March 27, 2008, y TOM FOWLER
Copyright 2008 Houston Chronicle
Reliant Energy's $300,000 gift to help preserve coastal forests near Houston also will help the company get ready for a future fixture of the power business — carbon trading.
The donation to the U.S. Fish and Wildlife Service will buy more than 1,100 acres in an area known as the Columbia Bottomlands, which stretches across Brazoria, Matagorda, Fort Bend and Wharton counties. The area includes some of the largest remaining tracts of old-growth forests in the southern United States.
Under the deal, Reliant gets the rights to "carbon credits" that will be created by the forest's ability to draw up to 154,000 tons of the greenhouse gas carbon dioxide from the atmosphere.
While it has no immediate plans to sell the credits, Reliant can use them on one of the carbon markets now operating in the U.S. or in a future market that many expect will be created by federal climate change laws in the coming years.
"Our interest is less in the credits themselves than in the opportunity to learn how to do more projects like this and get familiar with carbon markets today and in the future," said Dave Freysinger, a senior vice president in charge of generation operations for Reliant.
Electricity retailing giantReliant is best known in Texas as the state's largest electric retailer, selling power generated by other companies to millions of customers. But it also owns and operates 16,000 megawatts of power plant capacity in nine other states. About 4,600 megawatts of that comes from coal-fired plants, which have the highest CO2 emissions among power plants. Reliant generates the rest with natural gas.
As the largest stationary sources of CO2, power producers likely will face the most direct effect from proposed federal legislation aimed at reducing greenhouse gas emissions.
The plan with the most support so far would set a cap on the amount of CO2 emissions a company is allowed per year and then reduce the cap over time. Companies could cut their emissions by shutting plants and improving technologies or develop projects that reduce CO2 in the atmosphere.
The largest CO2 credit trading market is a mandatory program in Europe launched several years ago under the Kyoto Protocol, an international climate treaty the U.S. did not sign, said Emilie Mazzacurati, a senior analyst with research firm PointCarbon.
Despite early problems, the market is running fairly well, she said, with about $60 billion in transactions per year.
The U.S. has several voluntary markets in place or starting up soon, Mazzacurati said, but they have relatively low carbon reduction goals.
"They're not very ambitious, so companies can reach the goals without too much effort," she said.
They're still useful to help companies get comfortable with creating and trading carbon offsets, however, as Houston-based Waste Management has discovered. The landfill operator is a charter member of the Chicago Climate Exchange, a marketplace created in 2002 to providing a framework for buying and selling carbon offsets.
"It provides a consistent set of rules and uses third-party verification of the offsets, which is important for buying and selling any commodity," said Kerry Kelly, director of federal public affairs at Waste Management.
The company captures methane — considered a more environmentally damaging greenhouse gas than CO2 — at 108 of its landfills and burns it to generate nearly 500 megawatts of power.
Through third-party certifications those projects create carbon credits the company trades on the Exchange.
Since the existing U.S. markets are voluntary, prices for carbon credits are generally lower than they're expected to be under any federal regulations. They have traded at $1 to $5 per ton, but studies have put the price at $20 to $50 per ton under laws proposed in Congress, Mazzacurati said.
Other preservation efforts
Reliant's work on the Columbia Bottomlands isn't its first such effort. In addition to more than a dozen nature and wildlife preservation projects around the country, in 2003 it paid $160,000 to plant 162,000 seedlings on land in Smith County, a project expected to help remove more than 200,000 tons of CO2 from the atmosphere.
Such projects don't absorb all that CO2 at once, but capture the gas over many years.
"You need to protect the land in perpetuity to let forests recover and allow carbon to be permanently removed from the atmosphere," said Mike Lange, a wildlife biologist with the U.S. Fish and Wildlife Service who has been working on preserving the Columbia Bottomlands. "It is easy to plant a tree, but for carbon sequestration to work, the land that tree is planted on must be protected permanently."
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