Executive Summary

Municipal solid waste landfills, long reviled by the environmental community as sources of air and water pollution, have in recent years benefited from numerous subsidies associated with alternative fuels and renewable power. Federal and state tax credits and payments are now offered to landfill facilities that collect and utilize landfill gas for heat or electricity generation. Three related concerns have been raised with regard to these incentives. First, some have raised concerns about the health impacts of the exhaust from burning landfill gas. Second, some have pointed to the substantial environmental and public health damage caused by landfills and called into question the sustainability of landfills themselves and thus landfill gas. Finally, some have suggested that these subsidies are just another stone on the scale promoting landfilling over recycling.

The United States generated 231.9 million tons of municipal solid waste (MSW) in 2000, 55 percent of which ended up in the country's 2000 landfills. Landfill gas (LFG) is naturally produced by the decomposition of organic materials (also known as biomass) in landfills, and approximately 60 percent of the non-recovered MSW is organic. Landfill gas contains mostly methane and carbon dioxide, both of which are greenhouse gases that contribute to global warming. Methane, which comprises about 55 percent of LFG,¹ has 23 times the global warming potential of carbon dioxide,² and although its worldwide emissions are much smaller than those of carbon dioxide, methane's potency as a greenhouse gas has marked it as the second most important anthropogenic (originating from human activity) greenhouse gas. In addition, LFG may contain small but significant amounts of ozone-forming volatile organic compounds (VOCs) and toxic or carcinogenic hazardous air pollutants (HAPs).

Landfill gas is a threat to human health and global warming, and flaring or utilizing it for energy greatly reduces its climate change impact. Burning LFG also serves to mitigate its public health impact by destroying the majority of hazardous air pollutants in landfill gas through the combustion process. Furthermore, using LFG to produce electricity avoids the need to generate electricity at traditional power plants and thus reduces air pollution from these plants. However, LFG combustion produces minute quantities of dioxins, an extremely toxic group of chemicals that are harmful even in very small amounts. In our analysis of the environmental impacts associated with LFG, first we look at the toxicity of LFG and exhaust from the combustion of LFG, then we add in the emissions from displaced electric generation, and finally we look at source reduction and recycling as alternative waste-management options.

Since the cost-effectiveness of recycling programs is directly linked to the cost of alternative waste-management options, landfill-gas energy (LFGE) subsidies could possibly reduce the competitiveness of recycling programs by enabling landfill operators to charge lower tipping fees. Each LFGE project is uniquely affected by LFGE incentives. Some projects may depend on subsidies to break even, while others may be cost-effective even without subsidization. We start our analysis with an overview of existing subsidies, evaluation of the economics of LFGE subsidies, and an attempt to quantify the short-term effect of LFGE subsidies on landfill tipping fees. Finally, we recognize that these subsidies are additive and must be looked at in the context of a whole range of incentives for landfilling over recycling. Thus, as with the environmental impacts, we need to look at LFGE subsidies in broader contexts and over longer periods of time.

This paper examines these concerns as quantitatively as possible. Many of the claims of both LFGE proponents and critics are highly dependent on how broad a view one takes both in terms of how much of the existing infrastructure one examines and how far into the future one is willing to look. In drawing our conclusions on these matters and laying out the policy guidance that follows from these conclusions, we have tried to balance idealism and reality. As Allen Hershkowitz wrote in his wonderful book, Bronx Ecology: "To truly deliver tangible ecological benefits to the world, environmentalists must emphasize a practical side to idealism."³

Key Findings:

• Combustion of raw LFG in a flare, an engine, or a turbine dramatically reduces the overall toxicity. Raw LFG contains many hazardous air pollutants, many of which are carcinogenic. The destruction of the vast majority of these more than makes up for the formation of minute amounts of dioxins. Our analysis of the inhalation cancer-risk factor suggests that the overall toxicity of LFG combustion is 23 times less than that of raw LFG.



• Collection and combustion dramatically reduces global warming impacts and toxicity. As mentioned above, LFG contains a lot of methane and methane is a very powerful heat-trapping gas. The combustion of LFG converts the methane to carbon dioxide, which while still a heat-trapping gas, is dramatically less powerful.



• Using LFG to generate electricity further reduces the greenhouse gas impacts and also reduces emissions of nitrogen oxides, sulfur dioxide and mercury. By displacing demand for electricity from traditional power plants, LFGE projects further reduce these important pollutants. However, when LFG is already being flared, the emission reductions are substantially less. Furthermore much depends on exactly what type of power plant is being displaced. If new natural-gas power plants or renewables are being displaced, then LFG may be better off simply flared.



• Burying garbage in landfills results in the release of more heat-trapping gases than any other waste-management option. The best way to combat LFG is to avoid landfilling biomass. This is true regardless of how much LFG is collected and used for energy. The best strategies are resource reduction and recycling.



• Because LFG is a by-product of landfills, and landfills are such a poor way to manage our waste, LFG can not be considered renewable. In addition to the global warming impacts of landfills, they are also a source of groundwater pollution. At best, the Environmental Protection Agency's (EPA) current landfill regulations merely postpone the inevitable damage landfills will cause. Landfills are simply unsustainable, and therefore so is LFG.

Based on these findings, we can establish the following hierarchy of priorities:

1. Avoid LFG by avoiding landfills. The first priority must be increased resource reduction and recycling. Biomass -- especially paper -- is easily recycled or composted. If there is no biomass in landfills, then there will be no LFG.



2. Burn all LFG that is produced. Even if we could close all landfills today, they would continue to produce LFG for years to come. Combusting LFG in an engine, a turbine, or simply in a flare has tremendous benefits in terms of reduced toxicity and reduced greenhouse gases. Sixty one percent of LFG is generated at landfills with no collection system and at least 25 percent of LFG at landfills with collection systems simply escapes. Collecting all of this gas and burning it -- preferably for energy, but at least in a flare -- should be a priority nearly equal to avoiding landfills.



3. Use LFG for energy production. While there are instances where the use of LFG for energy can increase the amount of certain pollutants, the balance of benefits is in favor of using LFG for energy. Generally turbines are cleaner than engines, though less efficient. However the benefits of LFGE are greatest if we also increase air pollution regulations and energy efficiency so that we displace coal plants instead of gas plants.

There are two major federal subsidies for LFGE projects. The Renewable Energy Production Incentive (REPI) is only available to publicly owned projects and the Section 29 tax credit is only for landfills that installed collection systems before July 1998. Extensions and expansions were considered by Congress last year as part of the comprehensive energy bill that, in the end, did not pass. Various state and local governments also offer incentives. Two of the most intriguing policies that have been implemented at the state and local level are green pricing programs and renewable portfolio standards. Congress also considered a renewable portfolio standard that would have included LFGE.

The cost of electricity generation from LFG is dependent on a number of factors, including the presence or absence of a gas-recovery system, the size of the landfill, and type of conversion technology employed. On top of equipment cost, project cost components typically include grid interconnection costs and a number of soft costs. On a per-kilowatt-hour (kWh) basis, the cost of electricity generation can range from as low as 3.4 cents per kWh to as high as 10 cents per kWh.⁴ It is usually much more economical to produce energy where there is already a collection system in place. Figure ES - 2 (see the full pdf of this report)shows the cost of LFGE production for projects relative to different electricity prices for projects of different sizes. Note that the current wholesale prices are generally not high enough by themselves to cover the cost of LFGE.

In an attempt to bound the potential impacts of the REPI and section 29 tax credit, we analyzed five of the six largest LFGE projects receiving REPI payments and 117 landfills on which the EPA has extensive operations data. By looking at how much these landfills have received or would receive assuming they were eligible and dividing that by the amount of waste they receive, we calculated the maximum value per ton received that the subsidies could be worth. For the REPI landfills, the value ranged from 13 to 78 cents per ton. For the Section 29 tax credit, the average value is 79 cents.

While it is tempting to directly compare these payments per ton of disposed waste to landfill tipping fees, the actual effect of the subsidies is almost impossible to quantify. Although there is some correlation between the amount of waste that an LFGE site accepts each year and the amount of electricity it produces, electricity generation (and hence the amount of REPI funding) is ultimately dependent on the amount of methane generated by the landfill. A landfill's methane generation rate depends on a number of factors, including size and depth of the landfill, the amount of waste in place, the age of the landfill, and regional climatic factors.

We also calculate the present value of the potential excess profit that projects could generate. Depending on the level of these excess profits and the discount rate used, a ton of waste can be worth between 3 cents and $2.06. That is of course assuming there are excess profits. As Figure ES - 2 shows (see pdf file), even moderately sized projects that do not have to pay for private financing and receive the Section 29 credit will not necessarily be profitable.

Based on all of these calculations, it is tempting to conclude that while there is potential for incentives for LFGE projects to have an impact on tipping fees, the real work effects are likely to be small. However, these subsidies must be judged in a broader context. Incentives for LFGE projects are additional to all the subsidies that exist for landfilling in general. There are a host of incentives and policies that currently clearly tip the scales toward landfilling despite the clear benefits of recycling and resource reduction. For instance, in 1998 the Internal Revenue Service decided to end a tax exemption for recycling facilities still enjoyed by waste-management facilities.⁵ Over time, policies such as this slow the development of recycling, keeping the cost high and artificially depressing the cost of burying garbage. Thus while it appears unlikely that REPI subsidies, Section 29 tax credits, or existing green pricing programs by themselves are causing a near-term shift away from recycling towards landfilling, they must be looked at in the context of a plethora of subsidies that clearly are causing such a shift.⁶

Based on these findings, we make the following recommendations for LFG-related public policy:

• The EPA should expand the New Source Performance Standards (NSPS) rules to require collection systems at all landfills that accept biomass.


• The EPA should require LFGE projects at most landfills.

Unfortunately, requiring collection or energy systems would require acknowledging the threat of global warming, a step that seems unlikely under the current administration. In the meantime, we can not afford to abandon incentives. However, we should make sure that we target them carefully. To this end, incentives should:

• Favor non-NSPS landfills,


• Favor real renewables over LFGE projects,


• Favor closed landfills,


• Favor new LFGE projects over existing ones,


• Favor strict emissions requirements at NSPS landfills,


• Favor incentives that allocate subsidies competitively, and


• Limit the timeframe for all incentives and update economic analyses.

Green pricing and renewable portfolio standard, both force technologies to compete for market share. This means that any incremental payment over the market price for electricity will be minimized, and thus the risk that incentives will be too large and will impact tipping fees is also minimized. However, this same feature means that if LFGE is successfully competing in green pricing programs and renewable portfolio standard, then potentially other cleaner and more sustainable sources of electricity are being driven out of the market.

There are three reasons that LFGE projects should be included in these types of policies. First and foremost, the reality is that landfills and LFG will be with us for years to come, and it is too toxic and too potent a greenhouse gas to not address. Here is where we must practice the "practical side of idealism." The second reason is that these mechanisms force LFGE projects to compete against other sources and to vie for public acceptance. Especially as more real renewables become available, any subsidy that LFGE projects can draw in the market place should go down or disappear. The third reason is subtler. Because LFGE is generally available in most states and often available at prices only slightly higher than traditional electricity, it can act as a pump-primer to get these types of policies in place. Therefore we make these three final recommendations specifically for green pricing and renewable portfolio standard:

• These policies should rely on LFGE from non-NSPS or closed landfills.


• To the extent that NSPS landfills are allowed to participate, only new conversions from flaring to energy should be allowed and only when strict emissions standards are met.


• Once a robust market for real renewables develops, only new LFGE projects at landfills that previously had no collection system should be included.

Back to contents page

Notes

1. EPA, 2000e.

2. IPCC, Third Assessment Report (2001).

3. Hershkowitz, 2002, pg. 202.

4. CEC, 2002a.

5. Hershkowitz, 2002, pp 77-80.

6. Ibid.