carbon finance in ld cs hedon - public
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Financing highly social and environmental project through the voluntary carbon market
Olivier Levallois
Household energy demand! Challenges.
• Rural Biogas tanks in Guizhou province, China• Implemented by French NGOs • Project activity: 8 m3 biogas tanks for individual households. Use of
waste for energy production and as fertiliser• Baseline: use of fire wood, charcoal, coal• 5,000 tCO2/y for 1,700 units
Household energy demand! Challenges.
• Microsolar Lighting in Zambia• Implemented by SolarAid • Project activity: small LED lights powered by photovoltaic panels for
individual HH. Train solar entrepreneurs• Baseline: use of kerosene (common fuel for domestic lighting).
• Use of around 52-55 litres of kerosene / year. • 2.580 kg CO2/litre of kerosene. • 19% of their yearly spend
• 2,500 tCO2/y for 39,000 units ($20 each)
Household energy demand! Challenges.
• Ceramic Water Purifiers in Cambodia• Implemented by Hydrologic• Project activity: use of ceramic water purifiers to treat contaminated
drinking water (10 L units)• Baseline: conventional water treatment (boiling water with NRB -
firewood)• 20,000 tCO2e / year for 40,000 units ($20 each)• Role of carbon: subsidy price of filters
Policy options to reduce GHG emissions
Objective:
reduce greenhouse gas emissions
Non-Market-based Mechanism(s)
Regulation/Tax
Market-Based Mechanism(s)
Regulated Carbon Market:Cap-and-trade + Offsetting mechanism
Voluntary Carbon Market:Offsetting mechanism
Voluntary Carbon Market: companies, individuals, and other entities and activities not subject to mandatory limitations that wish to offset GHG emissions
Carbon credits financing channels
How does it work? Bring (additional) revenues to an emission reduction project Cover the cost difference between an old and a new technology Act as an international subsidy to clean energy in developing
countries Obtain core funding
Where do they grow? In a well taken care of tree Validated by auditors Issued by Standard bodies
Eligibility assessment
Project document drafting
Validation by independent auditor
Registration by the standard committee
Monitoring/Verification/Issuance
How do you obtain carbon credits from your project?
Let’s use the Clean Development Mechanism…
• International agreement (KP):• CERs accepted by signatory countries• Included in the EU-ETS and JV-ETS
• Goal:• Emission reduction cost-effectiveness• Sustainable development in host countries
• Benefits:• 1 billion tCO2e (source: UNFCCC)• Increase knowledge on emission reduction opportunities• Constructivism
• Limits:• Transaction cost• Sustainable Development• Price volatility/decrease• No LULUCF activities This is where voluntary market
can help
Compliant vs Voluntary market
• Project NOT registered/certified with UNFCCC:• Private standards: Verified Carbon Standard, Gold Standard
Foundation, Carbon Fix, Climate Action Reserve, etc.• Similar certification that CDM, same or similar
methodology/approaches
• Buyers of offsets are not obliged:• Various purposes: climate change engagement, communication
strategy, pre-compliance readiness, etc.
Voluntary carbon market’s main drivers
Demand Offer
WhoService/financial companies, manufacturers, retailers
Project owner/developers, intermediaries
ObjectiveReducing environmental impact, carbon footprint offsetting
Reducing/avoiding GHG emissions, improving environmental impact
Standard Recognised and credible Valuable
GeographyLink with the offsetting company' activities
Project located in developing countries. Growing sources of GHG
TechnologyLink with the offsetting company' activities
Industry or household energy-related, transportation, land-use, forestry
Price GBP 0.5 to GBP 12 / tCO2e GBP 1 to GBP 20 / tCO2e
Voluntary Carbon Market: 93 M tCO2 exchanged in 2011
Large companies offsetting
Google: 1,5 M tCO2e/y
Aviva: 130,000 tCO2e/y
Marriott: 3 M tCO2e/y
JLR: 700,000 tCO2e/y
Voluntary market! Objectives.
• Broaden parties involved in emission reduction activities• Voluntary initiatives
• Reduce transaction costs• Shorter process• Simplified methodologies• Lighter interpretation of the UNFCCC guidance
Voluntary market! Objectives.
• Account for Sustainable Development criteria• MDG Matrix:
• Air quality• Water quality and quantity• Soil condition• Biodiversity• Quality of employment• Livelihood of the poor• Access to affordable energy• Etc…
• During validation and verification
Voluntary market! Pros.
• Price level: according to the social and environmental value of the project:
• Household level energy demand (6 – 10 GBP)• Forestry projects (4 – 8 GBP)• Small scale renewable energy (2 – 4 GBP)• Large scale renewable (1 – 3 GBP)• Industrial gases (< 1 GBP)
• Lower price volatility
Household energy demand! Challenges.
• Working with households in LDCs• Technologies eligible: rural biogas, cook-stoves, water filters, solar
heater
• Larger number of participants (households, NGO, financing party, etc.)
• Introduction of the suppressed demand concept
Household energy demand! Challenges.
• Offer balance demand equlibrium
2007 2008 2009 2010 2011 20120
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OfferExponential (Offer)DemandLinear (Demand)
Demand: Marketing budget cut: Slowing of increase
Offer: Massive issuance from HH energy demand Forestry project first issuances
Household energy demand! Challenges.
• Higher cost of emission reduction• Less commercial incentive (not for profit)• Heavier management structure• More complex monitoring
• Surveys• Quantitative tests• Equipment
• Valuation of NRB
• Spot transactions
Controversies and credibility building
What is a credible emission reduction? ICROA: Code of good practice Financing meaningful projects
Additional
Real
Permanent
Measurable/Independently verifiable
Enforceable/Unique
What makes a credible & valuable offset credit ?
Industry association grouping 11 companies Offering Carbon management and offsetting Setting a code of good practice
Carbon Management: Use international standards (e.g. WRI/WBCSD GHG Protocols and
ISO 14064) Prioritise emission reduction strategies
Offsetting: ACR, UNFCCC, CarbonFix, Gold Standard, VCS, CAR Working with standards Building market credibility
Promote meaningful projects
Avoid industrial gases Avoid large hydro power plants Provide client with a story
Global Burden of Disease Study 2010 (THE LANCET)
Largest ever systematic effort to describe the global distribution and causes of a wide array of major diseases, injuries, and health risk factors
Household air pollution from cooking with solid fuels kills 4 million people annually
Wood fuelSupply/Demand balance
Partnership with Practical Action
Low smoke project in El Fasher, North Darfur, Sudan
Over 5 years, Carbon Clear has been providing
- Funds for micro-facility- Project management costs (Rugby, Khartoum, El Fasher):
- Staff- Logistics- Training- Workshop- Equipment- Indemnity from Women Development Associations
- Technical capacity building on Monitoring and Evaluation- Monitoring equipment
2008-2012: Objectives
Distribute up to 10,000 LPG stoves in El Fasher (North Darfur)
Reduction in indoor air pollution in households
Reduction of overall household energy expenditures for low-income families
Reduction of pressure on dwindling forest resources in the Darfur (NRB ~ 80-95%)
Strengthening of the managerial capacity of the community-based Women’s Development Association
2008-2012: Achievement/ Challenges
- 3,500 LPG stoves distributed in El Fasher- Part of it is outside El Fasher- (Price of stove + canister) x 3 - Price of LPG increased by 30%- Emission reduction (5-6 tCO2e / stove / year)
- Long delays- Validation lasted 3 years (no DOE available, then visit delayed many
times, then auditor not available, high turnover with DOE, etc.)- End of the 1st agreement period
Switching to a better energy