Solid domestic waste municipal polygon landfill gas utilization projects to be implemented in Russian Federation and considered from thr inxestor’s (carbon quota buyer’s) point of view

As it is known, Russian Federation is one of the countries that ratified Kioto Protocol in 2005, and being a member of group “Annex 1” it undertook for its task of not exceeding the amount of annual greenhouse gas total emission within the period of 2008-2012 inclusive in comparison with the level emitted in 1990.

As per National Report about the cadastre of anthropogenic source emission and greenhouse gas absorption, due to decomposition of organic remains, in 2004, the rate of total greenhouse emission made up 64.3 million tons of ÑÎ₂-equivalent to be expressed in the ratio of about 3.3% of greenhouse gas total amount emitted in atmosphere within the area of Russian Federation in 2004. The above data are in agreement with the ones determined on the worldwide basis.

Without due regard to land and forestry use and excluding current alterations, in 2004, the rate of total greenhouse emission made up 2152.4 million tons of ÑÎ₂-equivalent, as compared to the ratio of 107.6% specified in 2000 or 66.9% - in 1990 with the one to have been taken as the reference level. It is obviously that for the present, the country is on the way of saving of its considerable buffer stock and within the period of 2008-2012 years its potential permits to minimize the possibility of exceeding the level of 1990. Besides, it should be noted that in Russia the relative share of greenhouse gas emitted in atmosphere within the period of 1990-2004, as a result of organic waste decontamination, doubled from 1.7% to 3.3% and even with absolute figures taken, the rate of gain amounted to 12%. By the International Climate Fluctuation Analytical Group (ICFAG) classification, it is the only sector that is able to provide growth to be compared with 1990.

Thus, despite of the low share of waste disposal greenhouse emission, the one is subject to subsequent growth and any projects targeted to reduction of landfill gas emissions tend to attract foreign and, particularly, Russian investors. As per 2006, if to take the PSO projects developed in Russian Federation and validated by authorized experts, the landfill gas utilization projects rated 8% of total number of projects and 6% of total number of expected emission reduction units.

On the one hand, the landfill gas utilization investor is interested in conditions provided by mature technology and relatively low cost in terms of emission reduction units and, on the other hand, by social and ecological aspects. With the view of utilization of landfill gas, dump revegetation is required. This kind of activity, generally, contributes to sanitation of environment and reduction of air and water pollution. With the PSO projects implemented at municipal solid domestic waste polygons, municipal administration is interested in deciding the matters of introduction of new environmental technologies and creating new jobs. As a result of this, under the agreement with investors, the municipal budget will manage to gain additional profits after selling some portion of emission reduction units.

Besides, this kind of projects is comparatively suitable in terms of principle of complementarities, as the rate of emission reduction unit profit commercial advantage is quite low and associated with great risks.

It looks like of absolutely positive nature! But, in practice the problem is no of easy matter.

If methane contained in landfill gas with the factor of global warming potential to be of 21 is just burnt down in a flare, any project will be of low cost. As a result, carbon dioxide to be considered as greenhouse gas, but with its rate of global warming potential to be equal to one, is generated. But, with landfill gas burnt, a certain amount of harmful substances is emitted, due to which it will be of no easy matter to agree emission conditions with sanitation authority. Besides, any PSO project needs for its economic reasonability. The very term means that, in all probability, landfill gas flare combustion is the process of low economic interest and, that is why, Russian Federation Government can hardly approve the project. Thus, we face the necessity for more “deep” gas conversion process (e.g. with power station constructed, even the large polygon project will have the cost doubled). And that is excluding construction of power lines, as quite a number of polygons are not supplied with power. A certain problem is based on selling of produced electric energy. Thus, just a single emission reduction unit generation cost may be increased from 2-2.5 euro to 5-7 euro or more.

Also, as a result of a number of problems that may occur, quite a lot of time is required for coming up to an agreement with municipal authority, while the very idea is fully approved.

“Carbon” investor may sign two types of agreements: agreement of purchase and sale of emission reduction units, ERPA, or agreement of project joint implementation, by means of which the investor may gain the waste reduction rights (in total or partially). There the legal-point question may be asked – Who is an owner of emissions?

Quite often, the area, where a certain regional solid domestic waste polygon is located, belongs not to municipal, but some adjacent district authority, that may appear for a lease contracting party. Often this kind of contract either overdue or relates to a certain area, where the landfill was emerged spontaneously and delivery of wastes is made by other legal entity, municipal body or commercial company that has an agreement with municipal administration. Whom the investor should conclude an agreement to, with municipal, adjacent district administrations or with company? As for each certain case, sufficient analysis of the source documents is required. Possibly, multilateral agreement will be required, may be with participation of local administration. Evidently, no project can be technically implemented without local administration support. But, for the purpose of signing the agreement with any municipal authority, the legal department’s approval is required. This kind of approval is quite difficult to obtain, as lawyers are, as a rule, unfamiliar with the PSO legislative base and not competent in the practice of project implementation. Even if the agreement imposes upon municipal authority some financial liabilities, lawyers often prefer follow the principle of “you never know what might happen”. And it may be explained: in case, the implemented project is a success, a lawyer will hardly be awarded, while the risk for any auditing body claims is of real matter.

Another obstacle related to implementation of a project may be associated with licensing red-tapery, as any construction activity held within the area of Russian Federation must be licensed and the period of licensing may take for half a year.

Thus, any investor that is about to conclude the agreement of joint development of PSO or ERPA to be subject to the landfill methane utilization project should know that except of traditional risks (e.g. faulty estimation of methane stock and different operational risks), there may be occurred project delays for the reason of red-tapery and the rate of emission reduction units generated at the first period of report may be less than the expected one.