**SHAKLEE CORPORATION'S APPLICATION FOR CLIMATE NEUTRAL ENTERPRISE
CERTIFICATION**

**(Public Distribution Copy)**

**Submitted to the Climate Neutral Network**

**February 24, 2000**

### Approved by the CNN 

**Environmental Review Panel**

**March 17, 2000**

#### Prepared by

##### Trexler

[AND ASSOCIATES, INC.]{.underline}

I.  Introduction to Shaklee Corporation

Founded in 1956, Shaklee U.S., a division of Shaklee Corporation, is
recognized as an industry pioneer and a trusted name in health and
wellness. Shaklee U.S. (Shaklee) is a diversified consumer products
company that specializes in nutritional, personal care, household, and
home water treatment products. Its operations include multilevel
marketing, and product research and development. It maintains a
corporate headquarters and research facility in Northern California and
a manufacturing facility in Oklahoma. In addition it owns and operates
three distribution warehouses.

Shaklee's primary means of marketing and selling its products is through
a network marketing system of independent contractor distributors (who
are not employees or agents of Shaklee). Shaklee is a subsidiary of
Yamanouchi Pharmaceutical Co., Ltd. (Yamanouchi), a Japanese
corporation. Additional details of Shaklee operations can be found in
the sections below.

As Shaklee\'s application for Climate Neutral Enterprise Certification,
this document seeks to:

-   describe Shaklee\'s actions taken on behalf of its commitment to
    corporate responsibility;

-   illustrate the work Shaklee has engaged in to address climate
    change, both through participation in external programs as well as
    in-house actions;

-   present Shaklee\'s Greenhouse Gas Emission Footprint and explain the
    methodologies used in its calculation;

-   lay out a suggested five-year Climate Neutral offset portfolio; and

-   provide detailed descriptions of the Shaklee\'s offset projects.

II. Shaklee\'s Actions on Corporate Responsibility

Shaklee has taken considerable effort in attempting to integrate the
concepts of corporate responsibility into its business activities. Below
is list of several awards and programs Shaklee has been involved in as a
result of its environmental and social commitments.

***Family Circle Green Chip Award.*** Awarded by Family Circle magazine
for companies who help lead the way toward helping improve the
environment.

***Hayward Chamber of Commerce Environmental Award.*** Shaklee was
recognized for the incorporation of green space into the design of an
outdoor park as part of its Research and Development Facility.

***Cousteau Society.*** Shaklee has provided funding to continue the
work of the Cousteau Society to explore the environmental impacts of
pollution on oceans and seas.

***Twentieth Anniversary of Earth Day.*** Shaklee is one of only seven
national corporate sponsors for the Twentieth Anniversary and its
Basic-H has been designated as the Official Cleaning Product of Earth
Day.

***Wild Dolphin Project.*** Shaklee provided major funding for this
project which revealed how the natural habitat of dolphins is being
impacted by temperatures of ocean currents as well as encroaching
pollution.

***American Himalayan Foundation (AHF).*** Shaklee has been supporting
the American Himalayan Foundation (AHF) since 1989. Due in part to
Shaklee\'s involvement, the AHF has been able to assist the people of
Nepal in the building of schools and health clinics, the provision
housing and clean water systems for the poor, reforestation of areas
impacted by development and tourism. Shaklee support has resulted in the
planting of over 1 million trees in Nepal.

III. Shaklee\'s Actions on Climate Change Mitigation

Shaklee understands that in order to qualify for climate neutral
certification, it must demonstrate a commitment to address environmental
and energy efficiency considerations. Shaklee has sought to do so not
only within it's own operations, but also through participation in
several other programs. The section below describes several of the
programs Shaklee has participated in as well as in-house actions taken.

***Climate Wise Program.*** Shaklee participates in the U.S.
Environmental Protection Agency\'s *Climate Wise* program. Shaklee\'s
aggressive recycling program has resulted in annual declines in the
amount of non-hazardous materials sent to local landfills. As part of
Shaklee\'s *Climate Wise* audit, its Norman plant was rated as one of
the cleanest and most efficiently run manufacturing plants in the State
of Oklahoma.

***Woods Hole Oceanographic Institute.*** Shaklee provided major
one-time funding for a series of scientific studies in Antarctica
targeted toward discovering the details of coastal pollution due to
ocean warming and manmade contamination of rivers and waterways.

***Will Steger\'s Polar Expeditions.*** Shaklee was an official sponsor
of the Will Steger Polar Expeditions, which monitored environmental
changes at the North and South Poles. The exploration documented the
ranges in the size and depth of the polar ice caps, confirming
conditions of global warming and transboundary pollution.

***Shaklee\'s In-house Environmental Health and Safety Policies and
Programs.*** Shaklee has aggressively sought to meet and exceed federal,
state, and local laws in regard to environmental health and safety. Its
Norman Manufacturing Facility is currently developing an Environmental
Management System program. In addition, Shaklee\'s manufacturing
activities have increased its emphasis on recycling, chemical
substitution of less harmful materials, inventory control and careful
selection of waste management companies that promote state-of-the-art
waste treatment technologies as a means to reduce its output of waste.

***Shaklee's New Corporate Headquarters.*** In November 1999, Shaklee
moved its corporate headquarters from downtown San Francisco to
Pleasanton, California. The new 128,000 square foot facility was
designed to meet environmental performance requirements that and include
the following environmental and energy conservation design features:

-   Underfloor air supply to help control heat fluctuation which in turn
    reduces demand for energy used to either heat or cool the building;

-   Structure is configured to maximize the use of daylight with atria
    that bring daylight deep into the building interior, minimizing the
    use of electric lights;

-   Building facades are optimized for their orientation to the sun with
    the south elevation incorporating deep window recesses and light
    shelves; reducing cooling demands and glare. North facing elevations
    include larger areas of glass to maximize daylight and limit the
    heat absorption from the sun;

-   Full use of recycled, certified sustainable and environmentally safe
    materials, finishes and products;

-   Outdoor landscaping is designed to conserve water; and

-   Specially designed catch basin filters are part of the storm water
    management system which are designed to remove petroleum‑based
    contaminants found in urban storm water run‑off.

***Energy Saving Activities at the Norman Manufacturing Facilities.***
Shaklee has taken the following steps to address energy efficiency at
its Norman Manufacturing Facility:

> **Chilled water system.** The chilling systems have undergone
> significant technological upgrades since 1998 through the use of more
> efficient retrofits and well as selection of highly efficient
> technologies to meet additional capacity demands. The new chillers
> have an efficiency of 0.60 kW/ton versus the old chillers efficiency
> rating of 0.79 kW/ton. As a part of this project, the chilled water
> pumping system results in considerable energy savings compared to the
> conventional primary pumping method.
>
> **Hot Water System.** The process hot water system was replaced in
> 1998 resulting in energy savings as well as water conservation
> improvements.
>
> **Boiler System.** In 1998, the two 20,000 lb/hr boiler system was
> replaced with a high-efficiency single 25,000 lb/hr boiler which
> resulted in energy savings.
>
> **Solar Film In Warehouse.** The warehouse office area has always been
> uncomfortable for the people working in that area due to inadequate
> heating and air conditioning and the windows on the south side of the
> office. To alleviate this, a new air conditioning unit was installed
> on the roof to improve the air supply and room conditions, but
> temperature still could not be maintained. A window screen to prevent
> the sun from heating the room has saved energy by lowering cycle time
> on the air handler unit.
>
> **Insulating Pipes.** As proper insulation is a critical factor in
> reducing heat loss, Shaklee has made a special effort over the past
> year to insulate all pipes, fittings, and valves. It currently is
> replacing damaged insulation in different areas of the facility and
> has insulated all exposed steam and hot water pipe.
>
> **Repairing Air Leaks.** Air leaks are a major expense to any company.
> During the past year, Shaklee has repaired all of the air leaks which
> it could locate in the facility and is continuously monitoring the
> load time on the compressor to watch for increases that would be
> indicative of an air leak.

IV. Shaklee\'s Corporate Greenhouse Gas Footprint

To arrive at Shaklee's footprint of a \"Climate Neutral Enterprise\",
the company's operations were broken down into the various groups
detailed below. For each group the quantity of energy used by energy
type and category was multiplied by established emission factors to
generate estimated greenhouse gas emissions.

***Shaklee Operations Overview.*** The majority of Shaklee\'s greenhouse
gas (GHG) emissions are associated with product transportation,
marketing, and other corporate activities. Negligible manufacturing
emissions can be attributed to the fact that Shaklee\'s vitamin and
nutritional supplements are manufactured in-house at the Norman plant,
while the remainder of the product lines are manufactured to meet
Shaklee\'s quality specifications by private outside contractors. The
products are manufactured, packaged, and shipped to Shaklee warehouses.
Only once delivered to its product warehouses does Shaklee gain control
of the products. Products are stored in Shaklee\'s three warehouses
prior to shipping to end-users via postal carriers.

Shaklee conducts most of its marketing through a group of independent
distributors. As part of an incentive program, Shaklee provides bonus
cars, cash bonuses, and air tickets to Shaklee conventions to
distributors that reach a certain level of sales performance. They are
sometimes referred to as Sales Leaders.

One facility owned and operated by its parent company Yamanouchi
Pharmaceuticals is located on Shaklee property. Any emissions resulting
from Yamanouchi activities have not been included in the footprint.

Shaklee owns and operates the following facilities:

-   **Shaklee Corporate Headquarters, Pleasanton, California.** The
    corporate headquarters was previously located in San Francisco, but
    in November 1999 the company relocated to a new facility.

-   **Norman Manufacturing Facility, Oklahoma.** This facility conducts
    the manufacturing of Shaklee's vitamin products and nutritional
    supplements. There are actually two facilities located at Norman.
    Norman I is operated by Shaklee. Norman II is owned and operated by
    Yamanouchi Pharmaceuticals.

-   **Hayward Research Facility, California.** This is a small office
    housing the R&D and Quality Control laboratory personnel. It
    conducts routine product testing (micro, ingredient quality, etc)
    and general research (packaging, etc).

-   **LaPalma, California; Bedford, New Jersey; Dayton, Illinois.**
    These are Shaklee warehouses used to house products prior to
    shipping.

    ***Shaklee Boundary Issues.*** In light of the challenges in
    determining corporate ownership and control issues in modern
    companies, for the purposes of the Shaklee Enterprise Footprint, the
    Climate Neutral Network determined that the best methodology to
    employ to the case of Shaklee is a dock to dock approach. It is
    assumed that the first dock is when Shaklee\'s products leave the
    contract manufacturers and the final dock is when Shaklee delivers
    the products to the end user.

    In this case, Shaklee\'s GHG footprint encompasses the following
    elements or components of them:

-   Emissions resulting from regular business activities at their
    corporate headquarters and various other locations;

-   Emissions from transportation of their products from manufacturer to
    end-user; and

-   Emissions associated with activities of their independent sales
    force.

    The following section lays out the emissions associated with each
    element of the footprint.

    ***Commuting.*** As part of the *Climate Wise* program, Shaklee had
    already determined the number of employees at each facility as well
    as the average round-trip miles/day for commuters at each office.
    These numbers were used in conjunction with the CNN metrics of
    average miles per gallon and pounds of CO~2~ per gallon of gasoline.
    The number of workdays was assumed to be 220. The emissions
    determined for this section may be slightly overestimated
    considering Shaklee\'s data gathering also determined that 30-40% of
    the employees at the Pleasanton and Hayward offices telecommute 1-2
    days/week. In addition, the Pleasanton office issues monthly
    mass-transit passes to 60 full-time employees.

    ***Electricity Usage.*** Data on monthly electricity usage (in kWh)
    for all Shaklee facilities was found in utility bills. In order to
    determine the CO~2~ conversion factor, Adjusted Electricity
    Emissions Factors by State from the U.S. Department of Energy
    report, *Sector Specific Issues and Reported Methodologies
    Supporting the General Guidelines for the Voluntary Reporting of
    Greenhouse Gases under Section 1605(b) of the Energy Policy Act of
    1992, volume II* were used. The 1605(b) report contains the most
    recent and most complete set of data available. The emission rates
    for CH~4~ and N~2~0 were also integrated into the conversion
    factors, although their impact on overall CO~2~ equivalent tonnage
    was insignificant.

    For the Pleasanton office, as the time period for the GHG footprint
    analysis coincided with the relocation of the company headquarters,
    electricity usage for the old San Francisco headquarters was used as
    proxy. For the electricity usage at the Norman Manufacturing
    Facility, only the electricity usage at the Norman I, the facility
    owned and operated by Shaklee, was used for the quantification.

    ***Natural Gas Usage.*** Shaklee has records of the amount of
    natural gas used at all its facilities (in therms). The U.S. Energy
    Information Agency conversion factor of 8.2 lbs CO~2~/therm was
    used. Utility bills for the San Francisco office were used as proxy
    for the same reasons described in the *Electricity Usage* section.
    For the natural gas usage at the Norman Manufacturing Facility, only
    the natural gas usage at the Norman I, the facility owned and
    operated by Shaklee, was used for the quantification.

    ***Air Travel.*** Shaklee\'s travel services department supplied the
    number of air tickets used by Shaklee Corporation. Average number of
    air miles traveled by Shaklee employees was determined by using the
    Delta Airlines metric of average miles traveled per domestic ticket
    used. The commonly used metric of 0.5 lbs CO~2~/air mile traveled
    was used.

    ***Transport: Contract Manufacturers to Shaklee Warehouses.***
    Shaklee provided total weight of product. Load capacity provided by
    the trucking company was assumed for double-load 48-foot
    tractor-trailers. The trucking company also provided miles per
    gallon for diesel. For average distance traveled per load, 1500
    miles was assumed to be the average distance from manufacturing
    facility to Shaklee warehouse. The CNN conversion factor of 20 lbs
    CO~2~/gallon diesel was used.

    ***Transport: Shaklee Warehouses to End Users.*** Ninety-nine
    percent of Shaklee products are shipped to the end user via postal
    carriers. United Parcel Service is the primary delivery service
    utilized so their capacity of 20 tons per truck was used for the
    calculation. Shaklee warehouses are located near its primary
    customer bases therefore the average miles to end-user was
    calculated to be 200 miles. As it was assumed that the delivery
    trucks were not operating at full load capacity, a lower factor of
    miles/gallon was used to integrate these inefficiencies.

    ***Sales Leader Travel.*** In regard to the Sales Leaders, while it
    was agreed that Shaklee does not exercise effective management and
    operational control over the activities of each of its independent
    distributors, Shaklee does provide incentive programs, in
    particular, its bonus car program and travel awards to sales
    conferences. For this reason, the CNN Environmental Review Panel
    determined that Shaklee should share responsibility for 50% of the
    emissions resulting from bonus car miles and bonus air travel
    purchased by Shaklee.

    There are two components of Sales Leader travel. The first is bonus
    car usage. Shaklee awards bonus cars to Sales Leaders as an
    incentive program. As part of the *Climate Wise* program, Shaklee
    had previously calculated the number of miles driven expressly for
    Shaklee purposes, over and above personal travel, to be 12,000
    miles/year. These numbers were used in conjunction with the CNN
    metrics of for average miles per gallon and pounds of CO~2~ per
    gallon of gasoline.

    The second component of Sales Leader Travel is airline miles. In
    1999, there were a total of two Sales Leaders domestic conventions
    and one international convention that took place in Barcelona,
    Spain. The Delta metric of average air miles traveled was used for
    the domestic tickets and the number of air miles from Central United
    States to Barcelona was assumed for the international tickets. The
    metric of 0.5 lbs CO~2~/air mile traveled was used.

    ***Addressing Other Potential Sources of Emissions.*** Detailed
    below are several other areas of potential GHG emissions that were
    assessed, but determined to have insignificant emissions.

-   **Chillers.** At the Norman Manufacturing Facility, there are large
    chillers, which opens the possibility of significant refrigerant
    leakage. After consultations with large-scale refrigeration experts,
    it was determined that due to the stability of the systems, the only
    potential for leakage would be from unforeseeable accidents.

-   **Manufacturing.** Although there is manufacturing activities at the
    Norman Facility, none of the processes result in GHG emissions. The
    raw materials used to produce the products

    come in powdered form in bags and drums. The powders are then
    processed through a series of activities such as granulation, tablet
    compression, coating, and packaging. There are no chemical
    processes. Any emissions from the facility have been incorporated
    into the current GHG footprint.

-   **Shaklee Warehouses.** Another potential GHG point source,
    propane-powered forklifts, was not applicable as Shaklee uses only
    electric-powered forklifts and resultant GHG emissions are included
    in the electricity use emissions.

***Summary:*** The spreadsheet containing the calculations of Shaklee\'s
corporate GHG footprint can be found in *Appendix A*. It documents that
Shaklee\'s approved footprint totals 25,000 tons per year.

22. 

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V.  Offset Portfolio Options

Shaklee\'s offset portfolio was prepared by Trexler and Associates, Inc.
TAA is known in the GHG field for the development and pursuit of
technically and environmentally credible mitigation projects. Shaklee's
portfolio reflected this approach.

TAA initially presented a range of potential offset projects for CNN\'s
consideration, including:

-   Solar rural electrification

-   Energy efficiency in public schools

-   Landfill methane recapture

-   Reforestation

-   Strawbale housing

-   Coalbed methane recapture

-   SF~6~ reductions

Based on the review of the CNN Review Panel, a total of four projects
were selected for inclusion in Shaklee's offset portfolio:

1.  **Solar Rural Electrification**

2.  **Energy Efficiency in Public Schools**

3.  **Coalbed Methane Capture and Utilization**

4.  **Electricity Generation through Landfill Methane**

Using these four projects, Shaklee\'s proposes a two-year portfolio as a
means to offset its corporate emissions for the years 2000-2001. Upon
approval by the CNN Board, Shaklee will commit to the proposed two-year
portfolio.

**Shaklee's 2-Year Offset Portfolio**

**[Tons CO2 Offset]{.underline} [Project]{.underline}**

**15,000 Boiler Replacement in Portland Schools**

**15,000 Rural Electrification Through Photovoltaics**

**10,000 Coalbed Methane Utilization**

**10,000 Electricity Generation though Landfill Methane**

**\-\-\-\-\-\-\-\-\-\-\-\-\-\-\--**

**50,000**

The proposed portfolio meets the CNN requirements by reflecting the
following features:

-   ***Reflects the principal sources of greenhouse gases.*** Eighty
    percent of the offset tons result from the direct reduction of
    fossil fuel usage. This exceeds CNN\'s 60% requirement.

-   ***Balances geographic interests.*** Seventy percent of the offsets
    are domestic.

-   ***Creates multiple benefits.*** The portfolio was designed to,
    whenever possible, include projects which deliver benefits beyond
    those resulting from the reduction in GHGs. The Solar Rural
    Electrification project is the best example as it will result in
    cleaner, healthier lighting systems for communities in developing
    countries.

-   ***Fosters experimental innovation.*** The Solar Rural
    Electrification project features an innovative financial structure
    that turns the normally prohibitive costs of photovoltaic panels
    into a cost effective option for rural families.

VI. Offset Project Descriptions

In depth descriptions of the projects included in Shaklee\'s offset
portfolio are included in the following section. As there are still some
outstanding questions regarding the exact details of the fossil fuel
displacement project that will be used in Year 2 of the offset
portfolio, that particular project description is provided more for
illustrative purposes than as a detailed description.

**Project Brief One: Rural Electrification Through Photovoltaics**

**Sector: Fuel Switching (fossil fuel displacement)**

**Location: India, Sri Lanka**

**PROJECT DESCRIPTION**

**The Importance of Non-Fossil-Fuel Based Rural Electrification**

The transfer of renewable energy technologies to developing countries is
commonly advocated as vital to any long-term resolution of the climate
change issue. As stated by the IPCC, \[t\]here is a need for the rapid
transfer to the developing countries, on a preferential basis, of
technologies for addressing climate change, without hindering their
economic development.

Seventy percent of the developing world's population do not have
electricity and rely on candles, kerosene and other liquid fuels, or
batteries for light and limited power. Many people live in rural areas
far from the nearest electricity transmission grid. In India, only 25
percent of the rural population have access to electricity; in Sri
Lanka, only 18 percent have access. Lack of power for modern
conveniences such as television and recorded music has propelled rural
populations toward more developed and already crowded urban areas,
resulting in rapidly rising greenhouse gas emissions from central grid
power production.

Solar photovoltaics (PV) offer an immediate alternative to kerosene
lamps, diesel generators, and batteries in rural areas. Solar rural
electrification is also an alternative to expensive (and sometimes
impossible) extensions of the power grid or construction of new
fossil-fueled power plants. Solar rural electrification can take place
in several forms, including individual household systems,
community-scale or public building systems, or village-scale power
systems. Solar rural electrification as defined for the project's carbon
offset initiative is the widespread application of small-scale PV
systems for individual rural households that have little or remote
likelihood of the conventional electrical transmission grid reaching
them over the next 20 years.

Solar PV systems can provide the power people need for their homes
without producing greenhouse gas emissions. Over the 20 year lifetime of
one household 35 W solar PV system, more than 6 tons of CO~2~ that
otherwise would be emitted through kerosene lamp and battery use will be
avoided. Displacing kerosene use in millions of rural homes would have a
significant cumulative impact on national and regional CO~2~ emissions.
Slowing the growth and expansion of centralized power grids, which would
result from the promulgation of alternative mechanisms of
electrification in rural areas, would have an even greater indirect
CO~2~ benefit over the long term.

**General Description and Technology UsedGeneral Description and
Technology Used**

The proposed project, which has already received initial carbon offset
funding through the 1996 Klamath Proceeding in Oregon, provides capital
to help consumers finance the purchase of additional PV units. This is
done through the use of a revolving investment fund (RIF). As blocks of
panels are leased to homeowners on a lease-to-own basis, the
forward-looking lease revenue stream will be sold, and the proceeds
reinvested in additional panel sales. This allows the leveraging of
available funding to maximize the number of solar home systems that are
ultimately financed and installed with a given amount of up-front
capital.

Local solar electric companies in India and Sri Lanka have established
track records of marketing small-scale solar PV power systems to rural
households in developing countries, and have successfully developed the
infrastructure needed to support this industry. Offset revenues
dedicated to this project will piggy-back onto the existing carbon
offset project currently being implemented by PacifiCorp, expanding the
amount of loan capital available to expand PV sales and installations.

The companies expect the default rate on leases to their customers to be
low due to effective screening and the grassroots nature of the
operations. In prior pilot scale activities, defaults were virtually
non-existent. Impacts of default can also be minimized by the ability to
repossess and resell PV modules. Depending on system size and credit
terms, payments for PV systems would be between US\$5 and US\$16 per
month. Rural households typically spend between US\$7 and US\$10 per
month for kerosene and dry-cell batteries for flashlights and radios.

**Description of Measures to Reduce CO~2~ Emissions Description of
Measures to Reduce CO~2~ Emissions**

At present, households in rural areas that are not serviced by the
electricity grid typically use kerosene lamps to provide lighting.
Kerosene is a petroleum distillate that produces CO~2~ emissions when
burned. Many rural households also use automobile batteries to power
household appliances such as television sets, radios, and cassette tape
players. These batteries must be periodically transported to special
charging stations for recharging. Typically, the recharging stations use
electricity from the grid, although some use diesel-powered generators.
Solar PV systems provide emission-free, affordable, sustainable power to
electric lights and small appliances, and displace the need to use
kerosene.

The PV systems themselves are similar across the region. Each system
consists of a PV panel, which produces a 12-volt, direct current (DC),
and balance-of-system (BOS) components. The BOS includes a battery, a
battery charge controller, light fixtures with compact fluorescent lamps
(CFLs), and miscellaneous hardware such as a support structure for the
panel, wire, connectors, plugs, and switches.

The solar home system sizes of the systems range from 20 to 75 Watt-peak
(Wp). The systems provide electricity for lighting, radio, and
television services. Typically, a 20 Wp system can power three 8-watt
CFLs in addition to a radio/cassette player. A 35 Wp system can power
four 8-watt CFLs or two 11-watt CFLs in addition to a 14-inch, 12-volt
DC, black-and-white television set. A 50 Wp system provides power to the
same appliances as a 35 Wp system, but enables the system owner to
operate more CFLs or watch television for longer periods. And a 75 Wp
system allows up to eight lights or allows the user to use a color
television. The majority of systems sold through the program will be
either 20 or 35 Wp units. Systems larger than 20 Wp will also reduce the
need to recharge automobile batteries, thus reducing the CO~2~ emissions
associated with generating electricity either for the grid or from
diesel generators.

**The Market**

The primary barriers to market expansion are a lack of public knowledge
of the benefits of PV systems, insufficient technical experience in the
installation and maintenance of systems, and insufficient credit
financing.

**OFFSET CRITERIA**

**Calculation of (No-Project) Reference Case CO~2~ FlowsCalculation of
(No-Project) Reference Case CO~2~ Flows**

The reference case represents the CO~2~ emissions that would occur in
the absence of the PV offset project. In most cases, if a household did
not purchase a PV system, it would continue to meet its lighting and
appliance needs in the same way it currently does. The majority of
potential participating villages will never receive grid-connected
power.

Each 8-watt light displaces a kerosene lamp that consumes approximately
10.6 gallons of kerosene per year which, based on the carbon content of
kerosene, is responsible for 231 lbs. of CO~2~ emissions annually, based
on a CO~2~ emissions rate for kerosene of 43.5 lbs per MMBtu. Thus, each
1,000 households that would use a 20 Wp or larger system, displacing
three kerosene lamps, would emit 347 tons of CO~2~ per year from
kerosene.

Baseline emissions also include emissions associated with recharging
automobile batteries used to power radios, television sets, and other
household appliances. These emissions are only associated with systems
of 35 Wp or larger. It is assumed that batteries are recharged off the
grid using coal-fired capacity, which is the most likely source of new
electrical generating capacity in many developing countries. Since 20 W
of each 35 Wp system are allocated to powering lights, 15 W are
available for powering appliances that otherwise would be powered by
automobile batteries. A PV system operating 5.5 hours per day would
generate 30 kWh per year for these appliances. The CO2 emissions rate
for coal is assumed to be 1.05 tons per MWh, based on conservative
assumptions of a heat rate of 10,000 Btu/kWh and coal with a heat
content of 10,000 Btu/lb. and a 57 percent carbon content. These
assumptions are conservative since many coal-fired boilers in developing
countries are less efficient and use dirtier coal. The resulting CO~2~
emissions are 0.031 tons per year for each 35 Wp system sold. For this
analysis, it is assumed that 20 percent of the systems sold are 35 Wp,
and the remaining 80 percent are 20 Wp. This is a reasonable assumption,
since 10 Wp and 50 Wp systems make up a very small part of the total
market. Thus, for each 1,000 households, 200 would have emissions
associated with battery recharging for a total of 6.2 tons of CO~2~.

Thus, total emissions for the reference case, assuming a sales mix of 20
percent 35 Wp and 80 percent 20 Wp, are 353 tons of CO~2~ per 1,000
households.

**Calculation of With-Project CO~2~ Flows**

There are no CO~2~ emissions associated with operation of PV systems.
However, some households will continue to use small amounts of kerosene
for supplemental outdoor lighting needs. Kerosene is more expensive than
the operating costs of PV systems, and there are considerable safety and
health hazards associated with the use of kerosene. Therefore, kerosene
is not expected to constitute more than two percent of total lighting
needs in households with PV systems. The emissions associated with this
small amount of kerosene use are approximately 4.6 tons per year for
each 1,000 households with 20 Wp or larger systems.

The total annual CO~2~ benefit for the project is the difference between
the reference case and the with-project case. For each 1,000 PV systems
sold, CO~2~ benefits total 346 tons. CO~2~ benefits are assumed to
accrue at a constant rate throughout the 20-year life of an individual
solar panel.

Based on the use of the revolving investment fund, the attached
spreadsheet illustrates the CO~2~ benefits committed to over a 15-year
period after an initial offset investment. Total project life is limited
to 20 years. In other words, only five years of emissions reductions are
counted for the systems installed in year 15. To maximize the offset
benefit of the funding, this incremental funding provided as a result of
the purchase of offsets is assumed to piggyback onto the infrastructure
and offset model already created through the PacifiCorp offset projects
in India and Sri Lanka.

**CO~2~ Benefit Uncertainty**

**CO~2~ Benefit Uncertainty**

Project confidence is high out to the 15 years used here to quantify the
CO~2~ benefits. The project design minimizes the number of variables
involved, which reduces the factors affecting the robustness of the
analysis. These factors include:

 an increase in the total market (due to population expansion) is not
considered;

 there is minimal competition from conventional power supplies because
target areas have a high probability of not having grid-based power
within the project timeframe;

 the technology is already proven and no major technology changes are
assumed;

 a reasonable figure for system lifetime (20 years) is used;

 the energy source (solar) is constantly available; and

 calculation of CO~2~ benefits per unit is a straight function which
doesn't change over the life of the system.

This offset initiative represents a highly credible CO~2~ offset. Solar
PV systems sold will result directly in CO~2~ savings from avoided
kerosene consumption. There is little question of the additionality of
solar rural electrification efforts, as witnessed by the approval of
solar rural electrification projects based on this same general model by
the U.S. Initiative on Joint Implementation in Sri Lanka.

**MONITORING AND VERIFICATION**

Three major indicators need to be monitored for quantification of
benefits: the invested dollars from the fund, the number of units
purchased or manufactured, and the number of PV systems installed. Since
the CO~2~ benefit arises from reduction in kerosene use and the PV
panels are a direct proxy for the reduction in kerosene use, it is
relatively easy to quantify benefits by careful tracking of PV units
installed. Replacement units will also need to be tracked in a database.

The CO~2~ benefits from the project will be accounted and reported in
adherence with the methodologies outlined in the Section 1605(b)
guidelines. These methodologies are based on the IPCC standard approach
for estimating greenhouse gas emissions from energy supply sector
projects. The basic methodology includes:

-   identification of types and amounts of fuel consumed in each case;

-   determination of the CO~2~ emissions coefficients for each fuel
    type; and

-   calculation of the total CO~2~ emissions for each case.

    A cash-flow accounting system and a project-tracking database will
    be created upon project initiation. The accounting system will track
    the RIF\'s financial flow (*i.e.*, funds distribution and revenues).
    The database will record the purchase and installation of all PV
    panels from inventory generated as a result of the RIF funding. The
    database will also incorporate the survey, monitoring, and
    verification data described below.

    Periodically, a statistical sample of households with installed
    systems will be surveyed to determine usage patterns with respect to
    lights and appliances, actual energy use, kerosene consumption prior
    to purchasing the PV systems, and any ongoing auxiliary use of
    kerosene. CO~2~ emissions and offsets from the project will be
    calculated and adjusted as needed from information collected in the
    surveys.

    Monitoring and verification of the investment fund will also be an
    ongoing part of the project. The Project will maintain an accurate
    accounting of payments from and income to the investment fund and a
    cost accounting of uses of investment fund monies, including the
    number and types of systems purchased with investment funds.

    **ADDITIONAL PROJECT BENEFITS**.

    Solar rural electrification has significant non-CO~2~ economic,
    social, and environmental benefits. These benefits accrue at the
    individual, local, and national levels, and include: health (less
    kerosene fumes), safety (fewer fires), economic independence (less
    dependence on an externally produced fossil fuel), education (better
    reading light, longer hours, TV), and social and family life
    improvements (better and more light). These impacts are discussed in
    more detail below.

    **Non-CO~2~ Environmental ImpactsNon-CO~2~ Environmental Impacts**

    Solar rural electrification will have environmentally beneficial
    impacts beyond carbon emissions reductions. Successful deployment of
    rural PV systems will over time reduce the need for new power
    plants, avoiding not only the societal cost associated with their
    construction, but also the fuel consumption and air and other
    pollution associated with operation. Reduced need for power plants
    will reduce the need for power distribution systems with their
    corresponding environmental impacts.

    **Health and Other ImpactsHealth and Other Impacts**

    Numerous houses using kerosene lamps in rural areas are reduced to
    ashes each month by kerosene-related fires, with accompanying
    serious injuries to the inhabitants. Homes using PV systems will
    eliminate this fire risk. Parents will no longer live in fear of
    their children knocking over kerosene lamps. Children will no longer
    have eye disorders and irritations or respiratory problems
    associated with reading by dim, smoky, kerosene lamps. Children will
    be able to play after school and do their homework after dark.
    Families will have additional time in the evening.

    **Economic Development ImpactsEconomic Development Impacts**

    The provision of energy resources to rural communities in developing
    countries can stimulate social and economic development. There are a
    number of direct and indirect economic development benefits that
    arise from installation of a significant number of household PV
    systems in a community. There are also household-level economic and
    social benefits.

    **Technology Transfer ImpactsTechnology Transfer Impacts**

    Household rural electrification advances technology transfer
    objectives in several ways. PVs clearly advance sustainable
    development as they are renewable resource-based. Dispersed
    household PV systems have lower externalities than fossil fuel-based
    grid-connected energy supplies. The individual scale, portability,
    and modular nature of the PV systems allows great flexibility in
    adapting to local conditions and needs. Finally, the use of
    in-country businesses with local distribution networks provides for
    ease of implementation. Having multiple companies in multiple
    countries coordinated through one central investment fund provides
    for ease of administration.

    **SOLAR RURAL ELECTRIFICATION IN THE SHAKLEE PORTFOLIO**

    Based on the decisions of the CNN Environmental Review Panel, this
    project's offsets were accepted into the Shaklee Portfolio. The
    project was subject to the following discount factors:

-   The project life was limited to 20 years.

-   A 2% baseline discount rate was imposed on the CO~2~ benefits.

    The quantification of the benefits can be seen in the attached
    spreadsheet.

-   **Project Brief Two: Boiler Replacement in Portland Public Schools**

    **Sector: Fuel Switching**

    **Location: United States**

    **PROJECT DESCRIPTION**

    In 1990, Portland Public Schools launched the District Energy
    Program with the goal of maintaining \"energy usage and costs at the
    lowest level that is reasonable and consistent with an efficient
    learning environment.\" (Portland Public Schools Energy Policy
    3.30.080).

    The Energy Program encourages the efficient use of energy in both
    the short and long term operation of the District. Although not
    focusing on reducing emissions over the past ten years, the Energy
    Program staff estimates that efficiency efforts have achieved
    reductions of over 1,600,000 lbs. of CO~2~ in addition to SO~2~,
    NO~x~ and particulate emission savings. Portland Public Schools
    became an ENERGY STAR Buildings Partner through an extensive
    lighting retrofit program completed in 1994.

    The Energy Program leaders are the management, engineering and
    technical staff of the Department of Environmental Services in the
    Facilities and Asset Management Division. Environmental Services
    staff are responsible, with onsite facilities staff, for energy
    management of the entire facility base of the School District. The
    Environmental Services group is also a developing a broader
    \"green\" policy for facilities development and management.

    District management would like to make investments in heating plant
    upgrades in the schools. Due to budget cuts resulting from statewide
    property tax cap legislation, operation and maintenance (O&M)
    activities are being reduced and already small capital expenditure
    budgets are shrinking further or disappearing in some cases.

    **Portland School Energy/Emissions Fact Summary**

    The Environmental Services staff currently manages 82 of the 105
    facility heating plants via remote dialup. An automated energy
    management system (EMS) provides real time data from each heating
    plant hooked up to the EMS. On‑screen readouts of temperature, fuel
    consumption, steam pressure, water temperature and related operating
    parameters are available with some remote control capability. The
    staff is completing installation of remote EMS monitoring/control
    systems in the remaining facilities.

    Approximately 200 of the boilers generate steam. High efficiency
    pulse and condensing hot water boilers are not cost effective at the
    majority of the schools because of the high costs of converting a
    steam distribution system to hot water. These systems will be
    considered separately for schools with hot water systems.

    There is no specific budget allocation for any of these projects.
    Third party financing will be required to initiate any and all
    project activity.

    **The Four-School Project Scenario**

    The basic scenario involves using the cost-effective strategy of
    changing-out existing oil steam boilers to a high efficiency natural
    gas‑fired steam boiler and a change from oil burners to natural gas
    burners in the remaining two boilers in several schools.

    The heating plants in the schools are of an older firebox‑type steam
    boiler, which used to run on coal. These units are less efficient
    than the oil packaged units in use at many other Portland schools.

    Planned cutbacks in O&M budgets will not allow the facilities staff
    to maintain efficiency levels. Staff plan to continue to maintain
    the existing, aging heating plants at both schools. As the existing
    burners become unrepairable new standard oil burners would be
    purchased and installed. Under some circumstances, a switch from an
    oil burner to a standard gas burner might be made, but only if the
    underground oil storage tank at the school was at risk of leaking
    and not lineable. System‑wide there is the continuing risk of
    leaking underground oil tanks. There is no leak risk at the schools
    being considered for this project.

    **OFFSET CRITERIA AND CARBON QUANTIFICATION**

    **Project Carbon Baseline**

    The emissions offset from the fuel switch, high efficiency boiler
    retrofit and burner change, would not have happened given the
    financial limitations of the school district. A change from existing
    oil to new oil would be the most likely retrofit scenario. A fuel
    switch to gas would not take place without an external driver ‑
    usually a disintegrating oil storage tank. Therefore, the project
    baseline for offset accounting purposes is the full increment of
    CO~2~ (noted below), that is gained from the substitution of the
    existing oil boiler with a new high efficiency gas boiler, and from
    the change from new standard oil burners to new standard gas
    burners. Any small CO~2~ savings that might result from the
    changeout of an existing oil burner to a new standard oil burner are
    not included in the emissions savings calculations.

    **Project Reductions Quantification**

    As noted above, the emissions reductions will result from the
    substitution of the existing oil boiler with a new high efficiency
    gas boiler, and from the change from the new standard oil burners to
    new standard gas burners. Detailed quantification of the available
    emission reductions can be found in the spreadsheet appendix to this
    document. A brief technology of the components is provided below:

    *Boiler technology*: The new boilers will be commercially available
    100 hp Miura LX boiler with a stack economizer. The Miura unit is a
    low mass, high‑efficiency boiler with digital energy management
    system controls for staging the loading of the heating plant. The
    unit is rated at an 85 % fuel to steam efficiency including stand‑by
    and purge losses. Built in condensate return temperature sensors
    will help determine boiler loads and steam trap efficiencies. This
    boiler will produce steam in 5 minutes, as compared to 45 minutes
    for the existing oil boilers. In addition, two gas burners will
    replace the oil burners on the other two boilers not being changed
    out.

    *Burner technology:* Webster or Gordon‑Piat burners with modulating
    operability. The current oil burners are on‑off only.

    *Controls technology:* direct digital controls with remote
    operability allow optimization of the heating plant.

    The emissions reductions result from several factors:

-   The switch from the existing oil burners to new standard gas burners
    yields a 5% increase in of burner efficiency.

-   The overall system efficiency of the existing oil boilers is 65%,
    notwithstanding a combustion efficiency of the overall system is 86
    %. The overall system efficiency of the new system will
    conservatively rise to 77%, although combustion efficiency will
    actually drop to 84%. The existing system has losses in the stacks,
    from long cycle times, and the physical size of the boiler. The new
    high efficiency gas boiler has an economizer that reduces stack
    losses, has much faster cycle times, and is 50% smaller than the
    existing system.

    These operating characteristics of the new boiler drive an overall
    reduction in fuel use and therefore CO~2~ emissions, beyond the
    simple fuel switch from oil to gas. The School District facilities
    personnel believe that the calculated savings shown below are
    conservative. Although the detailed engineering has been done for
    the Roosevelt High School, these same efficiency factors are
    expected to apply to the additional schools being considered for
    this project.

    **Additional CO~2~ Savings**

    The switch from oil to gas creates additional emissions savings from
    the elimination of electricity needed to pump and heat the oil, and
    compress air to atomize the oil, prior to combustion.

    **ADDITIONAL PROJECT BENEFITS**

    **Direct Financial Benefits**

    The proposed retrofits will save the school district on energy
    costs, which will repay a school district loan as part of this
    project.

    **O&M Benefits**

    The full switch to natural gas from oil provides a significant
    annual O&M savings in each school, as calculated by the
    Environmental Services staff. These O&M savings include elimination
    of state regulatory permit costs, the weekly punching of boiler
    tubes, and most emergency calls, along with easier reporting and
    accounting of monthly fuel usage.

    The new gas boilers are expected to require tube punching only once
    or twice annually. The advanced digital controls add important value
    in the form of increased O&M efficiency, reduced O&M costs, and
    better operating control, which results in increased confidence that
    the expected emission savings are being achieved.

    **MONITORING AND VERIFICATION**

    The School District will be the primary M&V partner for the project.
    The School District represents a stable and technically competent
    agent for ongoing M&V responsibilities for this project.

    The Environmental Services staff uses a customized, Windows
    software‑based, energy accounting package, Utility Manager, to track
    energy use and costs in all facilities. The commercially supported
    software package tracks monthly energy, water and sewer costs for
    all facilities and includes weather normalization for energy
    use/cost calculations. Use and cost data is imported from the
    Accounts Payable Department to the Environmental Services group and
    analyzed monthly for unusual readings. A local electricity supplier
    provides monthly kWh consumption information via electronic data
    transfer. Currently, the Environmental Services group can provide an
    annual or cumulative energy use and cost report for any facility,
    with complete baseline data compiled from 1990 to the present. Group
    personnel would like to develop a web‑based, direct digital control
    capability for the entire boiler population, but do not have the
    resources to even begin planning this strategy.

    Environmental Services staff will continue to use Utility Manager to
    provide the basis to support monitoring, verification, evaluation
    and certification protocols. The formal carbon agreement between the
    parties will spell out the content, format and distribution schedule
    for the agreed upon carbon management M&V reports. By agreement:

-   The School District will account for carbon and other relevant
    climate gases on an annual basis on an agreed upon reporting
    schedule.

-   The basis for reporting will be the annual and cumulative CO2
    emissions compared with the projected emissions from the Year 2
    baseline.

    Typically, an equipment and operation shakedown period will occur
    during the first year. Therefore, it is not until the second full
    year of operation that a stable operating regime can be set for
    subsequent energy use and emissions monitoring objectives.
    Therefore, the second full year\'s energy use will serve as the
    baseline for the ongoing M&V protocols.

    The metrics to be submitted will include actual fuel use, by type,
    and units as reported in the Utility Manager outputs. Emissions
    figures calculated from actual fuel use will be stated in terms of
    tons of CO2 offset annually and cumulatively, covering the reporting
    period. These results will be compared to the initial emission
    assumptions. The question of \"were the CO2 emissions actually
    avoided?\" will be answered by a review of the data.

    **BOILER SWITCHING AND THE SHAKLEE PORTFOLIO**

    The CNN Environmental Review Panel reviewed this project very
    favorably as the offsets generated not only resulted in fossil-fuel
    displacement but also provided additional local benefits to the
    Portland schools.

    The Review Panel determined that a 25-year project life would be
    appropriate, and used two discounting factors on the project:

    ***Additionality discount***. In order to account for potential
    technology changes over time, a baseline discount factor of three
    percent per year starting in year ten was imposed.

    ***Front-loading discount.*** In order to discount for credits taken
    in forward years, a discount factor of one percent was assessed
    across the 25-year benefit stream of the project.

    The GHG calculations and underlying assumptions are documented in
    the attached spreadsheet

    **Project Brief Three: Coalbed Methane Utilization**

    **Sector: Methane Recapture**

    **Location: United States**

    **PROJECT DESCRIPTION**

    Large quantities of methane are vented to the atmosphere from coal
    mines with no or limited use being made of the released energy. This
    project involves using vented methane gas from abandoned coal mines
    to produce electricity. Few mines vent methane at sufficient
    concentrations to allow its direct use for power production. By
    utilizing methane that would otherwise be vented (rather than
    flared), the emissions reduction benefits of the project are
    particularly significant. There is also a carbon offset benefit from
    the displacement of existing fossil fuel use in this coal-intensive
    region of the country.

    Methane originally formed with coal is stored in large quantities
    within coal seams and rock strata surrounding the seams. When coal
    is extracted, the difference in pressure causes the methane to be
    released. Currently, most coalbed methane is vented directly to the
    atmosphere, though a small amount is flared or used for power
    production. U.S. underground coal mines emit approximately
    four million tons of methane annually; up to 250 megawatts (MW)
    could be powered per million tons. As of 1992, 550,000 tons of this
    methane was being recovered (U.S. DOE, *Emissions of Greenhouse
    Gases in the United States 1987-1994* (1995)). Almost all methane
    now recovered is pipeline-quality methane from mines in Alabama,
    Utah, and western Virginia. It is sold into the gas pipeline system.

    The resource the project developer is targeting with this initiative
    differs from the large-scale cogeneration and power production
    projects undertaken at a number of coal mines around the United
    States. The targeted resource is small-scale methane sources that
    have not previously been exploited due to insufficient economic
    returns and because the methane involved is not pipeline-quality.
    The project will take advantage of operational knowledge developed
    by energy company that can exploit these methane sources more
    cost-effectively than in the past. Even then, the modest rate of
    return means that climate change mitigation remains an important
    motivation for projects such as this one. The offset overcomes
    existing market barriers by providing financing and technical
    expertise toward development of new methane-based generating
    capacity.

    **Technology Description Technology Description**

    Construction of facilities to utilize methane from coalbeds is not a
    new concept. These facilities are generally not cost-effective,
    however, except for the largest mines. The project developer has
    developed a new approach to power production at these sites that
    makes the utilization of methane more cost-effective. The new
    technology can be installed at many coal mine vents in the eastern
    United States. The technology, given its modular and off-the-shelf
    components, also offers tremendous benefits in international
    applications.

    The project developer's technology uses internal combustion engines
    that run on low concentration methane gas to drive electric
    generators. The company\'s generating units are small relative to
    electric utility installations: the basic module is rated at 150 kW.
    Each module (also known as a skid) consists of two automobile-type
    engines driving a single generator and switchgear, which includes
    protection against voltage and frequency changes. These
    off-the-shelf modular units cost less than conventional turbine
    installations. Since automobile engines are mass-produced items, the
    cost per horsepower is a small fraction of field-constructed utility
    plants. Automotive engines typically cost at least 50 percent less
    than industrial engines and can be as much as 90 percent less. For
    larger installations, spark-ignited diesel engines may substitute
    for automobile engines.

    The switchgear installed with the units protects against variations
    in voltage, frequency, and current. The generated power is supplied
    at 480 volts; other voltages can be provided with a transformer.
    Once the skid-mounted unit is delivered to the site, the user need
    only make the electrical connections from the generator to the plant
    power lines, install and connect the piping systems, and build the
    enclosure for the unit.

    A coal mine vent installation requires only one piping system to
    carry gas from the vent to the engines. No hot water supply system
    is required. The units typically have a skid-mounted enclosure to
    protect the unit from inclement weather. The technology has been
    proven at installations in Pennsylvania and Ohio. The on-line
    availability of these units has been over 90 percent during their
    several years of operation to date.

    **Project LocationProject Location**

    This project is primarily based in Ohio, although emissions
    reduction activities may occur in Pennsylvania and nearby states.
    The coalbed methane resource, and the closed mines that are the
    basis for this project, is concentrated in this region.

    **OFFSET CRITERIA**

    Many of the emissions reductions available through this project are
    associated with a unique regulatory proceeding carried out in Oregon
    in 1996. In that proceeding, state officials approved coalbed
    methane capture as one component of a larger mitigation offset
    portfolio. However, only the CO~2~ fossil‑fuel displacement benefits
    of the methane capture and utilization project were counted for
    offset purposes. The project\'s direct methane emissions reduction
    benefits were not allowed to be counted for purposes of the
    proceeding due the wording of the governing statute which referred
    to ACO~2~ benefits. The Oregon Office of Energy interpreted the
    status to apply only to direct CO~2~ benefits, in this case the
    fossil fuel displacement resulting from producing electricity with
    the methane. The methane emissions reduction benefits themselves,
    while considered completely credible and key to the economic
    viability of the overall project were allocated to the project
    developer.

    The coalbed methane capture projects being pursued through the
    existing mitigation program resulting from the Oregon proceeding are
    being undertaken purely on climate change mitigation grounds and are
    clearly \"additional.\" The sale of the methane conversion benefits
    was a key element of the willingness of the technology supplier to
    pursue the projects in the first place. The fact that these credits
    were not claimed as part of the regulatory proceeding was purely an
    artifact of the regulation governing the proceeding, rather than any
    sort of judgment that the methane reductions should not be credited
    as such.

    **CARBON QUANTIFICATION**

    A typical 900-kilowatt power production system will burn 300,000 CFD
    of coalbed methane to generate electricity, and result in the direct
    reduction of almost 2,000 metric tons of methane per year, the
    equivalent of almost 50,000 tons of CO~2~. Each installation will
    burn 100 million cubic feet of methane annually to generate 7,096
    MWh of electricity. Carbon dioxide reductions from displaced fossil
    fuel consumption will depend on the source of electricity being
    displaced. If coal‑fired electricity is displaced, a 1,000-kilowatt
    system will offset approximately 7,000 tons of fossil fuel carbon
    per year. The total benefit would therefore be approximately 56,000
    tons of CO~2~ equivalent per year per MW of installed coalbed
    methane capacity.

    **MONITORING AND VERIFICATIONMONITORING AND VERIFICATION**

    Project monitoring and reporting for this project will be
    comprehensive and open for review and validation. The monitoring and
    verification plan will incorporate the following elements:

-   The operator will monitor the volume of fuel consumed and the amount
    of electricity generated by the facility. This monitoring will be
    built into the project component as part of its design and
    operation.

-   CO~2~ emissions will be calculated directly from fuel consumption
    data, based on the known heat value and carbon content of methane.

Because of the simple and straightforward nature of the monitoring
process, the project developer did not incorporate external
verification.

**ADDITIONAL PROJECT BENEFITS**

The methane offset projects will have several important ancillary
benefits beyond the CO~2~ emissions reductions resulting from displaced
fossil fuel consumption. First, they will result in reduced emissions of
NO~x~, CO, SO~x~, and particulates through the displacement of fossil
fuel use. These benefits were not quantified for this proceeding. The
coal mine offset project will burn methane that otherwise would have
been vented to the atmosphere.

A final feature of the methane projects is the potential technology
transfer implications. Cost-effective use of off-the-shelf internal
combustion engines for projects at coal mines, landfills, and sewage
treatment plants in developing countries holds considerable potential as
an economic development and greenhouse gas mitigation tool. The energy
company's technology has not yet been proven in these applications. The
information gained through this project will be applicable to a far
broader market.

**COALBED METHANE REDUCTIONS AND SHAKLEE'S PORTFOLIO**

Based on the decisions of the CNN Environmental Review Panel, this
project's offsets were declared to have met CNN criteria for
additionality, transparency, leakage, and verifiability. The assumptions
used in quantifying the GHG benefits are documented in the attached
spreadsheet.

**Project Brief Four: Landfill Methane Power Production**

**Sector: Fossil Fuel Displacement**

**Location: United States**

It was decided that a fossil fuel displacement project through landfill
methane recapture and utilization (or similar means) would be a valuable
additional to the Shaklee offset portfolio in year two of the portfolio.
At the time of the submission of this document a specific project was
not yet available. The description contained below is in regard to the
ReGen^sm^ product, which is one option for inclusion in the portfolio.

## PROJECT DESCRIPTION

The ReGen^sm^ product is intended to provide convenient, affordable, and
credible means for companies to reduce the environmental impacts of
their power use through the use of non-CO~2~ emitting energy sources.
Although there are plans for the eventual inclusion of wind and PV
power, for the first several years of the project landfill methane will
be the primary energy source used.

As with most landfill methane offset projects, the ReGen^sm^ offsets are
created through the generation of electricity from captured methane.
Shaklee will purchase credits based on the generation of power from a
landfill or other renewable energy source, based on the fossil fuel
displaced in the system mix.

## ADDITIONALITY

ReGen^sm^ estimates that its project will displace CO~2~ emissions from
the New England power system at the rate of 1,584 lbs for each l MWh
generated. Project baseline carbon emissions are based on the marginal
emissions rates of CO~2~ from the New England power system. Marginal
emission rates are those based on the impact of new generation, like the
renewables developed under the ReGen^sm^ program, when added to the New
England grid. These emission rates are quite different from and higher
than average emission rates from the New England system because the
nuclear and hydro power plants in the region, low/no carbon emitters,
are not on the margin are expected to continue operations unaffected by
the addition of new renewable supplies. In contrast, the power plants on
the margin are likely to be the older, less efficient, and higher
emitting, oil, coal, and gas-fired power plants on the system. The
marginal emission rates reported by the NEPAL Environmental Planning
Committee bears out this theory.

All of the ReGen^sm^ power supplies are zero net carbon emitters. Wind
and photovoltaics projects are obviously zero emitters. Landfill gas
projects are treated as net-zero emitters because we assume that
otherwise the landfill gas used in these generators would be burned from
methane to CO~2~ in an on-site flare.

## MONITORING AND VERIFICATION PLANS

The primary measure for verification of ReGen^sm^ is the metered
electricity production of the renewable energy projects under contract.
The contractor will be auditing its power purchase and power sale
contracts and then making this information available to the public to
confirm and verify that Shaklee is purchasing sufficient wind,
photovoltaic, and landfill gas power from new (post l/l/98 projects).

The emission benefits within the power pool will have to be determined
by periodic assessments of the power plants operating \"on the margin\"
within the New England grid.

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