Transcript Climate change mitigation and carbon markets Regulatory

FOCUS: MITIGATION
Compliance and voluntary
markets
Louis Perroy, ClimatEkos
30 August 2011, Vientiane, Lao PDR
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Climate change mitigation and carbon markets
Regulatory markets
Voluntary markets
Comparison of regulatory and voluntary markets
The AFOLU Sector and Carbon markets
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Climate change mitigation and carbon markets
Regulatory markets
Voluntary markets
Comparison of regulatory and voluntary markets
The AFOLU Sector and Carbon markets
What is climate change
mitigation?
‘An anthropogenic intervention to reduce the sources or
enhance the sinks of greenhouse gases.’
IPCC Glossary
Where do GHG emissions come from
in the agricultural, rural and land use sector?
Context for the region
Where emissions come from?
Waste
0%
Cambodia
Energy
3%
Industry
0%
Agriculture
18%
Waste
1%
Lao PDR
LUCF
72%
Tot emissions (‘000 tons)
59564 before biomass growth
-62050 after biomass growth
Thailand
Industry
5%
Tot (‘000 tons)
24521 before
-97093 after
VietNam
Waste
4%
Waste
3%
LUCF
17%
LUCF
35%
Energy
25%
Agriculture
18%
Energy
56%
Industry
0%
Agriculture
23%
LUCF
79%
Industry
6%
Energy
4%
Tot (‘000 tons)
285198 Before
232798 after
Agriculture
31%
Tot (‘000 tons)
207673 before
150673 after
Context for the region
Where emissions come from?
Global Emissions
Globally, and especially for the Mekong region, agriculture
and forestry plays an interesting environmental role: it is
both a victim of, and contributor to climate change.
What is climate change
mitigation?
AGRICULTURE
A. Domestic livestock (methane produced from intensive livestock, enteric
fermentation),
B. Rice cultivation (nitrogen fertilizer use (20% of global use), methane
emissions from fermentation of organic matter in flooded rice paddies)
C. Grassland burning
D. Agricultural residue burning
E. Agricultural soils
(almost entirely A and B)
LAND USE CHANGE AND FORESTRY
A. Change in forest/woody biomass
B. Forest/land use change
(mostly clearing of forests and draining of wetlands)
Project-Based Mechanisms
• Greenhouse gases are global → 1 tonne of reductions
has the same effect to atmospheric levels of GHGs
regardless of where the reductions are achieved
• Industrialised countries may invest in reductions where
those reductions can be achieved most cost-effectively
Emission Reduction
Value ($)
Buyer of
carbon
credits
Seller of
carbon
credits
Carbon Credit (tCO2)
Carbon market types
Compliance markets, motivated
by:
Voluntary markets, motivated by:
• Regulatory framework such as the
Kyoto Protocol or the EU ETS
• Early action
• Pending carbon regulation
• Demonstration of social responsibility
• “Green” PR and branding
Total voluntary
131Mt in 2011
EcoSystem Marketplace, 2010
Content
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Climate change mitigation and carbon markets
Regulatory markets
Voluntary markets
Comparison of regulatory and voluntary markets
The AFOLU Sector and Carbon markets
Regulatory markets: the Clean
Development Mechanism
Emission reductions from Non-Annex I countries may be sold to Annex I
countries
Annex I Country
Non-Annex I Country
(e.g., Switzerland)
(e.g., India)
CERs
A reduction project reduces
GHG emissions
Actual
emissions
Emission
cap
Carbon Value ($)
Buyer
Seller
As of January 2011, there are nearly 6,000 projects in the pipeline with
the overall potential of more than 2.5 billion tonnes of reductions until
2012 (UNEP Risoe, 2011) this compares with the EU emission of 4.2 billion/year and
WW 30 billion/year (of which 2% should be reduced per year to limit to 2oC).
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Climate change mitigation and carbon markets
Regulatory markets
Voluntary markets
Comparison of regulatory and voluntary markets
The AFOLU Sector and Carbon markets
Voluntary markets: the concept
EcoSystem Services Llc, 2009
In 2011, the voluntary market resulted in emission reductions
in the range of 131 million tonnes of CO2e, with a monetary
value of over USD 500 million. (EcoSystem Marketplace, 2011)
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Climate change mitigation and carbon markets
Regulatory markets
Voluntary markets
Comparison of regulatory and voluntary markets
The AFOLU Sector and Carbon markets
Land use sector in the carbon
market
Only the minority of these are rural projects
Compliance market
Voluntary market
UNEP Risoe, 2011 and EcoSystem Marketplace, 2010
Project location
Compliance market
Voluntary market
UNEP Risoe, 2011 and EcoSystem Marketplace, 2010
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Climate change mitigation and carbon markets
Regulatory markets
Voluntary markets
Comparison of regulatory and voluntary markets
The AFOLU Sector and Carbon markets
AFOLU sector as main
contributor to climate change
• Sector is important in several aspects:
• In addition, sector with highest potential
Main emissions methane,
• for synergies with other Conventions
nitrous oxides
IPCC WG III, 2007
Main emissions from
deforestation
AFOLU sector as key climate
change mitigation sector
• Apart from being an emission source, the AFOLU sector
can serve as carbon sink, like this contributing to
mitigate climate change.
• Carbon sinks are defined as ‘any process, activity or
mechanism which removes a greenhouse gas, an
aerosol or a precursor of a greenhouse gas from the
atmosphere’ (UNFCCC)
• Carbon sinks can be created, maintained or enhanced
through
– Carbon sequestration
– Carbon conservation
AFOLU in the carbon market
Compliance market (Kyoto)
Voluntary market
CDM: Carbon sequestration
• Carbon sequestration and
Conservation
• A/R, Revegetation, Forest
Conservation, Improved
Forest Management,
Improved Agricultural
Management, etc...
 Afforestation and
Reforestation
[JI: Carbon sequestration
and Conservation
 A/R + Revegetation,
Cropland management,
Forest Conservation ]*
• No soil protection
* Not relevant to Asian countries
• Soil protection eligible
Rural energy in the carbon
market
Emission Reductions through
• Replacing fossil fuels through biomass
• Generating renewable energy
• Controlling and capturing livestock emissions
• Achieving energy efficiency (e.g. fuel efficient
cooking stoves)
These project types are eligible for both the
CDM and voluntary markets
Opportunities to generate carbon
credits in the AFOLU sectors
Reducing Emissions By…
Agriculture
•… reducing fertilizer use, organic fertilizer
•... remove organic matter in flooded areas (rice)
•…remove water periodically from flooded areas
•… anaerobic digestion of waste
•… modifying livestock management (biodigesters, limit
enteric fermentation)
• ...limit release nitrogen from soil, soil conservation (no
tillage, cultivation of legumes fixing nitrogen),
•… using bioenergy
•… use of renewable energy
•… improving energy efficiency
Opportunities to generate carbon
credits in the AFOLU sectors
•forestry: increasing sequestration and conservation of
carbon
•...forest conservation,
•...agroforestry,
•...forest management
• ...reduce burden on forest for fire wood (develop other
sources of energy, renewable energy, improve efficiency of
cooking stove)
AFOLU type projects with significant sustainable development benefits are
well suited for the voluntary market as buyers are often looking for projects
that not only reduce emissions but also support the surrounding
communities and environment.
Eligibility of mitigation projects?
Area
Forestry
Agricultural sectors
Energy related projects in the
rural and agricultural sectors
Type of project
Afforestation/reforestation
Avoided deforestation (REDD)
Sustainable forests management
Agro-forestry and silvo-pastoral
systems
Cropland and grazing land
management
Soil conservation management
Eligibility
CDM VCS
Y
Y
N
Y
N
Y
N
Y
N
Y
N
Y
Fertilizer switch or management in
order to reduce N2O emissions
Y
Y
Bio-digestions and other methane
based project in the agricultural
sector
Livestock management
Biofuels Projects
Fuel switch projects (ex. coal and
biomass) contributing to the UNCCD
mandate
Small scale renewable energy
projects (ex. small hydro combined
with forestry activities for protection
of watersheds)
Energy efficiency
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Y
Outlook for AFOLU
• Promising and important sector, also according to IPCC: “outlook for GHG
mitigation in agriculture suggests that there is significant potential” and
“forestry can make a very significant contribution to a low-cost global
mitigation portfolio that provides synergies with adaptation and sustainable
development” (AR4, 2007)
• Yet underdeveloped due to different reasons, among them lack of political
will for forestry  change of mind, more activities & investment needed.
• First steps are being done but need to intensify actions, measures and
awareness.
• Number of project types that may not work under CDM, especially in forestry
and agricultural sectors, which could be very successful on the voluntary
market.
Outlook for Agriculture
Most prominent options for mitigation are:
• Improved crop and grazing land management (e.g., nutrient use,
tillage, and residue management)
• Restoration of organic soils that are drained for crop production
• Restoration of degraded lands
Significant mitigation is possible with:
• Improved water and rice management
• Land use change (e.g., conversion of cropland to grassland)
• Agro-forestry
• Improved livestock and manure management
IPCC, 2007
Outlook for Forestry
• REDD is seen as high potential sector that will be promoted in the
coming years
• Deforestation is the single most important CO2 source in the land
use sector , with a net loss of forest area between 2000 and 2005 of
7.3 million ha/y (FAO FRA, 2005)
•  In the short term, mitigation benefits of reducing deforestation
are greater than the benefits of afforestation
Measures in the forestry sector allow for the cost-effective
reduction of emissions while often also delivering development
and biodiversity co-benefits.
Cambodia approved its first CDM project in early January 2006, an important step to show that even a small and least developed country (LD) like C
Climate change mitigation
Cambodia
Voluntary: 2 REDD projects. protect of 60,245 ha of forest land in the
Northwestern province. Voluntary Carbon Standard (VCS) combined with the
Climate Community and Biodiversity Alliance (CCBA) guidelines (8.7 million
metric tons of CO2 over 30 years).
AFOLU relevant CDM: As of July 2011; out of 7 projects we isolate projects within
AFOLU sectors.
Name description
Status
Angkor Bio Cogen Rice Husk Power Project
Registered
Methane fired power generation plant in Samrong Thom
Animal Husbandry
Registered
W2E Siang Phong Biogas Project Cambodia
Registered
Biogas Project at MH Bio-Ethanol Distillery
At validation
Cambodia approved its first CDM project in early January 2006, an important step to show that even a small and least developed country (LD) like C
Climate change mitigation
Lao PDR
Voluntary: three voluntary REDD + projects in Lao PDR up to date.
AFOLU relevant CDM: 1 CDM project in Lao registered at the CDM EB: Rubber
based agro-forestry system for sustainable development and poverty reduction
in Pakkading, Bolikhamsay Province.
Lao PDR’s DNA has approved five projects.
Three projects are at or after the validation stage, while seven are at PDD
preparing stage. Two projects are in the area of afforestation and
reforestation, one in biogas, one in biomass.
Name description
Status
Mitigation of GHG: Rubber based agro-forestry system for
sustainable development and poverty reduction in
Pakkading
At validation
What is climate change
Technical aspects
Technical aspects of carbon projects within AFOLU sector
will be dealt with on Thursday, such as
• Carbon credit standards
• Eligible project types for the AFOLU sector
• Project timing
• Additionality
• Baselines
• Methodology
• Leakage
• Permanence & Land eligibility criteria
• Sustainable development criteria and Non diversion of
ODA
Land use sector in the carbon
market
Only the minority of these are rural projects
Compliance market
Voluntary market
UNEP Risoe, 2011 and EcoSystem Marketplace, 2010
There are several opportunities, especially in forestry and sustainable land
management that can be pursued on the global carbon markets. However, market
shares of these projects stay behind the potential, especially in the compliance market
Thank You!
Louis Perroy
Senior Partner and CFO
ClimatEkos
[email protected]