Transcript Carbon Trading for Dummies Opportunities for HD Operations

Carbon Trading
and the Kyoto Protocol
Antonio Lim
Sustainable Development Department
Europe and Central Asia Region
World Bank
Sarajevo, Bosnia-Herzegovina
April 16, 2009
Overview
• Kyoto Protocol and the Carbon
Market
• Features of a Carbon Finance Project
• Mitigation Project Examples
Climate Change and Global
Warming
Earth’s climate is warming and
human activities are primarily
responsible (>90% certainty)
280 to 430ppm concentration
between 1850 and 2000 (0.5-0.8oC
increase)
550ppm likely by 2035 with
77-99% chance of 2oC increase
50% chance of 5oC increase
Global Warming Potential (GWP)
• Measure the impact that particular GHG
on ‘radiative forcing’ – the additional
heat/energy retained in the earth’s
ecosystem through the addition of this gas
to the atmosphere
Unit of Measure: ton of CO2equivalent
(tCO2e)
Global Warming Potential (GWP)
•
•
•
•
•
•
Carbon Dioxide (CO2)
Methane (CH4)
Nitrous Oxide (N2O)
Perflurocarbons (PFC)
Hydroflurocarbons (HFC)
Sulfur Fluoride (SF6)
1
21
310
6500
11700
23900
Potential Impacts
The Kyoto Protocol
38 Developed Countries and Economies in
Transition (Annex I) agreed in 1997 to
• Reduce GHG emissions by 5.2% below 1990 levels
in the commitment period 2008-2012
• Total demand created for GHG Reductions: ~5 billion
tCO2e, including the US
• Marrakech Accord: agreed on the rules of
implementation in November 2001
• KP came into force in 2005 February with Russia
ratifying the Protocol
Global Market Created by the
Kyoto Protocol
• Most OECD countries have a reduction
target, on average 5.2% below 1990
• Targets to be achieved through:
– Reductions at home
– Purchasing emission reductions credits and
international emission allowances
• Credits from projects in developing countries
(Clean Development Mechanism – CDM)
• Credits from projects in economies in transition
(Joint Implementation – JI)
• International Emissions Trading of allowances
Carbon
Market
How Carbon Trading
Operates
Buyer’s side
Seller’s side (Host
Country)
Domestic action
Project emissions
Baseline emissions
Baseline Scenario
Emission
Reductions (ERs)
ER
Purchase of ERs
Purchase of
allowances
Purchase of ERs
is supplemental to Emissions target
domestic action
Host country benefits
from technology and
financial flows
Project Scenario
Mobilizing Resources for Climate Change
Mitigation
• Emission reduction projects located in “Kyoto”
countries: →Clean Development Mechanism
(CDM) and Joint Implementation (JI)
– Traded Unit: Certified Emission Reductions (CERs)
• Emission reduction projects in Non-Kyoto”
countries: →Voluntary Market
– Traded Unit: Verified Emission Reductions (VERs)
→ Dynamic rules and conditions involving
continuous change in standards,
requirements, demand profile, supply, etc.
Growth of the Carbon Market
Carbon Markets (Mil. USD)
120,000
Voluntary
Others
JI
CDM
UK ETS
RGGI
CCX
NSW
EU ETS
100,000
80,000
60,000
40,000
20,000
0
2005
Mil. USD
Compliance Markets
Voluntary Markets
2006
2007
2008
2006
2007
2008
31,165
63,770
117,084
70
265
499
Critical Operational Concepts in
Carbon Finance Projects
• Baseline
– Which GHG emissions will be reduced?
– Business-as-Usual (BAU) Scenario
• What is the future without the proposed project?
• How many years will the emission reductions last?
– What are the project boundaries?
• Additionality
Concept of Additionality
• Investment Barrier
– A more financially viable alternative can lead to higher
emissions
• Technological Barrier
– Less advanced technology leads to higher emission
• Common Practice Analysis
– Prevailing practice, existing regulatory or policy
requirements
• Benefits Analysis
– A more viable strategic alternative can lead to higher
emissions
Baseline/Additionality
emissions
Emission Baseline
Certified
emission
Reductions
(CER)
Project emissions
time
The difference between the actual
project emissions and the emission
baseline constitute the volume of
CERs
If project emission = baseline
emission → no CERs
Investment in Schools Heat Saving
Structures in Serbia
75.0%
1.3%
0.0%
0.8%
12.5%
5.9%
2.6%
1.9%
Wall insulation
Roof insulation
New windows and doors
Termostatic radiator valves and VSD pumps
Three-way valves and VSD pumps
Pipe & exchanger insulation, new heat exchanger
New heat substation or boilers (fuel switch)
Boiler reconstruction (with fuel switch)
Mitigation Impact for the Schools
• Total number of schools : 16 / 54,035 м2
• Heat for space heating (MWhe/y)
– before 11,168 -> after 6,321 (-43.4%)
• Average specific heat consumption for space heating
– before 207 кWh/ m2/y -> after 117 кWh/ м2/y
• CO2 emission reduction
– before 3,303 t/y -> after 1,844 t/y (-44.2%)
• Specific investments
– Average € 38.8/m2 in range € 18.1 to € 97.4 /m2
Investments in Hospitals Heat
Saving Structures in Serbia
55.7%
7.8%
16.1%
10.4%
4.9%
0.8%
1.4%
3.0%
Wall insulation
Roof insulation
New windows and doors
Termostatic radiator valves and VSD pumps
Three-way valves and VSD pumps
Pipe & exchanger insulation, new heat exchanger
New heat substation or boilers (fuel switch)
Boiler reconstruction (with fuel switch)
Impact of the Investment in the
Hospitals in Serbia
2
• Total number of hospital buildings: 11 / 50,934 m
• Annual heat for space heating (MWhe/y)
– before 16,747 -> after 10,673 = reduction of 36.3%
• Specific heat consumption
– Before 329 кWh/ m2,y -> after 210 кWh/ m2,y (-36.3%)
• CO2 emission
– Before 4,668 t/y -> after 3,101 t/year (-33.6%)
• Specific investments
– Average € 29.23/m2 ; range € 19 to € 58.8/m2
The Road Ahead for B-H
• EU 20-20-20 Vision
• US renewed engagement in international
negotiations
• Post 2012 International Agreement (post
Kyoto Protocol) – December 2009
Copenhagen COP 15 Final Negotiations
• Transformative Approach in Mitigation –
programmatic and sectoral approaches
Carbon markets surpassed US$130billion in 2008
Future w/ EU
Allowance markets
(US$ million)
Project-based transactions
(US$ million)
Opportunity for B-H
EU Emissions
Trading Scheme
JI
700+
100,000
(twice over 2007)
Assigned
Amount Units
180
Regional GHG
Initiative
240
CDM
6,000
New South Wales
Certificates
180
Secondary
CDM
25,600
Voluntary market in 2008 – niche segments (US$ million)
Chicago Climate Exchange
310
Source: WB State and Trends of the Carbon Market 2009, forthcoming, Point Carbon, Reuters
Voluntary & retail
500 ?
Thank You
• www.carbonfinance.org
• www.unfccc.int
Overview of CDM and Voluntary
Standards
Standard
Description
Eligible Project
Types
Certification of Offset Projects and carbon credits
Excluding Nuclear,
new HFC and REDD
Gold Standard Certification of Offset Projects and carbon credits
Only Renewables and
Energy Efficiency
CDM
VCS
Certification of Offset Projects and carbon credits
New HFc excl.
VER+
Certification of Offset Projects and carbon neutral
products
Nuclear, HFC and
large hydro excl.
CCX
Certification of CCX Offset Projects and credits
CCB Standards Certification of Offset Projects
ISO 14064
Certification of carbon credits, offsetting and
emissions
New HFC excl.
Only LULUCF
No restriction
Comparison of CDM and GS
Criteria
CDM
Gold Standard
Organization
UN-backed
Backed by 60 NGOs & charities
Supervising Body
UNFCCC EB
GS TAC
Registration Process
Rigorous & Bureaucratic
CDM-like with strong sustainable
development focus & community consultation
component
Project Types
Almost all types eligible
Only renewables and Energy Efficiency
Additionality
CDM additionality tool
Same as CDM
Sustainability
Assessment
Host country criteria
apply
additional sustainability criteria (SD matrix)
Stakeholder
Consultation
1-step consultation
2-step consultation (also at project design)
Prices
Roughly standard prices
Project dependent
Crediting Period
10 / 21 years (*LULUCF)
Same as CDM
Methodology
CDM methodologies
CDM methodologies + additional
methodologies
Issuance of Credits
By EB
By GS, into the “GS Registry” account