The proposed design for a National Greenhouse Gas Emissions Trading Scheme opens a window of opportunity to establish recycling as carbon abatement, writes Matthew Warnken.

A range of measures are being introduced globally to address climate change. In Australia this includes a National Emissions Trading Taskforce established by the states and territories in the absence of federal leadership.

The taskforce proposed a National Emissions Trading Scheme (NETS) to help achieve a 60 per cent reduction in economy-wide greenhouse gas emissions (based on 2000 levels) by 2050. The scheme targets stationary generators with a capacity in excess of 30 megawatts electric (MWe), but retains the potential to add other large users of energy.

It would cap carbon emissions from stationary electricity generators at two possible levels: firstly a cap of 176 mega-tonnes (Mt) in 2030 (same as in 2000); and secondly, at 150 Mt in 2030 (15 per cent reduction). These caps could be adjusted if the scheme was enlarged, or revised on the basis of international comparative performance.

NETS operates on the allocation of permits to emit one tonne of carbon dioxide equivalent ( CO2e), with the total permit allocation set by the relevant emission target for a given year. NETS participants will have to surrender one permit (or offset credit) for every tonne of CO2e emitted.
Permits are tradable commodities and can be banked, however there is no borrowing against future permit allocations to discharge liabilities. Models of the two abatement targets suggest a permit price peaking at $34 by around 2021 for the 150 Mt cap, and levelling out at about $29 in 2025 for the 176 Mt cap.

Offset credits and trades
Certain activities under NETS can create tradable offset credits with a value of one tonne of CO2e. Those unable to meet their emission targets will have the option of buying these credits to offset excess emissions. Eligible activities are likely to include forestry, carbon capture and storage, reduced industrial process emissions below ‘business as usual’, and methane destruction, such as landfill gas or sewage gas.

Offset credits created under Kyoto mechanisms may also be recognised. Offsets will need to meet additionality, permanence and measurement criteria. Additionality criteria will include considerations on environment (the project reduces emissions), regulatory/legal (project must be ‘beyond compliance’) and financial/investment (project not completed under business as usual).

Offset credits will not be created through the generation of renewable energy, meaning Renewable Energy Certificates (either under the national or proposed Victorian scheme) will not be interchangeable with NETS permits. Some NSW Greenhouse Gas Abatement Certificates (NGACs) may be interchangeable, but transitionary arrangements are yet to be proposed by the NSW Government. However, liable participants who generate renewable electricity will save approximately one permit for every megawatt hour of carbon neutral electricity generated. This would free up a permit to trade or bank and should drive demand in the renewables sector.

Opportunities for resource recovery
The major business opportunity for the resource recovery sector under NETS is the creation of tradable offset credits. Under the proposed scheme, landfill gas capture would be eligible to create offsets, while the generation of renewable electricity from renewable waste derived sources will have an indirect benefit.

Avoided methane generation from the diversion of biologically active waste disposal to landfill is another offset possibility, but is not included in the proposed scheme design. However, the major opportunity for resource recovery is perhaps in recycling as carbon abatement, recognising and valuing the embodied energy savings achieved through recycling. Embodied energy is the amount of energy used to transform raw materials into a final product or material. Recycling delivers a net energy saving as there is less embodied energy in recycled material than in comparable virgin products.

The ability to validate embodied energy savings as carbon abatement under NETS represents a multi-million dollar business opportunity. For instance, some six million tonnes of paper and cardboard, glass, aluminium, steel and plastic are disposed of to landfill each year in Australia. Indicative embodied energy savings for recycling these materials are as follows:
• paper and cardboard saves 13 gigajoules (GJ) per tonne recycled (virgin = 36.4 GJ/t, recycled = 23.4 GJ/t);
• glass saves 7.2 GJ per tonne recycled (12.7 GJ to 5.5 GJ);
• aluminium saves 152.5 GJ per tonne recycled (170 GJ to 17.5 GJ);
• steel saves 21.9 GJ per tonne recycled (32 GJ to 10.1 GJ); and
• plastic saves 69.5 GJ per tonne recycled (90 GJ to 20.5 GJ).

CSIRO research estimates each GJ of embodied energy represents a greenhouse gas emission of 0.098 tonnes of CO2e. Applying this factor to the embodied energy savings from recycling landfilled materials represents approximately 20 million tonnes of carbon abatement. In other words, the net savings in energy that could be realised from additional recycling is the equivalent of avoiding the burning of eight million tonnes of coal, or taking four million cars off the road.

Under a NETS scheme that recognises recycling as carbon abatement, these avoided emissions present a market opportunity of up to $600 million (where CO2e permits trade at $30), over and above the commodity value of the recovered materials.

Further benefits
Establishing the carbon abatement benefits of avoided methane generation from diverting biologically active wastes from landfill under NETS adds additional upside to innovative resource recovery projects. Using Australian Greenhouse Office calculations to estimate the avoided emissions from diverting the
10.5 million tonnes of paper and cardboard, garden organics, food and wood disposed of to landfill each year, identifies an opportunity to realise up to 18 million tonnes of avoided CO2e, a potential market value of about $540 million.

Therefore, the combined value of carbon offset credits to the resource recovery sector represents a potential market in excess of $1.1 billion. This estimate does not factor in new technologies such as the carbonisation of biomass-based materials (charring), which could gain credits for carbon capture and long-term storage, in addition to credits for avoided landfill emissions.

Submissions on the design of the National Emissions Trading Scheme are open until December 22. This is an opportunity for resource recovery companies to establish carbon offset credit categories under NETS that will reward the ‘eco-services’ of recycling.

Matthew Warnken is a director of sustainability, business and research consultancy Warnken ISE. For a briefing note on NETS email matthew@warnkenise.com.au