Maine hopes to sell carbon credits to finance energy projects

Posted July 08, 2010, at 9:07 p.m.

AUGUSTA, Maine — Energy experts long have touted home weatherization as the best way to save money while reducing Maine’s reliance on fossil fuels.

Now, state officials have developed a plan to potentially make money from Maine’s aggressive weatherization efforts, using the growing international “carbon market” to help fund additional energy efficiency projects.

MaineHousing officials said this week that they have taken a step toward being able to sell “carbon credits” from greenhouse gas emissions reductions achieved through weatherization projects.

If completed, Maine’s plan to sell credits from weatherization projects on the carbon market could set an international precedent. Revenues from the sale of carbon credits then would be reinvested in the state’s energy efficiency and weatherization programs.

“We’re the first in the world. We’re not just the first state,” said Dale McCormick, director of MaineHousing, the state’s affordable housing agency.

Carbon dioxide has emerged as a type of commodity in recent years as governments and the private sector seek to reduce emissions of greenhouse gases linked to global warming.

Typically, one carbon credit equals 1 ton of carbon dioxide, and those credits are bought and sold as part of an emissions market intended to provide companies with a financial incentive to reduce emissions. Maine, for instance, is part of the 10-state Regional Greenhouse Gas Initiative that placed a cap-and-trade system on fossil fuel-burning power plants.

Before selling carbon credits, Maine’s system for quantifying the amount of carbon dioxide reduced as a result of weatherization projects must be validated by two, independent accreditors.

In particular, validators are looking to make sure that Maine’s CO2 reductions are real, verifiable, permanent and eligible for sale on the carbon market, which is where companies and traders buy and sell credits.

First Environment, one of the third-party accreditors, already has signed off on Maine’s methodology. The state is in the process of seeking a second validation.

McCormick estimated that between MaineHousing and Efficiency Maine Trust programs, the state could sell 8,000 carbon credits a year. Exactly how much revenue that would produce is impossible to say, however, because the price of carbon credits fluctuates so much.

Peter Shattuck, a carbon markets policy analyst at the Maine-based nonprofit organization Environment Northeast, said he was interested in learning more about Maine’s plan.

One key for the state, Shattuck said, will be to meet the stringent requirements for showing that the emissions reductions are, among other criteria, verifiable and stemmed from new projects that would not have been undertaken otherwise.

As an analogy, Shattuck said a power plant cannot earn carbon credits for shutting down an inefficient, coal-fired power plant that already was slated to be taken off line.

“In general, I think it’s an intriguing financing mechanism for weatherization projects,” Shattuck said.

McCormick said the idea behind attempting to sell carbon credits for weatherization projects began simply enough.

“We’re saving energy when we weatherize homes, so we must be saving carbon as well, so why don’t we sell it?” McCormick said. “We always need more money for weatherization.”

When those discussions began about two years ago, she and others assumed that someone already had developed a model that Maine could follow.

“But, in fact, nobody had because they have been concentrating on the low-hanging fruit, which in the carbon world is big power plants … or methane recovery from [cattle] feed lots,” McCormick said.

Compared to those industrial projects, carbon emission reductions from weatherization projects in Maine are relatively tiny. But when combined with credits from similar weatherization efforts in other states, they could become a sizable figure.

It was unclear Thursday on which carbon markets Maine would seek to sell the weatherization credits.

Upon their return to Washington, D.C., Congress is expected to resume debate about a potential federal climate bill that could feature a cap-and-trade system for carbon emissions. Some supporters of federal climate legislation have suggested that the 2-year-old Regional Greenhouse Gas Initiative could serve as a model.

Under RGGI, the 10 participating states agreed to cap emissions levels from fossil fuel-burning power plants and then reduce those levels by 10 percent by 2018. Sales of the allowances or credits have generated more than $660 million for the 10 states, including more than $20 million for Maine.

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