This week, the California Air Resources Board is planning to vote on whether to adopt changes to its cap-and-trade program, including how to reduce greenhouse gas emissions from coal mines. Some may wonder why ARB is doing this with almost no active coal mines or coal-fired power plants in California. The answer lies outside our state's borders.
Over the last decade, California has moved away from coal-burning power plants and the use of coal mines due largely to recently enacted state environmental laws, which essentially banned new power purchase contracts with out-of-state coal-burning plants. However, coal is still very much a part of the existing supply from power purchase contracts in California. For example, according to public information available from the Los Angeles Department of Water and Power, if you are one of the 3.9 million Los Angeles residents who receives power from LADWP, 33 percent of your electricity currently comes from coal.
According to the U.S. Energy Information Administration, which is the federal government's primary authority on energy statistics and analysis, coal-burning electricity generators burned 92 percent of all coal consumed in the United States in 2010 (the other 8 percent was used to power industries such as steel production and cement manufacturing) and their collective output represented almost 40 percent of our nation's electricity supply. The Energy Information Administration also notes that, worldwide, coal represents nearly 30 percent of global energy use and is responsible for more than 40 percent of global CO2 emissions.
In short, coal still plays a major role in California, the United States and globally.
ARB is acknowledging this sobering fact in taking the first step at reducing emissions from coal by addressing coal mine methane emissions in the United States. Methane, also known as natural gas, is a prevalent greenhouse gas that is 25 times more potent than carbon dioxide as a greenhouse gas. Methane contributes to global warming when emitted into the atmosphere and can create an explosive hazard inside mines. However, when mine methane is recovered safely it is a valuable, clean-burning fuel source.
Unfortunately, domestic coal mine methane emissions are currently unregulated and are likely to be for some time. It is easier and cheaper to vent emissions into the atmosphere than to collect and use them for power generation or to inject them into natural gas pipelines, especially when it is expensive and there is no economic incentive to do so.
Not surprisingly then, coal mine methane continues to be emitted in more than 24 states. A simple solution for this pressing problem is to create a clear financial incentive to encourage coal mine owners and operators to reduce these emissions.
California can help accomplish this objective through its cap-and-trade program. Companies covered or "capped" by the program must directly reduce their in-state emissions, but can also use carbon emissions reductions, also known as "offsets," from ARB-approved uncapped sectors for up to 8 percent of their reduction requirement. Currently, a capped facility has only three offset project types to choose from - forest carbon sequestration, destruction of ozone-depleting substances and livestock methane.
Unfortunately, these project types do not come close to providing the offset supply necessary for California's capped sectors to take advantage of their allowable offset usage.
A recent California state study shows that mine methane offset projects have the potential to provide more than 28 million tons of carbon emissions reductions through 2020. This represents a significant influx of offset supply to California's cap-and-trade program, which, if approved by ARB, would afford capped entities more options with which to manage their costs. It will also provide a necessary price signal to coal mine operators across the country to address their significant fugitive emissions from active and decommissioned mines.
Opponents argue these projects encourage additional coal mining or might somehow "help" the coal industry. This is untrue. ARB's own economic analysis reinforces this point and illustrates that providing a financial incentive to capture mine methane will not encourage additional mining activity. These projects are small in relation to a mine's operations and therefore should not contribute materially to a mine's earnings.
They are, however, a way for mine operators to benefit from a third party with expertise to underwrite the installation of pollution controls that are not currently required by regulation and are likely to not be for some time. In the absence of a financial incentive, like carbon offsetting, these projects will not happen. The real beneficiary is the environment.
California can and should accept coal mine methane offsets into its cap-and-trade program. While state policymakers have taken steps over the years to further discourage coal use and emissions within California, the state can take a decisive leadership role in influencing policy outside of our borders.
We also need to ensure that sufficient offsets exist to limit the costs of compliance with the cap-and-trade program for the sake of California's businesses and consumers. Allowing coal mine methane offsets into the program can help further both important goals.
Greg Arnold is president of Solana Beach-based CE2 Carbon Capital, a company that finances and develops carbon emissions reduction projects.