The Market Value of Carbon Offsets

On the same day as a historic stock market collapse, we get news of a successful auction of the right to emit carbon dioxide. The Regional Greenhouse Gas Initiative (RGGI, or "Reggie") announced that last week's sealed-bid auction sold all the available CO2 emissions allowances for $3.07 per ton; this was the first chance for power plants in the ten Northeast states that participate in RGGI to buy allowances. RGGI becomes mandatory in 2009, and there will be thirteen more auctions before the first real accounting in early 2012.

This auction is also historic; although Europeans have been trading CO2 in a massive mandatory market for several years, those allowances were initially given away. RGGI only covers power plants and seeks to merely cut emissions 10% below current levels by 2019, but it can now claim the world's first CO2 auction.

Voluntary CO2 markets have existed in the United States for several years. The Chicago Climate Exchange set up a trading mechanism for greenhouse-gas reductions, but it has been buffetted by the inability of the federal government to make any progress on climate change legislation. Instead, regional organizations like RGGI and the California-led Western Climate Initiative have taken the lead, causing uncertainty over standards. Each region plans to regulate different industries and emissions, measure by varying methodogies, and reach independent goals. Meanwhile, some leaders continue to call for a carbon tax instead of a market for emissions.

At Farm Power, we will be reducing methane emissions from manure storage. Methane has at least 21 times the climate-changing power of carbon dioxide, so our reductions will be significant. We spent quite a bit of time last year exploring a sale of our reductions into the RGGI market, which allows power plants to buy a small percentage of offsets from projects like ours rather than buying allowances at auction. However, the RGGI offset system had yet to fully mature; we now expect to sell into the voluntary market for quite a few years until the alternatives become clear.

For today, we congratulate RGGI for pulling off its auction. The price stayed above the minimum, and now speculators have a new currency to trade in--a toast to the free market!

Bainbridge Graduate Institute Sends out Fifth Class, Welcomes Seventh

I received my MBA from Bainbridge Graduate Institute (BGI) in June 2007, when we were already well into the development of Farm Power. I visited regularly during the next year but didn't make it to graduation this June; fortunately, BGI just put out a newsletter with stories about the event which sent the fifth class out into the world.

This month, a seventh cohort of "change agents" is beginning its sustainable business education journey; the orientations have ended and the first round of classes takes place this week. BGI welcomes its largest class ever, and the excitement is contagious--as graduation speaker Van Jones said, the world is waiting for the students and their ideas.

And the media coverage update: the BGI newsletter included an article called "From Poop to Power", but more eyes probably saw an article on our grant in the Capital Press. This is just one more illustration of the different worlds Farm Power lives in; it is difficult to imagine two groups of readers more different than those who get the "The Circle" from BGI and those who read the west's weekly agricultural newspaper, but we love them both!

She's our state senator!

Most farmers in Skagit County call themselves Republicans. A mix of business and social issues make them at home in the GOP, and their fields often host campaign signs for Dino Rossi and other Republican candidates. However, several of these same fields also host large signs for State Senator Mary Margaret Haugen (D-10th), a longtime supporter of agriculture. Skagit County farmers are not stupid; they know that having a powerful friend in the Legislature trumps party ideology.

A conservative political action committee has targeted Mary Margaret with a TV attack ad on the standard script--"Democrats spend lots of money". If these tactics succeed in propelling political newcomer Linda Haddon into the Legislature, the 10th district will suffer a huge loss. Why? I'll let the Haugen campaign explain with its "respected and effective" advertisement, found on YouTube here. In the first seconds, you can see Mary Margaret walking with the farmers who will be hosting our digester.

Our state senator was the primary sponsor of almost one hundred bills during this last legislative session; several of these aided agriculture, while others addressed issues important to a wide range of 10th district voters. As the chair of the Transportation Committee and a senior member of the Democratic party which controls (and will continue to control) the Legislature, Mary Margaret can get things done. People of both parties in Skagit County appreciate her effectiveness.

The best money the federal government spends

Most grants--both private and federal--fund studies, program development, and similar activities. However, the U.S. Department of Agriculture has a Renewable Energy and Energy Efficiency program that awards grants for actually installing green power systems or high-efficiency retrofits. The program originally awarded $23 million in grants annually; more recently, some of the money has been shifted to funding loan guarantees. Midwestern states have aggressively pursued this USDA funding, and it has enabled the construction of dozens of anaerobic digesters.

From the beginning, we planned to make a renewable energy grant a part of our funding package. We applied for the maximum grant--along with two loan guarantees--in June and settled in to wait for the USDA to its work. In most years the results came out in September, but things moved more quickly this year--awards were announced on August 27, and Farm Power received its full $500,000!

We were the only Washington recipient--actually, the first award to the state since 2005--so our Congressional delegation was happy to hear that their letters of support helped; Congressman Larsen's office put out a press release. Now if Congress would just pass an extension to the Renewable Energy Production Tax Credit.... The Skagit Valley Herald ran another little story and various supporters celebrated; we actually got the news during a day-long series of meetings in Whatcom County, so we were too tired to do much! I guess we'll just celebrate in a couple months when we're actually building.