Accounting for the unknowns under a new ODS methodology

Tuesday, 16 Jan 2024

ACR has recently updated its Methodology for the Quantification, Monitoring, Reporting and Verification of Greenhouse Gas (GHG) Emission Reductions from the Destruction of Ozone Depleting Substances (ODS) and High-Global Warming Potential (GWP) Foam for ODS projects in the U.S. The new methodology (v2.0) changes some of the default parameters used in establishing the emission reduction (ER) claims of ODS destruction projects. In this blog, we describe the two major changes enacted under v2.0 of the ACR methodology, the context behind these changes and the impact they ultimately produce on the GHG integrity of these projects. Our investigation sheds light on some of the underlying assumptions and uncertainties within the methodologies for ODS destruction.

The unique position of ODS projects

ODS destruction projects fill a policy gap left by the Montreal Protocol. While the Montreal Protocol called for a phaseout of ODS globally, it did not indicate what to do with existing ODS stores. Since the development of the Montreal Protocol in 1986 and its enactment in the early 90s, the destruction of existing ODS has yet to be mandated in most countries. 

There are many potential fates that await ODS if they are not destroyed. They could be reclaimed and/or reused in existing equipment, be illegally vented or remain in old equipment. In each of these circumstances, it is likely that ODS would leak out into the atmosphere over time, which would contribute to global warming. Stockpiling also occurs, but with mixed results – sometimes there is very limited leaking from a secure canister and in other situations, if the container is degraded, significant leaking of the chemicals can occur. ODS destruction projects prevent this long-term leaking.

Future policies or solutions may be developed to contain and reduce emissions of existing ODS. However, destruction is currently the only concrete solution to fully prevent ODS from entering the atmosphere, and carbon funding is the primary mechanism used to finance non-governmental ODS destruction projects.

Baselines and crystal balls

ODS destruction projects are unique in the manner in which they issue carbon credits. ODS destruction projects receive credits for the emissions that would have occurred as a result of ODS leaking over time. For example, while an ODS destruction project may occur and be completed in 2023, the project is essentially receiving credits for emissions that would have happened in 2024, 2025, 2026, etc.

All ODS destruction projects receive credits upfront for the ODS that presumably would have leaked many years into the future. However, since there is no crystal ball to predict the future, the ODS that is destroyed is not guaranteed to produce a legitimate emission reduction. For instance, a (hypothetical) new policy or subsidy for ODS destruction could threaten the additionality of ODS credited from that point onwards. It is worth noting, too, that more cost-effective strategies for the management of ODS emissions may be developed in the future. In such hypothetical cases, the ODS would not enter the atmosphere in the long run, thus putting in question the present-day ER claims that assume a business-as-usual scenario of long-term leaking.

Reuse and substitutes

Another unique trait of this project type is that many of these substances are, in fact, still in use today. From fire extinguishers to foam insulation, ozone-depleting chemicals are often commercially valuable. CFCs, a common class of ODS species, are highly efficient coolants and are still used in long-lasting refrigeration equipment. Destroying these substances prevents them from being resold and reused in existing equipment, and therefore causes the market to shift to “substitute chemicals” which, in theory, would replace the ODS destroyed by a carbon project. Substitute chemicals produce a lower global warming potential than ODS, but the impact is still significant, and could counterbalance some of the emissions reductions associated with ODS destruction. 

Reuse is not the only option for ODS owners to deal with their ODS. However, it is the only option that results in a direct financial gain for the ODS owners, and it is the only option that causes substitute emissions.* For these reasons, assuming a baseline scenario of reuse appears to be a reasonable and conservative approach for quantifying leakage of ODS projects in the U.S.

What changed in the new methodology: concerns for baselines & leakage

In essence, the new methodology changes the crediting period and baseline scenario, resulting in higher baseline emissions and the exclusion of substitute emissions. The updated methodology therefore enables higher emission reduction claims.

  1. The removal of the 10-year crediting cut-off

Under the previous methodology (v1.2), projects received credits for an assumed 10-year period after ODS destruction occurred. ER claims were based on the portion of the ODS that would have leaked from equipment over the 10-year period, as determined by the chemicals’ cumulative leak rate(s). While most of the ODS would have leaked by the end of the crediting period, a portion of the ODS would remain in the original equipment or stockpile after 10 years, and thus would not be eligible to receive carbon credits. However, under the new methodology (v2.0) the crediting is no longer limited to a 10-year projection. Instead, v2.0 assumes that all of the ODS will leak eventually, and thus assumes that in the baseline scenario, one hundred percent of the chemicals would have been emitted to the atmosphere. Without the 10-year cut-off, the new v2.0 methodology does nothing to account for future uncertainty.**

  1. Baseline scenario of “continued stockpiling” (and removal of substitute emissions)

Secondly, the previous methodology v1.2 defined the baseline scenario as “reuse” for ODS. The reuse scenario assumed that ODS destruction could result in project leakage, as the destroyed ODS may be replaced by other emissions-producing chemicals. Under this scenario, the v1.2 methodology accounted for project leakage by incorporating substitute emissions into its calculation of project emissions. 

However, under the v2.0 methodology, the baseline scenario has been changed to “continued stockpiling” of ODS. The new methodology assumes that, in the absence of carbon projects, ODS would be stockpiled instead of reused, and thus no substitute emissions would occur. This circumstance may be true for some projects: it is possible that in some cases, the owners of ODS may face significant barriers to accessing the reuse market, and the ODS would not enter into the reuse market. 

In most cases, we do not know for certain what fate would have awaited the ODS destroyed by a carbon project, and the potential fate of “reuse” cannot be ruled out. Calyx Global has determined that “reuse” generally remains a viable option for ODS in the U.S. While the use of some ODS chemicals are declining (due to the decommissioning of older equipment), there is still a commercial use and demand for ODS substances in the U.S. and, as such, it is plausible to assume that at least some of the destruction of ODS could cause a demand for new replacement substances. These substances have their own GWP, and accounting for them increases the conservativeness of ER claims.

The final verdict for v2.0’s greenhouse gas integrity

We believe that the spirit of the original methodology was more sound. In most cases, it is difficult to know for certain what fate would have awaited the ODS destroyed by a project. It could be stockpiling, reuse or even illegal venting. It is our understanding that the authors of earlier versions of ODS methodologies considered the “unknowns” (including potential future policies or changes in the context of ODS use and disposal) and that the baseline assumption of reuse, limited to only 10 years and including quantification of substitute emissions, was considered a reasonable “proxy” for the multiple scenarios that could actually occur. 

It is worth noting that ODS projects under the v2.0 methodology are still considered to have higher carbon credit integrity than many other projects in the voluntary carbon market. While we believe the new methodology produces risks of over-crediting, there are typically no other risks associated with these projects (i.e. no risks to additionality, reversals, overlapping claims) and the level of over-crediting is not as severe as other project types, such as REDD or cookstoves. 

Finally, we understand that ACR will soon provide further justification regarding the changes to ACR’s methodology, which we eagerly await. 

*Reuse in this context applies to both direct reuse and reuse after reclamation. Technically, reclamation involves a process of purifying ODS to a higher standard and allows the ODS to be sold back into the market at ‘like new’ conditions. Both outcomes result in substitute emissions. 

** The 10-year cut-off is somewhat arbitrary – for all we know, ODS destruction may become mandated within this period. Nevertheless, it is within reason to assume that no policies will develop in the next 10 years. There is currently no policy under discussion for ODS destruction in the US, nor in the past 30 years since the Montreal Protocol’s enactment.

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Calyx Global

This article includes insights and input from multiple experts in Calyx Global.