XIV. Types of Projects Funded
1. Forestry
We are satisfied that forestry is an adequate sector on which to focus initial CPT program efforts, given that the CCAR has already developed a protocol for forest-based projects. Moreover, no party objects to PG&E contracting for GHG reductions in the forestry sector.
Our key concern is whether there is an adequate market for forest projects in California. According to PG&E, achieving the CPT program's expected 2 million tons can be accomplished with roughly 3,000 to 14,000 acres of reforestation projects. One of the CCAR witnesses, Sam Hitz, testified that "the Registry currently has two forestry members ... both of which have signaled their interest in undertaking projects and certifying reductions with the Registry." PG&E states that one of those members, the Van Eck Foundation, has already "expressed a direct interest in trying to provide certified reductions into the CPT program." Hitz also indicated there has been significant interest outside
these two members, and that multiple studies have been done demonstrating the potential for forest sector projects to work out economically in California, at projected CPT funding levels.44
PG&E is new to this endeavor, however, and we are not certain that it will achieve success if focused solely on the forestry sector. We will examine PG&E's annual reporting for an indication of how this focus is working, and expect candor from PG&E if it is encountering a lack of contracting opportunities or other obstacles. However, we agree with PG&E and other parties that conserving forests has positive environmental benefits beyond GHG emissions reductions, in the areas of water quality, habitat conservation, and prevention of stream erosion. Thus, we accept forestry as the first focus of PG&E's CPT project.
As discussed above, a portion of the administrative expenses for the CPT will go to development of new, non-forestry protocols by the CCAR. These protocols will enable PG&E to mitigate the risks involved with limiting its purchase of offsets to a single source. As these protocols are developed, we expect PG&E to expand its portfolio of projects.
AECA is particularly interested in having PG&E expand its program to include manure management programs. PG&E's application states that future projects for the CPT could include "processes to capture methane released from cow manure at dairies."45 After hearings, PG&E stated that "PG&E and AECA now agree that 'manure management' methane projects should be eligible to apply for CPT funding."46
TURN has concerns about the potential for double counting the value of biogas (manure) electricity generation if the same environmental attributes are being sold to two distinct buyers. TURN notes that under the Commission's Renewables Portfolio Standard (RPS) program, a biogas seller that sells its output to a buyer also transfers avoided methane emissions to that buyer.47 Thus, TURN claims that it is unclear whether any emissions reductions would be available to a second buyer, such as PG&E, that wanted to contract for a methane project. PG&E states in reply that TURN misinterprets the relevant RPS decision.
We agree with PG&E and AECA that reducing methane output provides significant environmental benefits. Methane is 23 times more potent a GHG than CO2, and thus methane projects are potentially very cost-effective on a per ton CO2 equivalent bases, because reducing one unit of methane is equivalent to reducing 23 units of CO2.
However, it is not clear based on the language both parties cite in the RPS decision, Decision 04-06-014, whether or not there is potential for double counting of emissions reductions if PG&E enters into contracts with methane producers that are also selling methane as part of the RPS program. We will not categorically preclude methane projects from consideration as part of the CPT, because there may be a way to make such projects work without double counting. The concerns parties have raised about potential double-counting are not unique to manure management, but pervade the design of offset projects, although they manifest themselves in different ways for different types of projects. Indeed the "additionality" principle, which is a bedrock principle in the design of the CCAR protocols that PG&E intends to use as the basis for certifying projects, is specifically aimed at preventing any form of double-counting of emissions reductions.
We will require that any additional type of project PG&E funds under the CPT - including methane projects - guarantee "additionality." PG&E to enter into contracts for projects other than forestry projects only as protocols are developed and approved for that class of projects by CCAR or some other appropriate entity, as discussed in the previous section. As approved protocols become available --for methane and other types of projects-- PG&E may by advice letter seek blanket permission to enter into contracts for that class of projects. In its advice letter filing PG&E shall document that any new protocol provides rigorous safeguards to assure that projects undertaken under it shall be "additional" and pose no double counting problem. We delegate to the Energy Division authority to issue a resolution addressing PG&E's advice letter.
44 PG&E opening brief at 57-58 (citations omitted).
45 Application at 5.
46 PG&E opening brief at 22.
47 D.04-06-014, Appendix A, page 2.
