|For this article we will refer to the gas as just Renewable Natural Gas (RNG) to keep things simple, but if you are interested in other differences in the ways the U.S. and Europe treat this resource, please see our handy infographic.|
While many organizations have successfully mitigated their electricity emissions, reducing direct emissions that result from sources owned or controlled by an organization, such as emissions from natural gas combustion, can be challenging. This is where Renewable Natural Gas (RNG), also called biomethane, comes into play. As a growing number of organizations commit to decarbonization, solutions like these are essential to address natural gas emissions and fulfill existing commitments.
Until recently, electrification, energy efficiency, and carbon credits were the primary options available to address natural gas emissions. With growing demand for a new tool, the use of RNG has expanded with the development of Renewable Thermal Certificates (RTCs). While guidance from the Greenhouse Gas Protocol (GHGP) on the use of these certificates to claim RNG emissions in scope 1 has not been finalized, other primary voluntary standards either allow RTCs or acknowledge that their role for GHG accounting is still under development.
As a result, it is important to understand how these certificates work, geographic differences (U.S. vs. Europe), nuances associated with different project types, and how they can be applied towards an organization’s climate goals.
What is Renewable Natural Gas (RNG)?
To create RNG, you typically start with “biogas,” which is a mixture of methane and other gases (mainly CO2) that have been produced from organic feedstocks. It is captured from the decomposition of organic waste in landfills or anaerobic digesters that process waste from food processing plants, agricultural facilities, or wastewater treatment plants. The biogas gets captured, cleaned, and then either injected into the national natural gas pipeline or shipped to the point of use, offering a climate-friendly alternative to fossil fuel.
Since the feedstock is renewable, the carbon emissions that result from combusting RNG are considered biogenic – like the carbon emissions from other sustainable biofuels. Not only that, the process often reduces the methane emissions normally associated with the feedstock. This is important because methane is a potent greenhouse gas that, in many cases, would have otherwise been released into the atmosphere and is instead converted into renewable energy.
When we say potent, we really mean it! Methane is short-lived in the atmosphere, but while it’s there it traps significantly more heat than CO2 (28x more than that of CO2 when compared over a 100-year time horizon or 84x over 20 years). Given this immediate impact, methane alone has caused roughly a third of the warming we have experienced to date. In addition to the benefits of avoiding methane emissions, CO2 that is removed in the biogas upgrading process can be used in food, chemical, and steel making – processes that would normally be derived from fossil fuels.
So the benefits of producing RNG are clear, however, let’s look closer at how these attributes are tracked using RTCs.
What is a Renewable Thermal Certificate (RTC)?
An RTC (also called an RNG Certificate, Renewable Gas Guarantee of Origin (RGGO), Thermal REC, or Green Gas Certificate) represents the environmental attribute associated with renewable natural gas injected into the gas pipeline and is the commodity used to purchase RNG. Similar to renewable energy electrons on a shared power grid, RNG cannot be distinguished from its fossil fuel equivalent when injected into a distribution pipeline. An RTC serves as the proof that the gas originated from renewable or biogenic sources. Similar to Energy Attribute Certificates (EACs), RTCs are unbundled from the physical gas that’s injected into the natural gas pipeline, allowing organizations to apply them to their existing gas supply. The end-user of the RTC can claim the environmental benefit of using RNG instead of conventional natural gas.
In almost all cases, companies can purchase RNG through the procurement of RTCs without changing their systems and processes or existing gas purchase agreements (GPAs). RNG is generally injected into the national common carrier pipeline network from which companies looking to mitigate their greenhouse gas (GHG) footprint receive their gas supply. RTCs, therefore, can reduce or address your natural gas emissions under certain government programs and voluntary standards without needing to fundamentally change natural gas procurement or on-site infrastructure*.
GEOGRAPHIC DIFFERENCES BETWEEN THE US AND EUROPE
RNG markets differ significantly between the U.S. and Europe – the former is a transport-based market whereas the latter is more focused on stationary applications.
In the U.S., chain-of-custody attribute tracking via RTCs is primarily used under the Environmental Protect Agency (EPA) and California Air Resources Board (CARB) transportation programs. A voluntary market separate from these compliance programs is now emerging. RTCs can be tracked and retired on the M-RETS Renewable Thermal Tracking System to support this voluntary market.
Whereas in Europe, the chain-of-custody attribute tracking system is primarily used to track RTCs (also called Green Gas Certificates) for static applications and in national registries. The market is still developing, with a mix of voluntary and legislated registries and, although there is extensive interconnection between counties, cross-border trade of these certificates is currently only possible amongst a few European countries. Given the region’s significant aspirations for this fuel, we expect these markets to more formally establish in the near future.
GAS PURCHASE AGREEMENTS (GPAs)
RTCs can be procured via short- or long-term agreements. Short-term agreements allow immediate action with fewer risks, while long-term agreements can come with powerful claims and a meaningful relationship with the-generator.
Gas purchase agreements (GPAs) are a mechanism for long-term agreements and are similar to Power Purchase Agreements (PPAs) for renewable energy and can be physical or virtual. A physical GPA is a contract between two entities where one of those entities is typically a developer or project owner that is selling both the natural gas supply and RTCs from their project to a buyer (sometimes called an offtaker).
Similarly, virtual GPAs grant buyers the right to the RTCs generated by a specific project but, unlike physical GPAs, they are financially-settled and do not involve the physical transfer of gas. The virtual GPA buyer receives physical natural gas from its usual provider and can source a virtual GPA from anywhere within the same gas distribution system.
How can Renewable Thermal Certificates help organizations achieve GHG reduction targets?
There are fundamental differences from carbon offset reporting for natural gas emissions. With carbon offsets, an organization is required to report all direct carbon emissions from gas consumption and then show that those emissions have been matched with offsets. With RNG, companies report zero carbon emissions from any natural gas consumption that is matched with RTCs, eliminating emissions associated with natural gas.
Considerations for Renewable Natural Gas Purchasers
RNG has its own complicated set of considerations. It’s essential for buyers to consider the following variables:
- Feedstock: The cost, carbon-intensity, and co-benefits of RNG vary widely depending on the source of the biogas. Buyers need to weigh tradeoffs and be aware of the price impacts of and potential reputational issues associated with feedstock-specific preferences.
- Environmental integrity: While voluntary standards are emerging, project due diligence is key to ensuring real environmental benefits. Buyers need to ensure that projects are real, have proper measurement and metering of gas flow, align with emerging standards for the voluntary market, and have safeguards in place to prevent environmental damage and double counting.
- Temporal matching: The voluntary market currently does not have any standards for the time period over which RTCs from RNG injected into the pipeline can be matched with gas consumption; buyers should monitor emerging standards around this guidance and be aware of the “vintage” of the product they are purchasing.
- Price: RNG is expensive. Production costs are high and U.S. buyers are also often competing with lucrative transportation market incentives and they should be aware of how long-term contracts can affect these prices.
- Geography: In the U.S., because the common carrier pipeline interconnects the United States, companies can source projects from anywhere in the country and claim fuel switching to RNG over fossil gas. Companies may, however, choose regional methane capture projects to provide co-benefits to their business and community. For companies in Europe, despite interconnection, making cross border trades continues to be challenging, however, transfer registries are being developed to improve this situation. European RTCs from certain projects can also count toward an organization’s Emissions Trading System (ETS) commitments.
- Co-benefits: Beyond the energy source produced by methane-capture, co-benefits like air and water quality improvements and local economic benefits can increase the positive impact of an organization’s RNG investment, if they have a clear line of investment to a certain project.
Matching RTCs to natural gas use is a direct and immediate way to address natural gas emissions. When integrated with energy efficiency initiatives, electrification, and carbon offset investment, RNG can be a meaningful tool in a company’s comprehensive GHG emissions reduction strategy.
Interested in learning more about how RNG can be integrated into your company’s climate plan? Get in touch with us.
*This is confirmed by carbon policies in Europe and in the US, and voluntary standards including, The Climate Registry.
Peter Weisberg is a director on the Carbon Markets team where he manages the company’s renewable natural gas work.
Tom Matthews is a manager on the Energy & Climate Practice Team in Europe where he works on strategy and implementation of renewable energy and climate solutions.