ADBA proposes creation of carbon-credit trading platform

The proposal is to establish a company that will seek to list and trade a biomethane carbon-credit product, the Biomethane Credit (BMC).

While ADBA will not have any direct interest in the new company, it believes that this will be of benefit, particularly to biomethane producers, by offering them an additional revenue stream to help support the development of the industry’s gas-to-grid capability. It would also deliver the increase in energy from waste through anaerobic digestion that the government committed to in its Coalition Agreement.

The government is due to announce the Renewable Heat Incentive (RHI) later this month. Part of the RHI is to provide incentives to build AD plants that can produce biomethane for grid injection.

To date, only three such plants have been built, with the benefit of substantial grants.

ADBA said in a statement that the proposed scheme has the potential to serve as an effective way for the government to ‘de-socialise’ the biomethane element of the cost of the RHI. It would do this by creating a tradable product that will have an external value to grid-injecting biomethane producers. This, in turn, would eventually transfer the cost of providing subsidy for the renewable industry from the consumer to the private sector.

The intention behind the proposal is to gain regulatory or statutory carbon status for BMCs, allowing them to be delivered as an offset under mandatory trading schemes.

ADBA further believes that it is likely that the gas-supply companies will want to purchase BMCs so that they can offer a certified ’green gas tariff’ to their consumers, similar to a basic green-gas certification scheme.

Furthermore, while the green-gas certification aspect of the BMC is a benefit, it is believed that greater value can be gained by monetising the low-carbon credentials of biomethane rather than solely seeking to sell origin certification on to the consumer.  

At the point of injection to the grid, it is proposed that a regulating entity will allocate to the gas producer electronically one BMC for every 5m³ of biomethane gas injected. The company could then create a continuously traded market in these credits, which would provide a liquid, low-denomination and easy-to-access product to carbon-credit buyers.

ADBA went on to add that there is no intention to trade in the physical gas — only the carbon credit, which will be allocated to the producers of biomethane once it has been injected into the gas grid.