While the government has not indicated that the waste management sector will have its emissions capped, the Kyoto Protocol will have significant impacts on the sector. The most obvious impact is a levy likely to be imposed on the consumption of energy. As waste management operations utilize energy for transportation, compacting and other related activities, increased costs will go directly against the bottom line.
Other impacts will take the form of business opportunities. One of these is that companies that have emissions caps will purchase emission reduction credits from other companies and (importantly for members of the waste management sector) from those outside the emissions cap.
It is unclear exactly how the emissions trading system in Canada will be designed. The benefit to non-capped industries of creating efficiencies that result in reduced emissions may be significant. For example, should a private entity reduce the amount of material delivered to a municipal landfill, that private company could be entitled to emissions credits based on the reduced greenhouse gas (GHG) emitted by the municipal landfill (i.e., methane). But at this stage it is unclear whether it will be the municipality or the entity creating the efficiency that would receive the benefit of the credit.
All emission reductions will need verification in order to qualify as actual emissions credits. Verification becomes more difficult the more remote the physical and technical efficiency is from the actual point source of the emission. For that reason, technologies such as those utilized to generate electricity from landfill gas will be favourable as the generation, efficiency and emission are located close to one another.
It is quite straightforward to determine how much waste goes into a landfill, the amount of GHGs generated by traditional decomposition, the release of landfill gas into the atmosphere, and the production of GHGs when landfill gas is used to generate electricity. As such, the offset of GHGs can be determined to create an emissions reduction credit.
The strength of landfill gas generation is in its conversion of methane-based landfill gas to much less harmful GHGs. For example, landfill gas generally contains 40 to 50 per cent methane, which has a warming potential of 24.5 (far higher than CO2). This means that complete combustion of the methane results in a 24.5 times reduction in GHG emissions.
But it doesn’t end there. If the electricity produced by landfill gas combustion displaces other fossil fuel generation such as natural gas or coal, approximately two times further reduction in GHG is achieved. With millions of tonnes of materials landfilled each year in Canada it’s obvious that the collection and use of landfill gas for electricity generation could have a very significant impact on Canada’s Kyoto obligations should its use become widespread.
Other potential solutions to Kyoto obligations are also already present in the waste management sector. Several technologies divert waste from landfills through various incineration processes while recovering glass and metals. Some generate electricity to heat water and/or buildings.
These technologies are numerous, but the capital needed for their successful development and marketing is dear. Financing may be more a factor in their success than the technological benefits. While the ability to obtain private financing has been significantly impaired in the recent downturn in the financial markets, there are some mutual funds and private equity companies that specialize in what could be characterized as the environment and energy marketplace. (See “Waste Business Watch,” page 36.)
One example is Toronto based Investeco Capital which invests in companies in the pollution prevention, alternative energy, water technology and organic food sectors. As with other private equity companies, Investeco considers investments in companies with proven technologies that lack the capital to move them to the next level of business success.
While such organizations are currently limited, their presence in the marketplace demonstrates that there is and will likely continue to be opportunities for those with suitable technologies and an equivalent degree of business planning.
Things to consider
The following (paraphrased) statements included in Canada’s Kyoto Climate Change Plan, released November 21, 2002, provide some context and food for thought:
Landfills generate about 24 megatonnes of greenhouse gas each year, which is the equivalent of GHG emissions for more than six million cars;
Approximately 25 per cent of landfill methane is recovered through active collection;
The Canadian government believes that it can make an investment in methane captured at landfills that will reduce GHG emissions by about two megatonnes a year and possibly another eight megatonnes in the future;
Canada’s target for Kyoto is to reduce its GHG emissions by 240 megatonnes by 2012, which amounts to approximately 50 megatonnes annually over the next 5 to 10 years.
Written by Adam Chamberlain, LL.B. of Power Budd, the Canadian affiliate of Cameron McKenna, an international law and consulting firm. E-mail Adam at email@example.com