Carbon credits

In 2019 the South African government put in place a carbon tax bill. This implements a taxation on greenhouse gas emitters and is based on the mass of carbon dioxide equivalents (CO2e) released to atmosphere. However, this bill also allows for negative emitters of greenhouse gases to create carbon tax offsets, also known as a carbon credit. A negative emitter can sell carbon credits to a tax paying emitter and in that way reduce the emitters reduces emissions tax that would have had to be paid. The current marginal carbon tax rate is at R127 per tonne of carbon dioxide. However, depending on the industry, an emitter can qualify for various tax rebates to lower the effective tax rate incurred. The function of the rebates is largely to allow companies a period to invest in emissions reduction technology whereafter these rebates will reconsidered after 2022 (National Treasury of South Africa, 2019).

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An example of negative emissions is renewable energy. The emission is considered negative as it reduces reliance on fossil fuels and thus reduces the amount of carbon dioxide equivalents that would have been emitted. A form of renewable energy is burning biogas in combined heat and power generation. The selling of carbon credits produced from a renewable energy source must comply with the following:

• be from the production of less than 15MW.

• if generation exceeds 15MW then the sale of power must be less than R1.09kWh.

Diverting degradable organic waste from landfill also creates negative emissions which would have otherwise decomposed to methane. An example of diverting organics from landfill is sending sludge to a regional anaerobic digestion facility. Methane created from these organics is thus no longer is released to atmosphere. For this study it is assumed all methane produced from anaerobic digestion is captured and used for heat and power generation. The CO2 portion in the emissions from combustion of the recovered gas i.e. CO2 in the biogas prior to combustion are not considered significant, as the CO2 emissions are of biogenic origin (IPCC, 2006).

A carbon credit is equivalent to one tonne of carbon dioxide not emitted. Once credits are earned, they can be traded both locally and internationally. AS mentioned previously, the current value of carbon tax is R127 per tonne of carbon dioxide equivalent (CO2e). Carbon credits are expected to trade at around 15% below the tax rate which prices carbon credits at R108 per CO2e (Engineering News, 2020).

If the carbon credit creator is a carbon taxpayer then the credits are effectively used internally by that taxpayer to offset their own reductions and reduce their own emissions tax. It cannot be sold to another taxpayer, as this would then result in double accounting of the benefit.

The act mentions that initially most industries will receive up to a 90% rebate. This means that 90% of their emissions will not be taxed, but the balance will still be taxed at the marginal tax rate. There are numerous industries which will need to pay tax, and as long as the purchase price of carbon credits is lower than the marginal tax rate then there will be a market for companies to benefit from buying carbon credits. Emissions producers both locally and internationally can buy carbon credits from a South African project e.g. petroleum refining, steel and iron processing, food and beverage manufacturing, amongst others (as shown in the act).

Before a value can be applied to the carbon credits generated from biogas beneficiation any methane produced first needs to be converted to CO2e. This is done by applying a Global Warming Potential (GWP) factor. Annexure 1 of the Carbon Tax Act gives the methane GWP as 23 i.e. 1kg of CH4 is equivalent to 23kg of CO2, essentially implying methane is 23 times more significant as a greenhouse gas than carbon dioxide.

When considering methane production in landfill the methane passes through an aerated layer and as a result a small fraction of up to 10% is oxidised to carbon dioxide (Towprayoon et al., 2019). As this is a comparison to landfill this is taken into account in determining the net benefit of diverting sludge from degradation in landfill. The following formula will be used to calculate the CO2e that is a result of sludge no longer decomposing in landfill ( and preventing the release of methane to the atmosphere):

Page 60 of 165 𝐶𝑂₂𝑒_𝑚 =(𝐺𝑊𝑃_𝐶𝐻4⋅ (1 − 𝑂𝑋) ⋅ 𝜌_𝐶𝐻4)

1000 ⋅ ∫ 𝑄_𝐶𝐻4⋅ 𝑑𝑡

𝑡_𝑒𝑛𝑑 𝑡_{𝑠𝑡𝑎𝑟𝑡}

tonCO2e/annum (3-20) Where,

• CO2em is the carbon equivalent negative emissions in ton/annum from no longer releasing methane form landfill

• GWPCH4 is the Global Warming Potential for methane which is 23

• OX is the oxidation factor for methane oxidised to carbon dioxide that would have occurred in the aerated layers of the landfill, given as 0.1 by the IPCC.

• QCH4 is the flow of methane produced in Nm³/d

• ρCH4 is the density of methane, kg/Nm³

𝜌_𝐶𝐻4 = 𝑀𝑀_𝐶𝐻4 ⋅ 𝑝 𝑅 ⋅ 𝑇 ⋅ 1000 Where,

• MMCH4 is the molar mass of methane, 16g/gmol

• p is pressure under normal conditions, 101 325 Pa

• R is the ideal gas constant, 8.314J.mol^-1.K^-1

• T is temperature in degrees Kelvin

Various assumptions are made in the estimation of carbon credits.

• This study will ignore the CO2 in the biogas which would be the same whether the sludge is decomposed in landfill or if it was subject to treatment in the regional facility.

• Transport for the is the same in both cases as the extra sludge from surrounding WWTW’s that would have been diverted from landfill needs to be transported to the regional facility. Therefore, the emissions due to transport will be assumed to cancel out in each case.

• The remaining organic fraction of sludge not treated by anaerobic digestion i.e. the unbiodegradable organics and the residual biodegradable organics would eventually decompose in landfill whether they remained as part of the digested sludge or had gone to landfill in the first place, and thus are not considered in this comparison.

The CO2e is also recovered from using renewable energy to create power and reduces the carbon emissions incurred by local power utility, Eskom, in power generation. However, the combustion of methane still creates carbon emissions which must be accounted for and is subtracted from the benefit, as shown in the second term below:

𝐶𝑂₂𝑒_𝑝= 𝑃_{𝑒𝑙𝑒𝑐}⋅ 𝐸𝐹

1000− 𝑄_𝐶𝐻4⋅ 𝜌_𝐶𝐻4⋅ 𝐶 ⋅ 365 kg/annum (3-21) Where,

• CO2ep is the carbon credits in ton/annum saved from the generation of power using renewable energy, equivalent to the CO2e that would be emitted from coal fired power generation

• QCH4 is the methane flow combusted in CHP, Nm³/d

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• C is the stoichiometric mass ratio for the mass of CO2 formed per mass of CH4

combusted, which is 2.75

• EF is the missions factor as given by Eskom (2020) as 1.04kgCO2e/kWh

• Pelec is the electrical power produced from combustion of biogas in CHP engines, kWh/annum, given by:

𝑃_{𝑒𝑙𝑒𝑐} = 𝐿𝐻𝑉 ⋅ (𝜀_{𝑒𝑙𝑒𝑐}) ⋅1000 ⋅ 365

3600 ⋅ ∫ 𝑄_𝐶𝐻4 𝑑𝑡

𝑡_𝑒𝑛𝑑

𝑡_{𝑠𝑡𝑎𝑟𝑡}

kg/annum (3-22)

Where,

• QCH4 = methane production, Nm³/d

• εelec = electrical energy recovery factor for CHP of 40%, as presented in Table 3-1

• LHV = lower heating value of methane of form 8.026x10⁸J/kmol taken from Perry (2008) is converted to 33.4 MJ/Nm³ using the ideal gas law by equation (3-4):