China biogas farm project to yield 20M carbon credits

Posted on July 12, 2012

LONDON -- A biogas project in China could generate 20 million carbon credits over a 28-year period by helping up to one million farming households in rural Sichuan Province reduce greenhouse gas emissions, the project’s developer said on Friday.

Small farms in China will be equipped with biogas digesters to harness methane from pig manure. -- BW File Photo

Registered by a United Nations program, it is the first project of its kind to get the green light under the Clean Development Mechanism (CDM), a carbon offset scheme that promotes emissions-reductions projects in developing countries, Germany-based project developer UPM said.

The so-called program of activity (POA) project is unique due to its relatively large size of average annual volume and involves converting animal waste to biogas for rural households. Many POA projects are for cook stoves or efficient light bulbs.

But with CDM credit prices trading near record-low levels, UPM is likely to wait to sell the carbon credits that the project generates on the forward market, Ralph Westermann, a consultant with UPM told Reuters.

“We are prepared to wait until a better price environment arises;” he said, noting the company is in talks with potential buyers, mainly industrial and power companies in Europe.

Benchmark CDM credits, called certified emission reductions (CERs) are trading just over €4 ($4.97) a ton in the secondary market, slightly up from a record low of €3.16 a ton hit on June 12.

Prices in the CDM market fell by more than 60% last year due largely to a glut of supply and a European economic slowdown that has stifled demand.

A certain number of CERs can be used for compliance in the European Union emissions trading scheme, the world’s biggest carbon market that caps emissions on over 12, 000 industrial and power plants, as well as airlines.

Demand for CERs will be further limited from the start of next year, when the EU ETS will only accept credits from CDM projects located in least developing countries.

Yet Mr. Westermann said emerging carbon markets in Australia, North America and China could create additional demand for the project’s carbon credits, some of which may also be sold to companies with voluntary carbon targets outside of the EU.

Under the terms of the project, each household, such as those with two to three pigs, will be equipped with a household biogas digester that will treat manure anaerobically and recover the methane, a potent heat-trapping gas, from waste pits.

The recovered methane can be used for cooking, replacing the need for households to burn coal, which emits another potent greenhouse gas, carbon dioxide. The leftover waste can also produce a more-efficient fertilizer than without the treatment.

Mr. Westermann said UPM has similar project types in the pipeline. -- Reuters