North America

California Pilot to Use Carbon Credits to Finance Supermarket’s CO2 System

The North American Sustainable Refrigeration Council (NASRC) and Natural Capital Partners are partnering to develop a financing mechanism that will leverage carbon offset credits from greenhouse gas emission reductions to help pay for natural refrigerant projects in California.

The plan was discussed last month at a workshop in San Francisco, Calif., organized by NASRC to discuss financing options to support adoption of natural refrigerant technology. NASRC is a nonprofit that supports natural refrigerant adoption by supermarkets.

Under the NASRC/Natural Capital Partners carbon-financing plan, carbon offset credits would be purchased from a supermarket, reducing the upfront cost of a natural refrigerant project, according to a NASRC statement.

A pilot program that includes a supermarket in Oakland, Calif., is under development. “We expect to have offsets for the first pilot store issued in 2020,” said Morgan Smith, NASRC’s manager of programs & operations. She could not share the amount of funding that would be available in the program.

According to a presentation given at the NASRC workshop, the Oakland store  – “an aging store [that] serves a low-income community” – would be replacing an HFC direct expansion (DX) system with a transcritical CO2 system, thereby generating an estimated 4,500-5,000 tons of CO2e. The American Carbon Registry is part of the project.

The location of the project in California means that carbon credits generated through the program could be purchased and used by a third party to satisfy its requirements under the state’s cap-and-trade program. “The unique thing about this program is that we can actually get buyers to purchase the carbon credits from the supermarket to contribute to their sustainability goals,” said Smith. California’s cap-and-trade programalready acceptscarbon offsetsfor the destruction of ozone-depleting gases.

NASRC sees this funding source as being coupled with state or utility incentives to make a low-GWP refrigerant project financially feasible. This year, the California state legislature allocated $1 million to the state’s low-GWP incentive program, which was established in 2018 under the California Cooling Act. 

In addition California supermarkets can participate in utility programs to receive incentives for the energy and demand savings associated with using low-GWP refrigerant technologies, such as Pacific Gas and Electric’s custom incentive program and commercial whole buildings program.

“Any one of these financial options may not be enough to allow a supermarket to move forward with a natural refrigerant system,” said Danielle Wright, executive director of NASRC, in a statement. “But combining a number of financial mechanisms may be the solution that allows supermarkets to adopt natural refrigerant systems that will not be subject to future regulations.”

CARB meeting

California has legally established goals to reduce greenhouse gas emissions to 40% below 1990 levels by 2030, and to reduce HFC emissions to 40% below 2013 levels by 2030. To achieve these goals, the California Air Resources Board (CARB) has proposed new regulations that would prohibit the use of refrigerants with a global warming potential (GWP) above 150 in new large refrigeration systems starting in 2022, and above 750 for new air conditioning systems in 2023, as well as ban the sale of virgin refrigerants with a GWP above 1,500 in 2022.

CARB is expected to approve final regulations in May 2020, according to the Environmental Investigation Agency (EIA)

At a working group meeting held on August 6, CARB discussed the proposed regulations. Among the takeaways reported by EIA:

  • CARB requested input for the definition of “replacement systems” in remodels and replacement of existing systems with new low-GWP equipment.
  • CARB heard qequests by some companie to delay the ban of refrigerants with GWPs above 750 in new air conditioning beyond 2023. It’s response was “a delay of even one year will cause us to miss the 2030 target,” said EIA. “To consider these kind of requests, industry must propose another cost effective policy alterantive that can deliver the required emission reductions.”

CARB is expected to hold at least one more working group meeting before approving final regulations. Its invites stakeholders to share any suggestions as soon as possible, said EIA.

Combining a number of financial mechanisms may be the solution that allows supermarkets to adopt natural refrigerant systems that will not be subject to future regulations.

Danielle Wright, NASRC