This text, written by André Leal in co-authorship with Ricardo Esparta and Karen Nagai, is an expanded version of an article originally published by Magazine Opinions.
Companies in the sugar and alcohol sector or landfills that produce biomethane can earn very significant financial revenues by generating different types of environmental decarbonization assets. This is the case of Decarbonisation Credits from the federal Renovabio program (known as CBIOs), Renewable Energy Certificates (RECs, for Renewable Energy Certificate) or carbon credits generated by Verified Reduction of Greenhouse Gas Emissions (VERs , or Verified Emission Reductions). However, the indiscriminate overlapping of these environmental attributes can generate double counting, compromising their value for buyers who seek in these assets the reduction, abatement or mitigation of their own greenhouse gas emissions. Before pointing out solutions to this problem, it is important to be clear about the characteristics of each of these environmental assets.
First, let's understand what CBIOs are. Renovabio is a Federal Government program to encourage producers of fuels from renewable sources, such as ethanol, biodiesel and biogas. Companies that produce fuels of this type can issue certificates called CBIOs. For every ton of carbon equivalent (tCO2e) that the production and consumption of this clean fuel stops releasing into the atmosphere, compared to oil, for example, a certificate attested by the National Petroleum Agency is issued. Companies interested in offsetting or neutralizing their emissions can then purchase these certificates. Renovabio creates a regulated environment where fossil fuel distributors are required to purchase CBIOS. To participate in the program, producers of renewable fuels must complete three steps. The first is to fill out the Renovacalc, an extremely detailed form about your operation, for ANP's assessment, since the certificate evaluates not only the amount of fuel produced, as well as the energy efficiency and "cleanliness" of the point's production process. point of view of greenhouse gas emissions. The second is to hire an independent audit to validate the data entered in Renovacalc, an ANP requirement for the producer to be able to issue the CBIOS. Thirdly and lastly, the fuel producer must look for a stock exchange distributor to hold and account for their certificates, so that they can be traded in over-the-counter environments on the stock exchange, as is the case with B3. BlockC assists renewable fuel producers in every step of this process, from filling out the Renovacalc, through hiring an independent audit, to the custody agreement with securities distributors.
Secondly, let's understand what Renewable Energy Certificates (the RECs, for Renewable Energy Certificate) are, in this case, the BioREC, the Biomethane Renewable Energy Certificates generated in the sector's production process. These papers attest to the guarantee of renewable origin of the biomethane generated, allowing its traceability, in order to guarantee that it does not come from fossil fuels. This guarantee of origin of the renewable attribute is not a mandatory instrument. Depending on the form of commercialization, the certificate can be negotiated separately from the “energy product”, or, relating the energy generation to the consumption of this energy. In cases of generators and consumers not connected to gas pipelines, for example, the analysis model is more complex, requiring operationalization rules. BlockC develops these analyzes in all scenarios, ensuring the traceability of the generated biomethane.
Thirdly, carbon credits generated by Verified Reduction of Greenhouse Gas Emissions (VERs, or Verified Emission Reductions) are issued from a set of activities implemented to reduce emissions. These emissions are monitored, verified and accredited by an independent audit, and approved by an emissions reduction program that can be regulated or voluntary. Each program has its own eligibility criteria, implementation deadlines, operating schedules, verification, registration and issuance procedures, among others. Regardless of the program, all emission reductions must be proven against a reference scenario, which is called the baseline. All carbon credit projects must demonstrate their positive impact through additionality, proving that the project is indispensable and that the reductions it generates would not be achieved without its implementation. BlockC has the expertise to design projects within all types of existing programs.
Taken together, CBIOs, BioRECs and VERs carbon credits are instruments for proving environmental attributes with different characteristics and purposes. Carbon credits are measured in tCO2and reduced or avoided and are based on additional emission reduction projects. After registration, the project will obtain the certificate of carbon credits after presenting the results obtained in a monitoring report, prepared in accordance with the monitoring plan audited by a third party and approved by the program in which it was registered. 1 CBIO is equivalent to 1 tCO2and avoided emissions, by simply comparing the difference in emissions over the life cycle of biofuel production and the substituted fossil fuel (diesel, gasoline, natural gas), as shown in Table 1. However, the CBIO does not assess additionality, that is, whether the generated CBIOs play an important role in the decision to produce the biofuel. In fact, the simple production of biofuel and certification at Renovabio automatically gives the right to issue CBIOs. As there is no assessment of additionality, there is no way to say that, in fact, there was a reduction in emissions unlike what would have occurred in the absence of the issued CBIO. Finally, BioRECs are issued in commercialized units (m3 or MMBTU) from these renewable sources of biogas/biomethane, that is, they do not include the reduction of emissions in their calculation, guaranteeing “only” the renewable origin of the energy generated.
Thus, when viewed together, the potential for overlapping environmental attributes is clear, since the three certificates deal with the same measure: the reduction of greenhouse gas emissions. When issuing the CER, the producer receives credits related to renewable energy. By issuing CBIO for the same period, the same producer certifies that the biofuel produced will emit less greenhouse gases than the equivalent fossil fuel. When issuing BioREC, although the producer does not receive credits for a fuel substitution, the purpose of this certificate is often the abatement in the inventory of emissions from the energy use of an equivalent fossil fuel.
In practice, depending on how it is structured, the risk of double counting can be eliminated by determining that projects will only be registered if they assume the commitment not to issue any other credit related to the reduction of emissions. For this, documentary evidence will be required. That is, the instruments could only coexist if there is a guarantee that the tracking will not be used for any purpose of offsetting or abatement of emissions where there is an overlap of these environmental attributes. According to BlockC's calculations, the overlap will occur in a portion between 10%-20% of the volume of biomethane produced and sold. Our platform, which uses blockchain technology, and in which all the documentary evidence of a commercial operation can be captured practically automatically and in real time, makes it possible to track the limits and overlaps of each environmental asset with high granularity, eliminating the risk of double counting and thus ensuring the highest valuation of these assets.
Andre Leal
Head of Business Development
It has been active in the decarbonization segment since the launch of the Kyoto Protocol, structuring carbon credit projects, their verification, validation and registration. He was O&M manager of more than 200 MW in wind, solar and small hydroelectric plants. Graduated in Economics from Universidade Federal Fluminense (UFF) and Master in Energy Planning from COPPE-UFRJ.
Coauthors:
Ricardo Sparta
Scientific Technical Director
Since 2000 technical director and founding partner of the Ecopart Group. Since 2009 member of the UNFCCC “CDM Accreditation Panel” and since 2017 member of the “roster of experts” for reviewing national update inventories submitted to the Climate Convention. Chemical Engineer and PhD from Poli-USP and researcher at the University of Stuttgart from 91 to 99.
karen nagai
Carbon Specialist
It carries out technical analyzes on projects with the potential to generate carbon credits, in addition to preparing emission inventories and other corporate initiatives to reduce emissions. She holds a degree in Civil Engineering from Universidade Anhembi Morumbi and in environmental management from the University of São Paulo. He has a specialization in renewable energy, distributed generation and energy efficiency at the Polytechnic School of USP.
