting in a crediting
period end date in 2025.
Landfill gas operators enter into contracts with site owners for the rights to the landfill gas and
install and operate the infrastructure necessary for landfill gas capture and combustion. Three-
11quarters of all projects are run by five operators, and one operator runs 40 per cent of all
registered projects (Table 1).
Table 1: Operators under the landfill gas method.
Operator Number of Number of ACCUs Contracted
registered issued abatement
projects
LMS Energy 41 7,732,726 9,770,306
EDL LFG 10 2,696,356 3,266,889
AGL Energy 9 941,852 1,037,500
Landfill Gas Industries 9 496,730 1,082,042
Veolia Environmental 7 801,346 1,810,051
Services
Suez 2 191,407 336,498
Other 23 1,547,065 3,097,794
Total 101 14,407,482 20,401,080
Source: Clean Energy Regulator, ERF Project Register, 14 December 2017.
Around half of all registered projects (54 projects, or 51 per cent) generate electricity from
landfill gas combustion17. Although relatively even in terms of number of projects, electricity
generation projects provide 80 per cent of total abatement contracted under the method.
Finding 2: The landfill gas method has 101 registered projects. The Australian Government
has entered into contracts with 87 projects to purchase Australian Carbon Credit Units
(ACCUs) representing over 20 million tonnes of abatement. Crediting periods of 95 projects
(94 per cent) expire during or after 2021. The Emissions Reduction Fund register shows 76
projects transitioned from the former Carbon Farming Initiative methods. Fifty of these projects
had previously transitioned from the former NSW Greenhouse Gas Reduction Scheme
(GGAS) or Greenhouse Friendly schemes into the former Carbon Farming Initiative.
The amount of gas captured on a site is largely a result of the nature of the waste deposited at
the site, its geographic location and design, site management, infrastructure, and stage of
development of a site. In a completed cell capped with a membrane or clay of sufficient
thickness, a capture rate of over 90 per cent is possible18. Ordinarily, rates are significantly
lower than this19.
The National Greenhouse and Energy Reporting Scheme (NGERS) allows a maximum
reported capture of 75 per cent of all gas generated by the site. In 2013-14, eight sites
reporting under NGERS reported the maximum allowable capture. Four of these sites did not
have projects registered under the Carbon Farming Initiative, though all generated electricity
from landfill gas. Maximising income from the sale of electricity may have provided the
incentive for these projects to maximise their gas capture.
17 Data from the Clean Energy Regulator’s project and contract registers.
18
Barlaz, MA, JP Chanton and RB Green (2009). Controls on Landfill Gas Collection Efficiency:
Instantaneous and Lifetime Performance, Journal of the Air and Waste Management Association, 59:12,
1399-1404. DOI: 10.3155/1047-3289.59.12.1399.
19 Powell, JT, TG Townsend and JB Zimmerman (2016). Estimates of solid waste disposal rates and
reduction targets for landfill gas emissions. Nature Climate Change, Vol 6, 2016.
12A list of sites operating landfill gas projects during the Carbon Farming Initiative in 2013-14
was generated using a combination of NGERS data and the ERF project registry. Figure 7
shows the gas capture rates of 34 sites during the Carbon Farming Initiative period. Capture
rates vary widely across the sites, though the data does not allow any conclusions to be drawn
as to why.
9
8
8
7
NUMBER OF SITES
6
5
5
4 4 4 4
4
3
3
2
2
1
0
0-10% 10-20% 20-30% 30-40% 40-50% 50-60% 60-75% 75%
PERCENTAGE GAS CAPTURE
Figure 7: Landfill gas capture rates of 34 sites participating in the Carbon Farming Initiative in
2013-14. Source: Department of the Environment and Energy (note: NGERS allows a
maximum gas capture rate of 75 per cent).
The available data suggest landfill gas capture and combustion is more prevalent at larger
sites than small sites. As discussed, NGERS data indicate that more than 90 per cent of sites
that received over 100,000 tonnes of waste in 2013-14 captured and destroyed methane.
Landfills receiving less than 100,000 tonnes of waste in 2013-14 were less likely to have
landfill gas capture and combustion systems. Only 58 per cent of smaller sites had these
systems. The proportion of sites with landfill gas capture fell to 48 per cent when looking at
sites that received less than 50,000 tonnes of waste. Figure 8 shows the percentage of gas
captured within each landfill size category. NGERS data only captures sites emitting more
than 25,000 tonnes of carbon dioxide equivalent per year. This result is consistent with a
previous report based on Waste Management Association of Australia survey data (2008-
2010), which found larger landfills are more likely to capture landfill gas than smaller landfills.20
20 Wright Corporate Strategy Pty Ltd, (2010), Review of the application of landfill standards.
1370%
60%
Percentage of gas captured
50%
40%
30%
20%
10%
0%
20 - 50 kt CO2-e 50 - 100 kt CO2-e > 100 kt CO2-e
Greenhouse gas generated per year
Figure 8: Gas capture within landfill size categories. Source: NGERS.
There are a number of reasons why large landfills are more likely to capture and combust
landfill gas than small landfills, including:
• they have higher revenues from gate fees, which can be used to support investment in
relevant infrastructure;
• larger landfills are generally closer to large population centres, hence more risk of odour
concerns;
• they produce larger volumes of gas resulting in higher environmental and safety risks;
• larger volumes of gas, and a more consistent rate of gas supply, are ideal for generating
electricity; and
• they are likely to have greater access to, and be able to more cost-effectively utilise, the
skilled labour necessary to operate projects.
Smaller landfills are often council owned and operated, have limited staff, limited income and
generate smaller volumes of methane. Smaller landfills are often located in rural or regional
areas and are less likely to pose an odour risk to population centres. Such landfills are also
more likely to face high grid connection fees due to distance from suitable infrastructure.
Views expressed in public submissions support this finding. Feedback generally indicated rural
landfills do not have the capacity or financing to undertake landfill gas projects in the ordinary
course of business. The eligibility to earn ACCU’s can therefore play a role in small rural
landfills installing capture and combustion equipment. One confidential submission provided
calculations which suggested extending the crediting period would make undertaking flaring
projects on small to medium landfills viable.
14An analysis of the licence requirements across a number of landfills did not indicate larger,
urban landfills were more likely to have a legal requirement to capture landfill gas and/or
capture greater amounts of landfill gas than smaller, rural landfills. Public consultation also did
not provide any insight on whether licence requirements differ between landfills of different
size or proximity to population centres.
Finding 3: Despite increasing generation of methane from landfill, net emissions from the
waste sector have decreased since 1990 largely as a result of landfill gas capture and
combustion activities. Landfill gas capture is more prevalent at larger sites.
3.2 Drivers of landfill gas capture activities
There are three main potential drivers of landfill gas capture activities:
• state and territory waste regulations;
• reputational and social factors; and
• financial returns from the sale of tradeable permits (ACCUs and Large-scale
Generation Certificates (LGCs)) and electricity.
These are discussed in turn below.
Finding 4: There are three main potential drivers of landfill gas capture activities: state and
territory waste regulations; reputational and social factors; and financial returns from the sale
of tradeable permits (ACCUs and Large-scale Generation Certificates (LGCs)) and electricity.
3.2.1 Regulatory requirements for landfill gas capture
3.2.1.1 States and territories are responsible for regulation of the waste industry
States and territories are responsible for the regulation of waste management facilities,
including landfills. All states and territories maintain regulatory frameworks governing
environmental and health impacts of waste management activities. The statutory basis of
these frameworks is typically the jurisdiction’s environment protection legislation (or similar),
with subordinate policy or regulatory instruments in force in some states (VIC, QLD, SA, TAS).
In addition to laws, the majority of jurisdictions have landfill guidelines (NSW, VIC, QLD, SA,
TAS, NT) or are in the process of developing them (WA). ACT has adopted the Victorian
guidelines, as they apply to monitoring. Individual landfill sites operate under site-specific
licences or authorisations issued under the relevant legislation, and are subject to
requirements in relevant legislative instruments and policy documents, including landfill
guidelines.
3.2.1.2 State requirements vary
Statutory requirements for landfill operaters to capture and combust landfill gas are generally
imposed via licence conditions and/or guidelines. The objects of these requirements is to
address odour and safety concerns and in some cases, to abate greenhouse gas emissions.
15Current state and territory guidelines refer to limiting landfill gas emissions to within a specified
range, however the range differs between jurisdictions. A summary of state and territory
guidelines is provided at Appendix A.
All available guidelines specify allowable surface and/or subsurface methane concentrations
for landfills. QLD, NSW, VIC, Tas and SA include minimisation of greenhouse gas emissions
as an objective for landfill gas management. If the guidelines translated directly into practice
on landfill sites it is likely some abatement of landfill gas would occur in the ordinary course of
events.
In at least some cases, the environmental objectives of licences could be satisfied without the
installation of a flare or other combustion device. For example, a landfill may find applying a
cap of sufficient thickness to prevent migration of landfill gas to the surface satisfies the
regulatory requirements.
An analysis of licence requirements found landfill gas management requirements varied
between sites, with no discernible pattern based on the size or location of the landfill. Specific
examples of licence requirements to combust landfill gas were found. One NSW landfill licence
stated:
Except in emergency conditions or short periods of shutdowns the licensee must
ensure that landfill gas generated by the disposal of waste and collected at the
premises is treated by oxidation to carbon dioxide.
Similar examples were found in all states and territories.
Consultation with states and territories has shown some expectation landfill gas projects would
continue in the absence of ACCUs. Victoria and Queensland provided the strongest view the
regulatory framework would result in the capture and combustion of methane. Tasmania and
New South Wales were of the view at least some landfills would continue to manage methane
through flaring or electricity generation in the absence of ACCUs.
The ACT contains only one active landfill, Mugga Lane. Its 2011-2025 waste management
strategy commits to ‘continue methane capture’ from the two ACT landfill sites. The
authorisation does not contain a requirement to capture landfill gas but does require the
Authorisation holder to monitor emissions in accordance with the Victorian landfill guidelines.
The authorisation also requires the holder to undertake all practicable steps to minimise the
impact of odour. The ACT government has recently released a request for tender for the
capture and combustion of landfill gas from Mugga Lane. The initial term is for 15 years.
Feedback from waste industry representatives emphasised the variability of landfill licence
requirements across the industry. Preventing odour impacting on sensitive receptors is often a
licence requirement, though stakeholders emphasised a landfill may satisfy the requirements
without installing a landfill gas collection system.
3.2.1.3 The method currently recognises regulatory requirements to capture gas
The method recognises licence requirements through the inclusion of a regulatory baseline.
Proponents of the method are required to subtract at least 30 per cent of the abatement
achieved by a project to represent the gas capture required by law. If a proponent is able to
16prove there are no legal obligations to capture landfill gas then this requirement may be
waived.
There are 18 landfill gas projects with a zero per cent regulatory baseline:
• 16 projects transitioned from the Greenhouse Friendly program to the Carbon Farming
Initiative; and
• two projects registered as new projects during the Carbon Farming Initiative.
The two projects registered as new during the Carbon Farming Initiative are located in
Queensland and Western Australia. At the time of registration they were assessed as having
no regulatory requirements to capture and combust landfill gas.
At present only Western Australian projects may be eligible for a zero per cent baseline
because it is the only state without landfill guidelines. However, all new Western Australian
projects registered under the ERF have a 30 per cent regulatory baseline. This indicates these
projects have licence requirements requiring the management of landfill gas or odour.
3.2.1.4 Safeguard Mechanism
The ERF Safeguard Mechanism aims to prevent emissions reductions achieved under the
Fund being offset by rising emissions in another part of the economy. Under the Safeguard
Mechanism, landfills are issued with a baseline derived from their highest level of net
emissions over the years 2009-10 to 2013-14. Safeguard provisions apply to large landfills
whose emissions from waste deposited after 2017 exceed 100,000 tonnes CO2-e per year.
These large landfills must ensure their net covered emissions do not exceed their baseline
emissions over their monitoring period. If a large landfill did exceed its baseline, it may be
required to surrender carbon credits to offset the excess emissions. To date, fourteen landfills
have been issued baselines under the safeguard and none have been exceeded.
Finding 5: While most state regulations and guidance for landfills reference mitigation of
greenhouse gases, they typically set standards for safety and odour management. Reflecting
this, the regulations usually require landfill gas project operators to meet odour and safety
standards rather than capture and combust defined quantities of landfill gas. The practical
effect of the regulations is that landfill gas usually needs to be captured and combusted to
some extent. However, the stringency of the regulatory requirements varies significantly
between and within jurisdictions. The method accounts for the regulatory requirements by
imposing a discount on calculated abatement. For new projects, the discount is the larger of a
calculated amount based on the state and territory regulations that apply to the site or a
default of 30 per cent of the methane destroyed in the combustion device, unless the
proponent can establish the site is subject to no regulatory requirements (in which case the
discount is zero). Different discounts are used for projects that transitioned from other
schemes: a 24 per cent discount is applied to projects from the New South Wales Greenhouse
Gas Abatement Scheme (NSW GGAS); and no discount is applied to projects from the
Greenhouse Friendly program.
3.2.2 Reputation and social reasons to reduce emissions
The Committee considered the extent to which landfills and landfill gas operators would
undertake emissions reduction activities on account of reputation and social factors. These
17reasons may include furthering corporate social responsibility goals or realising a reputational
benefit.
Submissions from waste and landfill gas industry representatives generally stated non-
financial benefits are not sufficient to outweigh the costs of undertaking a landfill gas project.
For example, while the City of Armadale referred to its landfill gas project as, ‘a crucial
initiative of the city’s corporate greenhouse action plan’21, it did not consider these reputational
benefits to be sufficient to undertake emissions reduction activities in the absence of eligibility
for ACCUs. In discussion, council landfill operators expressed uncertainty on whether the
reputational benefits of a landfill gas project would be strong enough for constituents to be
willing to pay more for their waste services. Several waste industry representatives also
pointed out the availability of cheaper and more visible options for generating positive
reputational benefits, such as installation of solar photovoltaics or energy efficient lighting.
Recent statements by policy leaders in Australia and globally have shown an increasing
awareness of the importance of managing climate risk. Most state and territory governments
have climate change strategies in place, and some have goals to reduce emissions. For
example, Victoria and New South Wales are aiming for net zero emissions by 2050. These
developments are likely to have implications for private landfill operators. In aiming for a zero
emissions target a state may decide to restrict methane emissions from landfill—this is
currently the case in the ACT. The prospect of future regulation or other statutory liabilities
may prompt landfill gas operators to capture and combust landfill gas or increase the extent to
which they are doing so. However, there is currently no evidence to suggest this potential
background threat of regulation is a significant driver of capture and combustion activities at
Australian landfills.
Finding 6: There are reputational and social factors that could potentially prompt landfill
operators to reduce landfill gas emissions. However, there is no evidence to suggest these
factors have had, or are likely to have, a material impact on operators’ decisions to establish or
continue landfill gas capture and combustion activities.
3.2.3 Financial reasons to reduce emissions
In the absence of material social or reputational drivers, it appears the primary reasons
operators undertake projects are regulatory and financial. Similarly, where landfill operators
capture and combust more landfill gas than is necessary to satisfy regulatory requirements, it
appears it is due to the financial incentives associated with the sale of ACCUs, LGCs and
electricity. This is consistent with feedback received from industry representatives and the
evidence provided by consultants. Data obtained from industry sources suggest the costs of,
and revenue generated by, landfill gas projects differ significantly between projects. Projects
that generate electricity have significantly higher capital costs but access significant sources of
additional revenue compared to flaring-only projects. This suggests these projects should be
considered separately when looking at the role the generation of ACCU’s plays in building a
business case for gas capture and combustion beyond the ordinary course of business.
Landfill gas and waste industry representatives broadly agreed the real cost of landfill gas
capture and combustion infrastructure had not decreased over time. Several representatives
21 10 July 2017, submission from City of Armadale
18reported costs increased in line with inflation and were subject to increasing costs of
complying with more stringent health and safety regulations.
The gas generated at a landfill contains compounds damaging to infrastructure, leading to a
need to replace equipment over time. Furthermore, operational landfills are constructed in
cells which are generally filled one at a time. As landfilling moves to a new cell new landfill gas
infrastructure is installed. This creates ongoing costs for landfill gas projects. Several
proponents of flaring only projects stated they would cease to combust landfill gas and remove
the flare at the end of the crediting period. Others said the maintenance regime required to
keep the system running optimally would cease and landfill gas capture rates would fall after
the end of the crediting period.
A financial analysis of flaring only projects, based on a small sample of small to medium sized
operations, showed the relevant flaring projects relied on ACCUs to recoup project costs.
Although a site may use gate fees to cover the costs of a flare, in the absence of ACCUs, it is
unlikely a flaring project would continue to operate unless required to do so under legislation.
The payback period for most of the sampled flaring projects extended beyond the current
seven year crediting period (see Table 2). The analysis also found the net present value for
most of the sampled flaring projects was negative, even with ACCUs.
Table 2 provides indicative values for the costs and revenue for landfill gas flaring and
generation systems. The costs and revenues illustrate a flaring project equivalent to 1000 m3
per hour and an electricity generation project equivalent to 1.8 megawatts.
Table 2: Illustrative costs and revenues for a flaring and electricity generation project
Item Flaring Electricity generation
Capital cost $875,500–$1,184,500 $3,595,500–$4,864,500
Annual operating and $178,500–$241,500 $297,500–$402,500
maintenance costs
Engine overhaul (annualised) N/A $221,000–$299,000
Non-ACCU revenue per year 0 $714,000–$966,000
ACCU revenue per year $297,500–$402,500 $467,500–$632,500
Payback period range (years) 6–13.5 2.5–6
Benefit cost ratio 0.98–1.32 1.28–1.73
Benefit cost ratio range 0.7–1.6 1.25–1.9
Source: Department analysis, RMCG 2017, SMEC 2017.
Projects that combust landfill gas using an internal combustion engine to generate electricity
incur significantly higher capital costs than flaring-only projects, but also have access to
additional revenue streams. The initial capital cost associated with landfill gas generators are
approximately $2-2.5 million per megawatt. These capital costs are comparable to other
electricity generation technologies. The available data also suggest landfill gas power
generation is competitive with other generation technologies.22
The annual operation and maintenance costs of electricity generation projects are higher than
for flaring-only projects. Much of the additional cost relates to maintenance of engines, which
according to industry sources and technical experts, need to be overhauled every 4 to 8 years.
22 Clean Energy Finance Corporation (2015) The Australian bioenergy and energy from waste market.
19On the other hand, generating electricity provides additional revenue sources—the sale of
electricity and credits through participation in the RET. Under the RET, registered suppliers
are awarded a Large-scale Generation Certificate (LGC) for every megawatt hour of electricity
produced. The supplier may then sell the certificates.
Analysis of a sample of electricity generation projects found ACCUs provided approximately
32–38 per cent of their revenues. This represents a significant proportion of project revenues
and could be the deciding factor in a new project being developed.
The majority of industry representatives were of the opinion the crediting period should be
extended for electricity generation activities. The arguments for extending the crediting period
were the ongoing costs of operating a landfill gas generation system, and the uncertainty of
future electricity and large-scale generation certificate prices. Some landfill gas operators
claimed they were locked into power purchase agreements, and were not able to take
advantage of higher spot prices in the electricity market.
Project data analysed by RMCG modelled the payback period for seven out of eight sampled
electricity generation projects to be between 3–6 years. The analysis found extending the
crediting period from seven to 14 years would not have a significant effect on the viability of
existing generation projects. Both the financial analysis and the technical report found that new
electricity generation projects would not be viable without the incentive of seven years
crediting provided under the existing ERF method.
The financial assessment of projects found they are sensitive to the price of electricity and
LGCs. Some industry representatives noted the price of certificates under the RET is expected
to fall, which is likely to happen once the target is achieved (i.e. in or around 2020). However,
there is considerable uncertainty in the energy market and it is unclear whether the emerging
National Energy Guarantee may replace the RET as a source of income for electricity
generation projects.
One submission received through the public consultation provided calculations suggesting the
revenues generated under the RET and by selling electricity were sufficient for electricity
generation activities to continue in the absence of the landfill gas method.
Finding 7: The primary reasons operators undertake projects are regulatory and financial.
Capture and combustion of landfill gas beyond the levels required to meet state and territory
regulations is driven largely by the financial returns associated with the sale of ACCUs, LGCs
and electricity. The magnitude and timing of the revenues and expenses associated with
landfill gas projects differs between the two eligible project types: flaring and electricity
generation. The initial capital costs associated with installing a flare and the associated
infrastructure are significantly less than those associated with an electricity generation project,
as are the operating and maintenance costs. Both project types have to continually install new
pipes and other infrastructure to capture landfill gas and transport it to the combustion device
as new cells are created at landfills. Both flares and generators also require ongoing
maintenance, much of which is attributable to the ‘dirty’ nature of landfill gas. However, unlike
flares, electricity generators must undergo expensive overhauls every 4-8 years. While the
costs associated with the installation and operation of electricity generation projects are
substantially higher than those associated with flaring projects, so too are the revenues. Both
types of projects receive revenue from the sale of ACCUs. However, unlike flaring projects,
20You can also read
