Category: Insights

National Petroleum Council Report Highlights Hydrogen’s Critical Role

National Petroleum Council Report Highlights Hydrogen’s Critical Role

By Tanya Peacock, EcoEngineers

As part of a diverse group of experts who participated in the study that provided the data for the National Petroleum Council (NPC) hydrogen report, I’ve gained a few insights and opinions on the report’s findings and what will be required to ensure clean hydrogen emerges as a promising pathway toward decarbonization.

Clean hydrogen emerges as a key player among the myriad technologies vying for attention in the quest to achieve net-zero emissions by 2050. However, the clean hydrogen industry will need additional economic and policy incentives if it is to grow supply and demand to help reach this goal, according to the NPC report, titled “Harnessing Hydrogen: A Key Element of the U.S. Energy Future.”

The NPC assembled a team of more than 200 experts from more than 100 organizations, 70% of whom come from outside of the oil and gas industry, including myself. The study was conducted in partnership with the Massachusetts Institute of Technology (MIT) Energy Initiative and leveraged scenario-based modeling. The study generated unique insights due to the diverse perspectives of the study participants, many of whom, like me, have practical experience with clean energy project development.

Report’s Top Findings

The NPC report includes 19 findings and 23 recommendations that, if acted upon, would help drive the deployment of low carbon intensity (LCI) hydrogen at scale through the entire value chain, including production, storage, liquefaction, transportation, and end uses. The top finding is the need for an economy-wide explicit price on carbon.

READ MORE: Summary of the Production of Clean Hydrogen Credits Under Section 45V of the Internal Revenue Code

The second and third findings are a national low-carbon-intensity industry standard and a national low-carbon-intensity transportation standard. The diversity of organizations – from oil and gas to environmental non-profits – that came together to agree on these recommendations for putting a price on embedded carbon was both surprising and inspiring, and a marked difference from the Low Carbon Fuel Standard (LCFS) implementation process in the late 2000s and early 2010s. “Harnessing Hydrogen” shows our evolving understanding of the need for market-based programs to support carbon reductions and economic prosperity in a carbon-constrained world.

Increased Policy Support Needed to Scale Clean Hydrogen

Central to the NPC report’s findings is how important it is to secure additional federal support to reach levels required to achieve net-zero U.S. carbon emissions by 2050. Current federal policies, including the IRA Section 45V clean hydrogen tax credit under the Inflation Reduction Act (IRA) and hydrogen hubs funded by the 2021 Bipartisan Infrastructure Law, would roughly double annual hydrogen production and demand by 2050 from about 11 million metric tonnes per year in 2021, according to the NPC report.

–National Petroleum Council, “Harnessing Hydrogen: A Key Element of the U.S. Energy Future”

While the NPC report finds that low-carbon intensity (LCI) hydrogen could abate about 8% of U.S. carbon emissions by 2050 at a lower cost than non-hydrogen alternatives, it’s obvious that significant and immediate actions beyond current policies are needed. To achieve this goal, clean hydrogen demand would need to increase sevenfold from 2021 levels to 75 million metric tons per year to enable a cost-effective path to net zero in the U.S. by 2050.

To spur production-side incentives of LCI hydrogen, the NPC recommends Congress adjust the IRA Section 45V clean hydrogen tax credits by extending the credit-claiming period to 20 years to match the incentive more closely with asset life cycles and advocates for greater utilization of Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model capabilities, including co-product allocation and the use of verifiable values for life-cycle analysis (LCA). The NPC, however, did not weigh in on IRA Section 45V’s contentious method to account for the emissions of hydrogen made from grid electricity.

Shrinking the Cost Gap of Clean Hydrogen

To reach net-zero carbon emissions by 2050, delivering LCI hydrogen at scale will require an evolving split between hydrogen from two key production pathways: fossil natural gas reformed hydrogen—or “blue” hydrogen—with carbon capture and storage (CCS) and renewable electrolytic hydrogen—or “green” hydrogen.

A cumulative capital investment of US$1.8 trillion will be needed to scale green hydrogen between now and 2050. To put this into perspective, green hydrogen production would require installed electrolyzer capacity to grow at a compound annual growth rate of 27% over the next 25 years.

–National Petroleum Council, “Harnessing Hydrogen: A Key Element of the U.S. Energy Future”

“While the required investment and growth rate to reach net zero supported by LCI hydrogen is formidable, it is comparable to the North American capital investment in upstream oil and gas ($1.9 trillion) and solar installation (30% compound annual growth rate) in the last decade,” states the NPC report.

Meanwhile, blue hydrogen coupled with carbon capture will require $100 billion in investments between now and 2050 to accomplish the same.

LCI hydrogen production will initially be driven by natural gas with CCS due to lower-cost feedstock availability and the ability to rapidly scale production, according to the NPC report, as it can provide the initial large-scale production needed to support dependable LCI hydrogen supply to new and existing end users, thus helping establish the LCI hydrogen economy.

READ MORE: The U.S. Department of Energy’s H2Hubs Program: Accelerating the Clean Hydrogen Economy

To achieve net zero by 2050, the CI of the LCI hydrogen production mix will need to experience continued reductions over time. “As the U.S. economy moves toward net zero, the marginal cost of abatement will rise,” according to the NPC report. “Ultimately, the production mix in the [net-zero 2050] scenario will have a higher proportion of [green hydrogen] due to its lower carbon emissions, the projected higher future cost of carbon, and anticipated cost reductions for green hydrogen.”

–National Petroleum Council, “Harnessing Hydrogen: A Key Element of the U.S. Energy Future”

In summary, the NPC report underscores the necessity for substantial policy interventions and investment to scale LCI hydrogen and achieve net-zero carbon emissions by 2050. Stakeholders across a multitude of industries must collaborate to implement the report’s recommendations, such as adjusting the IRA Section 45V clean hydrogen tax credit and increasing federal support for LCI hydrogen production technologies. Now is the time for decisive action to build a robust clean hydrogen economy that can meet our ambitious climate goals.

For more information on the NPC’s findings in the report or Eco’s hydrogen services, please contact:

Tanya Peacock, Managing Director, California and Hydrogen | tpeacock@ecoengineers.us

Prepare for CBAM Compliance

The following is an article originally published May 24, 2024, by Steel Times International.

Prepare for CBAM Compliance

The European Union’s (EU) Clean Border Adjustment Mechanism (CBAM) is a landmark regulatory framework aimed at curbing emissions embedded in imported goods, including steel. By 2026, it will require steel importers to fully measure, report, and pay for these greenhouse gas (GHG) emissions, aligning imported goods with the stringency of the EU’s climate policies.

By Urszula Szalkowska

In anticipation of CBAM’s full implementation, the first reporting phase has already commenced, with a grace period allowing the use of default emission values until June 2024. Nevertheless, steel producers are urged to prepare for more rigorous emissions reporting in compliance with EU methodology to maintain competitiveness in the EU market. From 2026 onward, importers must procure CBAM certificates at prices reflecting the EU Emissions Trading System (ETS), further incentivizing accurate emissions declarations.

Non-EU Importers Held to Standard

CBAM’s inception is a strategic move to address carbon emissions by ensuring that non-EU manufacturers are held to similar GHG-reduction standards as those within the EU. It attempts to level the playing field between domestic and foreign producers and reinforces the EU’s commitment to becoming a carbon-neutral continent by 2050. This mechanism marks a shift from negotiated international environmental regulations towards the EU leveraging its market power to project its climate policies globally. As such, it signifies the maturing and globalization of carbon markets, requiring producers worldwide to adapt to these comprehensive standards.

Prepare Now for EU Methodology

Currently, importers can use the EU calculation methodology or emissions calculations accepted in countries of origin or default values listed by the European Commission to report embedded emissions. Based on CBAM reports received in January 2024, most importers used the last easiest option, i.e., default values. However, as mentioned previously, this type of reporting will no longer be accepted after June 2024.

After a transition period in 2025, the EU calculation methodology and its emissions factors will be required for CBAM reporting in 2026. This means that importers and producers should be already preparing for actual life cycle GHG emissions reporting following the EU  methodology to remain competitive in the European market.

Additionally, importers in 2026 will be required to purchase CBAM certificates corresponding to the declared emissions. The price of CBAM certificates will be based on the weekly average price of the EU ETS allowance and expressed in EUR/tonne of CO2 emitted. An independent accredited verifier will need to verify the declaration’s accuracy. Each year, by 31 May, starting in 2026, declarants will surrender CBAM certificates equivalent to their declared and verified embedded emissions. CBAM certificates will not be tradable, but they can be re-purchased by a regulator that issued them.

READ MORE: Navigating the European Biomethane Market

New importers of iron and steel can register at any time they decide to bring goods covered by CBAM to the EU market. Depending on when they become importers, they need to follow the rules applicable in this specific period. For example, until the end of 2025, they need to follow transitional rules; starting in 2026, they must follow full compliance rules.

Importers can claim emissions reductions if a carbon price was paid in the country of origin and deduct this price from the CBAM cost. Details on how the EU will incorporate foreign climate policies into CBAM calculations will be finalized before a definitive rule is entered into force. The European Commission claims that it will consider the position of its international partners. In the meantime, some countries are already deliberating how to accommodate CBAM. For example, China is contemplating including CBAM sectors in its own cap-and-trade scheme, and India is discussing a CO2 tax.

READ MORE: Join Us: Life-Cycle Analysis Academy

As the CBAM enters into force, foreign companies must navigate the complexity of the system and its timeline to ensure compliance. Understanding these key requirements and the depth of the regulation is crucial for exporters looking to participate in the European markets.

Urszula Szalkowska
Urszula Szalkowska

For more information: 

For more information about CBAM or other EU climate policies and programs, please contact Urszula Szalkowska at uszalkowska@ecoengineers.us.

Urszula Szalkowska is based in Poland and is the managing director, Europe for EcoEngineers.

U.S. Treasury, IRS Release Additional Guidance on Section 40B Sustainable Aviation Fuel (SAF) Credits and Modified GREET Modeling

U.S. Treasury, IRS Release Additional Guidance on Section 40B Sustainable Aviation Fuel (SAF) Credits and Modified GREET Modeling

On April 30, 2024, the Department of the Treasury (Treasury Department) and the Internal Revenue Service (IRS) published a third piece of guidance regarding the sustainable aviation fuel (SAF) credits implemented under Section 40B of the Inflation Reduction Act of 2022 (IRA) and 6426(k) of the Internal Revenue Code (IRC). The following information contains highlights of this notice. Producers will find guidance concerning SAF credits, life-cycle analysis, verification requirements, and emissions reductions safe harbor.

Highlights

  • The IRS/Treasury guidance also announced the release of the new 40BSAF-GREET 2024 model to be used in calculating greenhouse gas (GHG) emissions for the hydroprocessed esters and fatty acids (HEFA production pathway) and alcohol-to-jet (ATJ-ethanol pathway).
  • An additional emissions reduction opportunity is included when using corn or soybeans as part of the U.S. Department of Agriculture (USDA) Climate Smart Agriculture Pilot Program (USDA CSA Pilot Program).
  • The modified GREET will only apply to the Section 40B SAF blending credit, which expires at the end of 2024.
  • Use of the modified GREET model for Section 40B will require third-party certification and compliance.
  • Renewable energy certificates (RECs) will be eligible, as well as credits for carbon capture and sequestration (CCS).

Full Summary

The U.S. Treasury Department and IRS notice issued on April 30, 2024, regarding the SAF credits implemented under Section 40B and 6426(k) of the Internal Revenue Code (IRC) includes the release of the new 40BSAF-GREET 2024 model to be used in calculating greenhouse gas (GHG) emissions, as well as an additional emissions reduction opportunity when using corn or soybeans as part of the U.S. Department of Agriculture (USDA) Climate Smart Agriculture Pilot Program (USDA CSA Pilot Program).

The modified GREET will only apply to the Section 40B SAF blending credit, which expires at the end of 2024. It is uncertain whether this model will remain the same or be updated for use with the Section 45Z tax credit, which goes into effect starting January 1, 2025, until the end of 2027.

READ MORE: U.S. Treasury and IRS Release Guidance on Section 40B Sustainable Aviation Fuel (SAF) Credits

The new 40BSAF-GREET 2024 model calculates emissions from two production pathways: hydroprocessed esters and fatty acids (HEFA production pathway) and alcohol-to-jet (ATJ-ethanol pathway). Per the regulation in IRC Section 40B, the use of the model will require third-party certification of compliance. Certification from a California Low Carbon Fuel Standard (CA-LCFS) verifier will be considered as meeting requirements if the certification is obtained in a form similar to an LCFS Verification Statement. If the producer uses CSA feedstock (described below), a different certification format will be used. EcoEngineers’ expert Life Cycle Analysis (LCA) team is doing a deep dive into the new 40BSAF-GREET 2024 model. Upon the first review of the User Manual, it appears renewable energy certificates (RECs) will be eligible, as well as credits for carbon capture and sequestration (CCS).

Corn used in an ATJ-ethanol pathway that is part of the USDA CSA Pilot Program is eligible for a 10-point reduction in the life-cycle emissions value, while soybeans used in the HEFA pathway are eligible for a five-point reduction. For corn production to qualify under CSA, the farm must use the practices of no-till, enhanced low-carbon fertilizer, and cover crops. CSA soybean producers must only use no-till farming and plant cover crops. The entire field must be subject to these practices and the feedstock must be grown in the United States (U.S.). Farmers must obtain a Certificate for Climate Smart Agriculture Crops.

READ MORE: Life-Cycle Analysis – The Praxis of Carbon Accounting

SAF producers using CSA feedstock must have a direct contract with a farmer, collect and maintain the Certificate for Climate Smart Agriculture Crops from the farmer, maintain records as described in Appendix A of the notice, and allow all records to be available for certification. Certification requires the auditing of supply chain records and a complete mass balance sheet verifying the traceability of crops to the SAF producer.

Applicants with pending applications for the credit who would like to instead claim credits using the new methodology may contact the IRS to do so.

A link to the notice can be found here.

Our team is ready to assist you with addressing your regulatory, LCA, and/or auditing/verification needs, and to be a resource for you in answering questions to successfully comply and monetize credits under this new guidance.

For more information about our regulatory, LCA, or auditing/verification services as they pertain to the latest IRS and U.S. Treasury Section 40B SAF guidance, please contact clientservices@ecoengineers.us.

Summary of California Low Carbon Fuel Standard Workshop – April 2024

Summary of California Low Carbon Fuel Standard Workshop – April 2024

The California Air Resources Board (CARB) held a workshop on April 10, 2024, addressing the proposed regulatory amendments to the California Low Carbon Fuel Standard (LCFS) program. This workshop discussed potential revisions to the rule, as well as sought additional feedback and comments from stakeholders. EcoEngineers is providing the following summary to highlight potential changes and areas of re-evaluation from the initial proposal.

A link to the presentation and supplemental documentation referred to can be found at: LCFS Meetings and Workshops | California Air Resources Board.

For more information, please contact Lisa Hanke at lhanke@ecoengineers.us.

Updated Modeling

CARB proposed four new step-down scenarios under consideration for the final rule. In creation of the new scenarios, CARB has updated the modeling to reflect:

  • Increased tailpipe emissions factors for methane (CH4) and nitrous oxide (N2O) affecting renewable diesel, biodiesel, and ultra-low sulfur diesel (ULSD);
  • Increased supply assumptions for renewable diesel from virgin oils and waste oils;
  • Energy demand from plug-in hybrid electric vehicles (PHEVs) and medium-duty vehicles (MDVs).

The first three of the new scenarios being analyzed reflect step-downs at 5%, 7%, and 9%. All three of the scenarios result in a 30% carbon intensity (CI) reduction by 2030 and a 90% CI reduction by 2045. The fourth scenario being analyzed is a 5% step-down in 2025 with the auto-acceleration mechanism triggered twice. This results in a 39% CI reduction by 2030 and 90% CI reduction in 2043. EcoEngineers had recommended a steeper step-down rate in the company’s written comments to CARB, and several commenters in attendance also supported a steeper step-down, many with preference for 9%.

The following chart from compares the modeled scenarios:

 
Source: CARB, LCFS Workshop Slide #47



Feedback was requested from CARB to determine the appropriate scenario to implement. Specific feedback requested is shown in the following:


Source: CARB, LCFS Workshop Slide #49

Sustainability Criteria

In addition to the originally proposed regulation, CARB is evaluating an increase in LUC values for high-risk feedstocks and methods to increase traceability, verification, and/or enforcement of waste feedstock. LUC changes may be based on empirical sub-national data, such as remote sensing or satellite monitoring. CARB requested feedback for potential data sources.

Additionally, CARB indicated several times throughout the workshop that they are interested in obtaining feedback for how the proposed sustainability certification should be implemented. Originally proposed regulations were based on existing certification programs, for example, International Sustainability and Carbon Certification (ISCC).

MDV/HDV Infrastructure

Though not a focus of the staff’s presentation, many commenters spoke with concern for the MDV/HDV infrastructure crediting regulations. Specifically, regulations regarding the number of eligible chargers at a specific site, which must be less than 10 under the current proposal, is too low, and geographic siting is a major hinderance. CARB expressed openness to obtaining feedback and updating the rules.

Timeline

The timeline for the implementation of the LCFS amendments was provided and is demonstrated below.


Source: CARB, LCFS Workshop Slide #67

Three Priority Takeaways from the USEPA’s RFS Set Rule Implementation Webinar – April 2024

Three Priority Takeaways from the USEPA’s RFS Set Rule Implementation Webinar – April 2024

The U.S. Environmental Protection Agency (USEPA) hosted a webinar on April 12, 2024, that served to further clarify the Biogas Regulatory Reform Rule (BRRR) provisions of the Renewable Fuel Standard (RFS) program. EcoEngineers submitted many questions on behalf of our clients for this presentation, and a number of employees attended in the live event.

Documentation from the USEPA’s webinar can be found here: USEPA RFS Set Rule Webinars.

Overall, our experts have highlighted three priority takeaways for biogas and renewable natural gas (RNG) producers from the webinar:

  1. The USEPA reinforced the implementation process and timeline for the BRRR over the next six to eight months. The USEPA will work to re-register existing RNG facilities between July and October. All facilities must be compliant with the new rules by January 1, 2025.
  2. Eco believes that most existing facilities will need to submit an Alternative Measurement Protocol (AMP) with their registration. The AMP will demonstrate how the facility is measuring and metering the gas flows to provide the necessary data within the regulation if all meters do not meet the published specifications per 40 CFR 80.155. Facilities should start drafting these plans now to be submitted with their registration packages.
  3. Facilities will need to provide information in their RIN generation protocols outlining data substitution methodologies in the event data is not collected from an out-of-service or failed piece of metering equipment which often occurs at some point in a facility’s operation. Biogas and RNG producers should begin work on these plans and understand how they may affect other programs they participate in like CA-LCFS and others.

EcoEngineers is following these RFS developments throughout the year, and we are here to help you understand the regulations through the education, engagement, and compliance services we offer.

For more information please contact clientservices@ecoengineers.us.

Navigating the European Biomethane Market

Navigating the European Biomethane Market

The European Commission’s (EC’s) recent implementation of the Union Database (UDB) represents a significant development in facilitating the traceability of renewable fuels in the European Union (EU) Member States (MS). While currently operational for liquid biofuels, the UDB is set to encompass gaseous renewable fuels such as biomethane by November 21, 2024, aligning with the Renewable Energy Directive III (RED). Since the need to satisfy renewable energy quotas drives a large part of the incremental value of these molecules compared to existing fossil fuel products, this change is relevant to all suppliers of biomethane to the EU market, potentially impacting the commercial feasibility of projects currently under development. 

Once the UDB opens for gaseous renewable fuels, certification of biomethane from third countries’ grid will only be possible if the foreign grid meets the conditions described in Article 31a of the RED and the implementing regulation. The foreign grid must ensure full traceability of the biomethane injected and withdrawn from the grid in a mass balance system. In particular, information on sustainability and any support provided for the production of a specific consignment of fuel will have to be recorded in the UDB. 

 Our Services: 

  • Regulatory Engagement 
  • Compliance Management 
  • Emissions Data Collection and Organization 
  • Life-Cycle Analysis (LCA) 
  • Cost-Benefit Analysis 
  • Investment Due Diligence 
  • Independent Third-Party Verification and Validation 
  • GHG Inventory and Accounting 
  • EcoUniversity Training 

Based on the RED and EC’s guidelines, the U.S. grid is not compliant with the European definition of interconnected infrastructure and is not considered a single mass balance system and therefore is not part of the UDB system. The limiting factor in the U.S. is the lack of a federal database to track the sustainability, production, transfer of title, and retirement of the environmental attributes of biomethane. 

Recent developments around the UDB present serious challenges for the trade of biomethane between the U.S. and the EU and carry significant repercussions that can jeopardize access of the U.S. biomethane to the EU. There are currently several working groups within the U.S. reviewing alternatives to comply with EU regulations. Whether it is amending the U.S. Environmental Protection Agency (USEPA) Moderated Tracking System (EMTS) to track non-transportation biomethane and include the functionality to capture the emission reduction benefits or utilizing the Midwest Renewable Energy Tracking System (M-RETS®), a registry platform that tracks voluntary biomethane in the U.S., many industry participants feel there is a solution to meeting the EU requirements. 

EcoEngineers is your strategic partner in navigating this intricate regulatory landscape, advising you on proactive essential measures to access European market. We bring expertise in both the U.S. and EU regulatory and market developments to help U.S. biomethane suppliers streamline compliance efforts and ensure market integration and business growth on both sides of Atlantic. We also developed an in-depth educational program on the EU’s renewable energy and cap-and-trade systems to help our clients position themselves in the expanding European biomethane market and make strategic business decisions. 

About EcoEngineers 

EcoEngineers is a consulting, auditing, and advisory firm with an exclusive focus on the energy transition. From innovation to impact, we help you navigate the disruption caused by carbon emissions and climate change. We help you stay informed, measure emissions, make investment decisions, maintain compliance, and manage data through the lens of carbon accounting. Our team of engineers, scientists, auditors, consultants, and researchers live and work at the intersection of low-carbon fuel policy, innovative technologies, and the carbon marketplace. Eco was established in 2009 to steer low-carbon fuel producers through the complexities of emerging energy regulations in the United States. Today, our global team is shaping the response to climate change by advising businesses across the energy transition. Together, we can create a world where clean energy fuels a healthy planet.

EcoEngineers is accredited by ANSI National Accreditation Board (ANAB) as a greenhouse gas (GHG) verification body in accordance with ISO standards ISO/IEC 17029:2019, ISO 14065:2020, and ISO 14064-3:2019. 

 

Urszula Szalkowska

For more information, please contact: 

Urszula Szalkowska, Managing Director, Europe | uszalkowska@ecoengineers.us 

Q&A from our Introduction to Midwest Energy Tracking System (M-RETS) Webinar

We answer questions from our most recent M-RETS webinar

With market uncertainty on the rise, many renewable natural gas (RNG) players are looking to diversify their credit pools. This EcoEngineers webinar aired for the public on March 5, 2024. It introduced an audience of more than 250 attendees to the Midwest Renewable Energy Tracking System (M-RETS) and its third-party verification process. Our experts examined the similarities and differences between audits under M-RETS, the California Low Carbon Fuel Standard (LCFS), and the U.S. Renewable Fuel Standard (RFS).

Current and prospective renewable thermal certificate (RTC) generators received new insight into the process from one of the industry’s top verification bodies and learned how it could apply to their businesses. This comparative approach guided generators through the process by using familiar programs to build their understanding in an easy-to-digest manner.

The presenters on this webinar were:

Due to time constraints, many questions went unanswered during the presentation, and we wanted to make sure we addressed them. Keep in mind without proper due diligence and knowledge gathering required to answer specific projects, we are speaking mostly in industry generalities. Watch the full webinar here.

Q: Are there any accreditation requirements for the Professional Engineer (P.E.) certifying the production, such as accreditation by the ANSI National Accreditation Board?

A: In the United States, the P.E. will need to be certified in the state where the facility is located. In Canada and Mexico, the engineer can be certified in any U.S. state or those respective countries.

Q: Would M-RETS qualify to meet the energy attribute certificate (EAC) requirements to reduce the carbon intensity (CI) of hydrogen under the 45V clean hydrogen tax credit program?

A: Much is still unknown about this tax program, but according to the proposed 45V rules: “The EPA has advised that EACs are an established mechanism for substantiating the purchase of electricity from zero GHG-emitting sources and that the use of EACs with attributes that meet certain criteria is an appropriate way for the Treasury Department and the IRS to document electricity inputs to electrolytic hydrogen production. Such EACs can also serve as a reasonable methodological proxy for quantifying certain indirect emissions associated with electricity for purposes of the section 45V credit. Similarly, the EPA and the DOE have advised that it would be appropriate for EACs with attributes that meet certain criteria to be included as part of the basis for assessing emissions for purposes of the section 45V credit.”

Q: Over what period is the CI score verified? Can a prior year CI score be used for later years?

A: CI is verified annually. Eco’s verification process includes verifying the CI score as soon as it is provided to us, and then every year afterward.

Q: With the new RFS set rule on gas storage, would it be practical to enter the program while trying to get RFS registration, so the value of gas is not lost?

A: Yes, we see this as one of the best opportunities M-RETS offers.

Q: Are there any specific metering quality or continuous measurement requirements under M-RETS for quantifying the biogas volume/quality? Is this similar or different from LCFS or RFS’s Biogas Regulatory Reform Rule (BRRR)?

A: This process is similar to LCFS and RFS requirements. Inlet biogas flow and methane content data must be monitored continuously, but there is not a 15-minute requirement as there is for the LCFS.

Q: Is the M-RETS program only applicable in Canada, Mexico, and the U.S.? Can it extend to other Central American and Caribbean Island nations?

A: Currently, there are no facilities outside of those three countries, but M-RETS is open to all nations in North America.

Q: How is double counting avoided if a generator is selling into the voluntary markets?

A: Generators must provide supporting documentation, including attestations, to demonstrate that double counting is not occurring. The verifier reviews this evidence as part of the audit process and checks it against other information at our disposal.

Q: If a dairy digester generated gas five years ago, and the gas was not eligible for RFS or LCFS credits at that time, would that gas be eligible for credits under M-RETS?

A: It depends on the reason for the gas not being eligible for the RFS or LCFS. If it was not eligible because it did not meet the feedstock requirements, it may be eligible in M-RETS. However, if the facility did not have meters in place to measure the flow of inlet biogas or the product gas volume, it is likely ineligible in M-RETS.

Q: Does gas qualify if it is being used by an end user and displacing natural gas — even though it is not pipeline-quality?

A: It may qualify, but since it is not pipeline-quality, it will have to be approved by M-RETS. Reach out to M-RETS with the specifics of the project, and they will be able to tell you if the project qualifies.

Q: Does your CI score impact the value of the RTC?

A: The value of your RTC depends on the contract with a particular buyer/end user and if they are willing to pay a premium for a lower CI attached to the certificate.

Q: If a project is participating in the LCFS program, why must that production be reported for M-RETS too?

A: M-RETS requires that all production be reported into their portal, so they can track all the production from generators in the program. This helps prevent double counting.

Q: Does M-RETS require audits to create RTCs? If not, does M-RETS show which RTCs were audited, and which were not?

A: If a generator is not splitting their production between multiple programs (i.e., they are sending all their production to M-RETS), a verification body is not required. However, any generation that occurs without being verified receives a higher level of scrutiny from the M-RETS system administrator.

Q: Where are the values of traded RTCs published?

A: The credits are not traded on an open market (as they are with RINs or Renewable Identification Numbers). The prices are much less transparent because they are individual agreements between an end user and the producer. M-RETS is merely the matchmaking platform for these two entities.

Project Spotlight: Red Trail Energy

Project Spotlight: Red Trail Energy

 

Project Spotlight: Red Trail Energy coverRed Trail Energy LLC (RTE) is now the first ethanol producer to enter the voluntary carbon markets – and the largest carbon removal project registered to date.

RTE is a 64 million-gallon-per-year corn ethanol production facility located near Richardton, North Dakota. In March 2024, RTE became the first producer in the U.S. to generate carbon dioxide (CO2) Removal Certificates (CORCs) in the Puro.earth registry for capturing and injecting the CO2 produced during the fermentation process at its plant. RTE captures the CO2, which would otherwise be emitted into the atmosphere, and injects it for permanent storage into an underground Class VI well located approximately 6,500 feet directly beneath its facility.

“We have not only achieved a groundbreaking milestone as one of the first bioenergy facilities with carbon capture and storage (CCS) but have also emerged as pioneers in bringing verified carbon dioxide removal (CDR) credits to the market. This program strengthened our position in the ethanol industry and has set a new standard for sustainability and innovation, driving positive change and demonstrating the viability of proactive environmental stewardship within our industry,” said Jodi Johnson, Chief Executive Officer, Red Trail Energy.

This case study demonstrates the opportunity for corn ethanol producers in the U.S. to take advantage of voluntary carbon markets (VCMs) and create alternate revenue streams that reduce project risks and create optionality for bioenergy with carbon capture and storage (BECCS) projects. It also sets the standard for other industries to follow.

“Monetizing CDR credits in the voluntary markets can be an important complementary revenue stream for companies across industries to support decarbonization efforts. Our goal was to help set RTE up for success in the regulated markets while helping them break new ground in voluntary markets. This gives RTE a significant competitive advantage within the ethanol sector and serves as a new industry standard for others to follow,” said Shashi Menon, Chief Executive Officer, EcoEngineers.

Read the full case study here.

Pivotal Year for the Nation’s Largest Transportation Fuel Markets

Pivotal Year for the Nation’s Largest Transportation Fuel Markets

By Lyndsey Nielsen, EcoEngineers

With the recent news of the state of New Mexico starting the process of developing its own Clean Transportation Fuels Standard, knowledge of the country’s low-carbon transportation fuel markets is more important than ever. These markets continue to drive the world toward decarbonization, and EcoEngineers has been the go-to consultant and auditor in these programs since 2009.

Eco is passionate about educating our clients on their journey to clean energy. The experts on our EcoUniversity team have been working in the regulatory landscape for decades, and they have analyzed data from two of the most influential low-carbon fuels programs in the United States transportation fuel markets in our two annual outlooks. Coming in March 2024, Eco is proud to publish our fourth edition of our California Low Carbon Fuel Standard (CA-LCFS) Fuel Supply and Credit Pricing Analysis and the third edition of our U.S. Environmental Protection Agency’s (USEPA) Renewable Fuel Standard (RFS) Credit Pricing Analysis.

READ MORE: CARB Proposes Steep CI Reduction Targets in Proposed LCFS Amendments

The CA-LCFS remains the largest market in the country for low-carbon fuels despite the recent dip in credit prices. Over the next three years, there will be an increasing oversupply of credits in this market. The price reduction from the previous report is primarily the result of two factors: 1) the increased value of cap-at-the-rack, and 2) strategic choices by refiners to move toward a low-carbon future. Modeling performed by Eco’s experts also shows an increasing contribution to the gasoline credit pool from electric vehicle (EV) energy consumption that is likely to become more important over the second half of this decade. We are poised to follow the regulation’s progress throughout the year, in a volume and credit market capacity.

In June 2023, the USEPA published the first post-2022 RFS rulemaking schedule, called the Set Rule, which was the most comprehensive rulemaking in 10 years. The rule changed annual rulemakings that had previously adjusted biofuel volume mandates to accommodate trends in biofuel production. Instead, the USEPA issued three years of preset volumes across 2023-2025, attempting to create more market certainty for the Renewable Volume Obligations (RVO) compliance requirements within the RFS. The imperfections and difficulty of its estimates have created sectors of oversupply and undersupply in the Renewable Identification Number (RIN) market, which has caused significant RIN pricing variations within biofuel markets throughout 2023 and early 2024.

READ MORE: Six Things Natural Gas Producers Need to Know About the Renewable Fuel Standard Set Rule

The analyses’ authors, Dr. Roxby Hartley and Paul Niznik, have been working in the low-carbon fuels field for decades, analyzing and modeling potential markets for low-carbon transportation fuel credits. Dr. Hartley is Eco’s Climate Risk Director. He focuses on both compliance and voluntary carbon methodologies, building carbon models, and researching how biodiesel and renewable diesel fuel types integrate into regulatory markets. He has more than a decade of experience in scientific research, development, and management of low-carbon diesel substitutes. Mr. Niznik is a Senior Carbon Consultant for Eco and is an expert on biofuel markets and mandates. His due diligence work has been used in the financing of some of the most capital-intensive low-carbon fuel projects in the nation.

This expertise, combined with Eco’s presence as engineers, regulatory experts, and renowned scientists is invaluable in the volatile election year market we are facing in the U.S. this year. These two outlooks — and their periodic updates provided throughout 2024 — will give your business an advantage regarding regulatory changes occurring in the transportation fuel markets in which you operate.

They can both be purchased today, so contact us to learn more. Fill out this form to receive pricing information.

Lyndsey Nielsen

For more information about our EcoUniversity services, contact:

Lyndsey Nielsen, Director, EcoUniversity | lnielsen@ecoengineers.com

Understanding and Measuring the Environmental Impact of Clean Hydrogen Production with LCA

Understanding and Measuring the Environmental Impact of Clean Hydrogen Production with LCA

New Policies and Tax Credits Require Quantifiable Emissions

By Tanya Peacock, EcoEngineers

As the world seeks sustainable energy solutions, clean hydrogen is emerging as a promising option among various approaches to decarbonization. Its potential to revolutionize energy consumption is particularly notable in heavy industries and transportation sectors where decarbonization poses significant challenges. To better understand hydrogen’s role in the energy transition alongside other decarbonization strategies, we need to understand the environmental aspects of producing, transporting, and using clean hydrogen.

The Importance of Life-Cycle Analysis (LCA)

LCA has emerged as a key tool in understanding the environmental impacts of not only hydrogen production but also a myriad of low-carbon fuels and pathways. This methodical approach accounts for the emissions across a product’s life stages. From extraction to disposal, LCA quantifies carbon emissions across various production pathways and is essential for transitioning to cleaner energy.

READ MORE: Summary of the Production of Clean Hydrogen Credits Under Section 45V of the Internal Revenue Code

Recent policies, including the Inflation Reduction Act (IRA), have made it imperative to quantify life-cycle greenhouse gas (GHG) emissions for hydrogen on a well-to-gate life-cycle basis to qualify for the new 45V clean hydrogen production tax credit. This guidance, which offers up to $3 per kilogram of hydrogen with a carbon intensity (CI) below certain thresholds, underscores the importance of LCA models like the Argonne National Laboratory’s Greenhouse Gases, Regulated Emissions, and Energy Use in Technologies (GREET) model used in government support mechanisms such as the 45V clean hydrogen production tax credit.

Making Clean Hydrogen Cleaner

The quest for cleaner hydrogen has drawn attention to blue and grey hydrogen projects, and its sustainability continues to be a point of focus. One innovative strategy for improving hydrogen’s environmental attributes involves leveraging renewable natural gas (RNG) credits. Market mechanisms like California’s Low Carbon Fuel Standard (LCFS) encourage RNG’s use for CI reduction by employing a book-and-claim system — a common accounting method where a sustainability claim made by a company is separated from the physical flow of these commodities. Yet, the proposed 45V clean hydrogen tax credit guidance from the U.S. Treasury and Internal Revenue Service (IRS), while allowing RNG use, awaits further clarification on compliance. The U.S. Department of Energy (DOE) also requires additional validation if RNG feedstock does not fit within the parameters of the 45VH2-GREET model.

Carbon capture and storage (CCS) is another critical component in the clean hydrogen narrative, and its potential to enable large-scale clean hydrogen production is significant. By utilizing established infrastructure and benefiting from economies of scale, CCS can be a powerful ally toward net-zero goals, especially with the financial incentive of 45V tax credits.

The U.S. Environmental Protection Agency (USEPA) has not yet approved any hydrogen pathways for Renewable Identification Number (RIN) generation under the Renewable Fuel Standard (RFS). Multiple pathway petitions have been filed by EcoEngineers and others on behalf of their hydrogen clients.

Clean Hydrogen Future Hinges on Low-Carbon Pathways

Hydrogen production from unconventional sources, such as dairy manure, requires detailed LCAs to calculate the CI accurately. The technology choice for hydrogen production, from steam methane reforming (SMR) to electrolysis powered by renewable energy, directly influences the CI score derived from LCA. Producers are motivated to lower their CI not just to comply with regulations but to monetize credits and/or tax incentives and to meet sustainability targets.

The 45V clean hydrogen production tax credit guidance also outlines criteria for sourcing renewable power for hydrogen production. While on-site production is an option for some projects, any grid power used must be verified as renewable through Energy Attribute Certificates (EACs), adhering to strict registration and accounting standards.

READ MORE: Life-Cycle Analysis and Clean Hydrogen Consulting

Additionally, producers of clean hydrogen face the ongoing task of updating their LCA in alignment with GREET model revisions. The IRA mandates annual LCA updates, ensuring that life-cycle GHG emissions rate calculations are based on the latest data. Additionally, the LCA must address co-products and their emissions, with a clear methodology from regulatory bodies to ensure fair assessments, especially regarding emission allocations to co-products or crediting clean hydrogen production when displacing less clean hydrogen. Also required are annual verification reports performed by an unrelated party.

Summary

Understanding the CI of hydrogen is not just about regulatory compliance; it’s a business imperative. Project developers are incentivized to explore technology options and process improvements to reduce the CI of their hydrogen. Comprehensive LCA services are invaluable, assessing hydrogen CI and identifying strategies for carbon reduction. These services support project developers and policymakers in making informed decisions that align with environmental and economic objectives, aiming to create a transparent, consistent, and fair clean hydrogen market that reflects the true environmental costs and benefits of production methods.

READ MORE: Life-Cycle Analysis – The Praxis of Carbon Accounting

Integrating RNG credits, alongside strategic use of CCS and meticulous LCAs is critical for hydrogen production’s evolution towards sustainability. The interplay of regulations, market incentives, and technological advancements will determine the pace and scale of hydrogen’s role in the energy transition. As the clean hydrogen economy expands, our approach to measuring and managing its environmental impact must evolve in tandem, ensuring that a greener future is within reach.

Tanya Peacock

For more information about our clean hydrogen services, contact:

Tanya Peacock, Managing Director, California and Hydrogen | tpeacock@ecoengineers.com

Eco Engineers

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Des Moines, IA 50309

  +1 515.985.1260

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