Climate Neutrality
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The Role of Offsets in Meeting Duke University’s Commitment to ‘Climate Neutrality’: A Feasibility Study November 2008 Sustainable Duke Program Office of the Executive Vice President About this Report This report examines the potential role of carbon offsets in meeting Duke University‘s and other North Carolina universities‘ commitments to become climate neutral and to potential compliance obligations under a mandatory federal climate policy. We convened a spring semester course to research Duke‘s potential demand for offsets, identify the types of standards and policies Duke will need to adopt to transparently and credibly use offsets towards ‗climate neutrality,‘ the potential supply and cost of offsets from within North Carolina, the international and national market context, and the potential institutional models for engagement in offsets. The report was funded by Duke‘s Office of Sustainability and the Nicholas Institute for Environmental Policy Solutions. Primary Authors: Eben Polk (Associate, Nicholas Institute) and Andrés Potes (MEM ‘08) Graduate Student Contributors: Fuqua School of Business: Mareike Nossol, Martin Romero-Wolf, and Ankush Tewari. Duke Law School: Hannah Polikov. Nicholas School of the Environment: Patrick Bean, Julia Bunting, Julie Burlage, Tim Chung, Nick Donowitz, Zach Eyler, Denise Grubert, John Milligan, John Shaw, Brent Wanner, and Jason Wynne. i Contents About this Report ......................................................................................................................................................... i Executive Summary .................................................................................................................................................... 1 1. Introduction ............................................................................................................................................................ 7 1.1 What are Offsets? ............................................................................................................................................. 8 1.2 Offsets for Voluntary Commitments ............................................................................................................ 8 1.3 Offsets for Compliance with Federal Climate Legislation ......................................................................... 9 1.4 Summary of Questions Addressed in this Report ..................................................................................... 10 2. Duke University‘s Potential Demand for Offsets .......................................................................................... 13 2.1 Other Factors Influencing Duke‘s Demand for Offsets ......................................................................... 16 2.2 Shared Climate Goals in North Carolina .................................................................................................... 16 3. Developing an Offsets Portfolio ....................................................................................................................... 17 3.1 Compliance Offsets vs. Offsets for ‗Climate Neutrality‘ ......................................................................... 17 3.2 Credibility and Measurability ........................................................................................................................ 18 3.3 Mitigating Risk ................................................................................................................................................ 21 4. Greenhouse Gas Markets: the State of Play .................................................................................................... 22 5. Options for Offsets Investment and Engagement ......................................................................................... 27 5.1 Demand-Side Drivers: Leading by Example and Policymaking ............................................................. 27 5.2 Supply-Side Drivers: Research and Incubation ......................................................................................... 28 5.3 Purchasing and Funding Offsets ................................................................................................................. 28 6. A Review of the Array of Potential Offset Projects, Costs, and Availability in North Carolina ............ 31 6.1 Land Use and Land Management Offsets in Forestry and Agriculture ................................................ 36 6.2 Methane Capture ............................................................................................................................................ 50 6.3 Energy Efficiency ........................................................................................................................................... 55 6.4 Renewable Energy .......................................................................................................................................... 62 6.5 Synthesis of North Carolina Offset Opportunities .................................................................................. 67 Appendix A: Excerpt on Offsets from the American College and University Presidents‘ Climate Commitment Implementation Guide ................................................................................................................. 69 Appendix B: Offset Standards, Protocols, and Project Types ........................................................................... 70 Appendix C: An Evaluation and Comparison of Additionality Tests .............................................................. 72 Appendix D: U.S. Greenhouse Gas Economic Abatement Potential .............................................................. 73 Appendix E: Existing Research and Policy Initiatives on Offsets at Duke .................................................... 74 Appendix F: Five Forces and SWOT Analyses ................................................................................................... 75 Appendix G: Agriculture and Forestry Background and Methodology ........................................................... 80 Appendix H: Methane Background ...................................................................................................................... 82 Appendix I: Calculations for North Carolina Landfill Methane Capture Potential ....................................... 85 Appendix J: Energy Efficiency Background and Methodology ....................................................................... 87 Appendix K: An Energy Efficiency Calculator for Small Appliances and Solar Energy .............................. 90 ii List of Tables Table 1. Summary of Potential North Carolina Carbon Offset Supply (million MtCO2e per year). ............ 6 Table 2. Questions Addressed in this Report ....................................................................................................... 12 Table 3. Ensuring Credible Offset Investments ................................................................................................... 19 Table 4. Common Additionality Tests ................................................................................................................... 19 Table 5. Carbon Market Volumes and Value in 2006 and 2007 ........................................................................ 22 Table 6. Basic Offsets Typology ............................................................................................................................. 31 Table 7. Current Emissions Reduction Offsets Projects in North Carolina ................................................... 32 Table 8. Summary of Preliminary Estimated Carbon Offset Supply in North Carolina ............................... 34 Table 9. Southeast U.S. Forestry Carbon Offset Supply Potential by Carbon Price ...................................... 37 Table 10. North Carolina Forestry Carbon Offset Potential by Carbon Price ............................................... 37 Table 11. Sample of Maximum Offset Supply and Costs of Afforestation from Land Acquisition, by NC County ........................................................................................................................................................ 39 Table 12. Average Agricultural Cash Rents per Acre in Coastal and Piedmont North Carolina, 2006 ...... 40 Table 13. Land Use Change in Durham and Orange Counties, and Surronding Lands ............................... 45 Table 14. Agricultural Soil Sequestration Potential in the Southeast & North Carolina by Carbon Price . 47 Table 15. Estimated Conservation Tillage Rates for Major Crops in North Carolina, 2004 ........................ 47 Table 16. Conservation Tillage Practices Reported to the NC Agricultural Cost Share Program ............... 48 Table 17. Agricultural Methane and Nitrogen Oxide Emissions Reduction Potential in the Southeast and North Carolina by Carbon Price ............................................................................................................ 49 Table 18. Hog Farms Modeled for Methane Capture by the Nicholas Institute and Cavanaugh Consulting* ................................................................................................................................................ 52 Table 19. Potential Annual GHG Reductions from Average-Sized Hog Farms ............................................ 52 Table 20. Comparison of Results: Cost and GHG emissions reduction potential of Small-Scale Energy Efficient Appliances