It's a Dung Deal

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American Electric Power (NYSE: AEP), the nation's largest CO2 emitter, is taking baby steps toward changing its dirty ways -- starting with cow manure.

The methane capture technology AEP plans to employ has been proven effective, and it should provide quick carbon offsets for the company. But in announcing this plan last week, I think the company revealed its extremely limited vision regarding sustainable energy practices.

Wondering how cow pies relate to carbon offsets? The Kyoto Protocol environmental treaty enabled both developed and developing countries to buy and sell each other credits for the carbon they produce. Ecuador's recent offer to sacrifice oil development by sparing its biosphere reserve, for a price, is a slight variant of such an arrangement. Companies can also earn carbon credits by preventing methane gas from escaping from livestock waste lagoons, among other efforts. AEP is paying a third party to work with 200 farms to capture methane. The firm it's hired will place PVC covers over the lagoons, then destroy the gas -- in this case, by burning it off.

Agricultural operator Bunge (NYSE: BG) has adopted a similar tactic in Latin America, with a smarter twist. Instead of simply flaring off the captured gas, Bunge uses it to generate electricity -- or, with a little processing, as a heating or cooking fuel for resale. So-called biogas hasn't made too much of a splash in the U.S., but it's already powering trains in Sweden and cars in Germany. Companies such as Archer Daniels Midland (NYSE: ADM) and Anheuser-Busch (NYSE: BUD) are also using methane capture to generate renewable power.

Other utilities clearly understand that methane is a resource ripe for exploitation. Exelon (NYSE: EXC) uses landfill gas to generate power in Pennsylvania. Entergy (NYSE: ETR) captures methane vented from coal beds to generate power.

It's disappointing to see AEP doing what looks like the bare minimum to secure carbon credits, and failing to envision real change in the way it runs its business. "Capture and destroy?" That approach stinks worse than the source of its methane.

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Fool contributor Toby Shute loves the sweet smell of success. He doesn't own shares in any company mentioned. Anheuser-Busch is an Inside Value recommendation. The Motley Fool's disclosure policy helps investors breathe easy.