Transcript Agenda 4(a) Replenishment of the Multilateral Fund for the

Supplement to the Report on the
Replenishment of the Multilateral Fund
for the Period 2009-2011
(and beyond)
TEAP - Replenishment Task Force
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Funding requirement 2009-11 summary
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The total funding requirement for the triennium 20092011 is likely to be in the range of
US $339 to US $630 million
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If based on two HCFC consumption funding and two cost
effectiveness scenarios for all Article 5 Parties
This is a slight (updated) change compared to the values
published May 2008, and does not take into account the
possible impact of various parameters investigated
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Two reports published in 2008
This presentation is a summary of the results published in
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The Supplement to the Assessment report,
October 2008
which report contains some more detailed investigations
of various aspects dealt with in the report
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The Assessment of the Funding requirement for
the Multilateral Fund for the period 2009-2011,
May 2008
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Decision XIX/10
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Mentions for the study: “…while taking further into account:
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The need to allocate resources…. Maintain compliance
Rules and guidelines by the Executive Committee
Financial commitments in 2009-2011
Approved country programmes
The provision of funds for accelerating phase-out and
maintaining momentum…
Experience to date
The impact of the international market on supply and
demand………”
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Decision XIX/6
Decision XIX/10 is related to XIX/6, which mentions
specifically:
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To agree that the funding available through the Multilateral Fund in the
upcoming replenishments shall be stable and sufficient to meet all
agreed incremental costs to enable…..
To agree that the Executive Committee …. give priority to cost effective
projects and programmes which focus on, inter alia:
 Phasing out first HCFCs with higher ODP,....national circumstances
 Substitutes and alternatives that minimize other impacts on the
environment, including on the climate…GWP, energy use and other..
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Additional requests at OEWG Bangkok
Additional requests were made for study at OEWG-28:
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Destruction
Inflation
Institutional Strengthening
Cut-off dates and impact of second conversion funding
Cost effectiveness factor composition
Climate benefits
Other issues, exports and multinational rule
Demonstration projects
Risk analysis in case of high growth through 2012
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Additional requests at OEWG Bangkok
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TEAP considered all elements requested for further
study regarding their impact on the funding
requirement; this with a focus on the next 2009-2011
triennium
In the case of the investigation of cut off dates and the
funding of second conversions the impact on the
funding requirement during the three trienniums was
considered
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Destruction (1)
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The Montreal Protocol has not yet financed emissions
reduction measures
Funding of destruction - disposal needs to be considered in
the triennium 2009-2011, because the banks of unwanted
CFCs and halons will largely “leak” away soon
Certain sources report 9-12,000 (metric) tonnes as
available for destruction in 2008
ExCom 48/42 report indicates 1500 tonnes available every
year
Impossible to accurately estimate the amounts concerned
Costs mentioned (US $6/kg) not related to carbon credits
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Destruction (2)
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Destruction activities were estimated to cost US $27
million; this estimate was based upon assumptions for
quantities and the cost for the destruction (including
logistics) (a quantity of 4500 tonnes was assumed for 3
years)
Further investigation was done on the basis of (28)
submissions of quantities by Article 5 Parties
On the basis of the submissions extrapolations were made,
the estimate could not be refined; it has been assumed
that the amount of US $27 million will still be enough to
cover all possible destruction costs in the next triennium
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Funding requirement (non-HCFC) 2009-2011
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ODS consumption (NPP, TPMPs) (MDIs)
CTC, process agents
MB consumption
Production phase-out
(CFC, MB, accelerated)
million
Destruction
Supporting activities
(CAP, IS, Treasurer, Core, MLFS, ExCom)
TOTAL
45.0 million
6.4 million
13.2 million
19.1
27.0 million
92.0 million
202.7 million
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T E A P R T F S u p p l e m e n t R e p o r t, M O P - 2 0, D o h a
HCFCs in Article 5 Parties before 2007
HCFC consumption considered in four Groups:
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(1) very large (China),
consumption > 12,000 ODP tonnes
(2) larger size (17 Parties),
consumption 120-1200 ODP tonnes
(3) smaller size (34 Parties), and
consumption 6-120 ODP tonnes
(4) small (83 Parties)
consumption < 6 ODP tonnes
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HCFCs in Article 5 Parties before 2007
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Small size Article 5 Parties have only HCFC-22 servicing
consumption
Total China HCFC consumption was 17,000 ODP tonnes in
2006
2006 totals for Groups 2/3/4:
Group 2 -- 7000 ODP t
Group 3 -- 1000 ODP t
Group 4 -- 150 ODP t
Total Article 5 HCFC consumption in 2006 was larger than
300,000 metric tonnes (± 25,000 ODP tonnes)
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HCFC Article 5 Consumption (ODP t)
30000
Group 1
Consumption (ODP t)
25000
Group 2
Group 3
20000
Group 4
15000
10000
5000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
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Baseline or 2012 funding
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In case only baseline funding is assumed, there will be
no funding needed to achieve the 2013 freeze
For the 10% reduction 2013-15, funding needs to start in
2010 -- when the baseline has not yet been established
In case of funding the 2012 consumption level,
funding needs to start in the year 2009; 2012
consumption will not be known at that stage; question is
how realistic this will be
The eventual funding requirement will be “somewhere in
between” (the two funding scenarios)
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Inflation
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Parties requested TEAP to look at the impact of inflation
Task Force determined the elements subject to inflation
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agreed projects cannot be inflated
new projects estimated can be subject to inflation; this includes all
new activities (non-HCFC and HCFC)
supporting activities not corrected for inflation; some already have
an annual adjustment mechanism
No references for global inflation numbers, normally split
for developed and developing (emerging) economies
Conclusion: funding would increase by US $4-9 million per
% inflation dependent on which HCFC funding scenario
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Servicing for HCFCs
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Servicing important for all Article 5 countries for achieving
compliance, but particularly for small consuming Parties
Cost estimates have been made for addressing servicing
(using the MLF experience in funding RMPs, NPPs, TPMPs,
via set-up of legal and technical frameworks, R&R etc.); in
cost estimate several IS components implicitly considered
Cost estimates made on the basis of HCFC consumption
Funding of the servicing (HCFC-22) sector is considered for
all Article 5 Parties
US $63 million assumed to be required for the triennium
2009-2011 to realise the first 10% reduction level in 2015
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Institutional Strengthening
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Parties requested TEAP to study IS funding scenarios
considering the needs likely to be encountered in 2009-11
The Panel reviewed the body of the work by the ExCom,
as well as cases made by some Parties
It is difficult to find good arguments to justify either a
level of decrease or increase in IS funding
Funding suggested for HCFC servicing includes elements
that are normally included as IS (at US $13.3 million)
May 08 funding scenario could be seen as an implicit IS
funding increase, even if direct IS funding is kept constant
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Cut-off dates (1)
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The Multilateral Fund has a cut-off date of July 1995 for
ODS (CFCs, halons etc.); capacities built after that date are
non-eligible
This is valid for both production and manufacturing
(consumption facilities)
In the Supplement Report the production has not been
considered, because the May 2008 report assumes that
production phase-out funding will not apply to the
replenishment 2009-2011
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Cut-off dates (2)
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Cut-off dates for HCFCs considered in the Supplement
report : 2000, 2004, 2007 (past); 2010 (future) has been
requested but was not really considered since no
differences with 2007 are expected
The eligible HCFC consumption is smaller the further the
cut-off date is in the past (with HCFC consumption
increasing after cut-off)
HCFC consumption consists of foams, refrigeration and AC,
of which the latter has a large servicing component
One would expect the funding to decrease with earlier cutoff dates, and smaller consumption levels
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HCFC Consumption China
China HCFC Consumption
30000.0
25000.0
20000.0
ODP t
HCFC-142b
HCFC-141b
HCFC-22 manuf
15000.0
HCFC-22 servic
10000.0
5000.0
20
20
14
20
12
20
10
20
08
20
06
20
04
20
02
20
20
00
0.0
Year
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HCFC Consumption Group 2 Parties
Group 2 HCFC Consumption
10000.0
9000.0
8000.0
7000.0
HCFC-142b
HCFC-141b
HCFC-manufact
HCFC-22 service
ODP t
6000.0
5000.0
4000.0
3000.0
2000.0
1000.0
0.0
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
20
Year
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HCFC Consumption Group 3 Parties
Group 3 HCFC Consumption
1600.0
1400.0
1200.0
1000.0
ODP t
HCFC-142b
HCFC-141b
800.0
HCFC-22 manufact
HCFC-service
600.0
400.0
200.0
2020
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0.0
Year
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Cut-off dates (3)
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The major assumption in calculating the funding
requirement dependent on the cut-off date is that the
Multilateral Fund will fund all consumption for compliance
A cut-off date of 2007 has a majority of reductions in the
(HCFC-141b) foam sector; with earlier cut-off dates the
eligible foam consumption decreases
In case of earlier cut-off dates, more reductions have to be
found in the eligible (more expensive) R/AC sub-sector
Compared to 2007 funding for 2000 cut-off is higher: US
$16 million - 0 years IOC, US$ 115 million - 2 years IOC
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Cut-off dates (4)
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Early cut-off dates have their impacts on the funding for the
first but also for the subsequent trienniums
The impact on the funding depends on the consumption
pattern of Parties (or Groups of Parties) in the cut-off year
Several Parties may have no difficulty identifying eligible
consumption for up to 30% of HCFC consumption reduction
Other Parties may have already difficulties to find enough
eligible consumption to be used for the funding of
reductions in the second or the third triennium (2015-17)
In the long term, early cut-off dates: lower funding, but…..
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Second conversions (1)
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Second conversions (conversions of equipment that already was
converted from CFC-11 to HCFC-141b -- with Multilateral Fund
assistance) can be funded at a chosen level incorporating
 Capital costs
 Operating costs
 Technical assistance costs,
or any combination thereof
The percentage of second conversions (related to the cut-off
date) can be determined from MLF Project Completion Reports
and from UNEP Article 7 data
It is difficult to derive consistent data sets; reporting deficiencies
in -141b may be related to pre-blended polyols
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Second conversions (2)
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Two scenarios can be considered for the funding of second
conversions (to the mix of alternatives mentioned):
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(1) Second conversions gradually
(2) Second conversions first (no other conversions)
Reality will be “in the middle” and will depend on a Party’s
choice in a HPMP to be developed
TEAP Task Force has calculated a large number of cases
for the next trienniums
For 2009-2011, funding requirement may be decreased by
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(1) US $5-10 million
(2) US $25-50 million
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Cost effectiveness factors (1)
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Foams (both HCFC-141b and -142b)
2006 HCFC consumption take as starting point
Plants of sizes 5, 25 and 75 tonnes were distributed
over all relevant Article 5 Parties, leading to an estimate
of the total number of plants
Different alternatives were assumed in different size
plants (HFC-245fa-mixes, methyl formate, water blown,
and hydrocarbons (40% share)) with each the specific
capital and operating costs (IOC)
Using the total consumption in all plants, cost effectiveness with and without IOC can be determined per kg
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Cost effectiveness factors (2)
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Refrigeration and AC (HCFC-22)
Split room air conditioning and commercial ducted AC
For split units HFCs (both R-410A and R-407C) and propane
considered; for commercial ducted AC only HFCs
Based on 80% split and 20% ducted systems --and equal
shares of all alternatives--, cost effectiveness factors (based
on capital costs and operating costs) were determined
For commercial refrigeration R-404A and HFC-134a
considered with a larger part of the conversions to HFC134a; based on this, cost effectiveness factors determined
R/AC CE factors based on 2/3 AC, 1/3 comm. refrigeration
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Climate benefits (1)
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A number of scenarios have been elaborated upon:
the Replenishment Scenario, the current pragmatic
approach with some implicit climate considerations
the Baseline Scenario (least cost solutions only)
the Functional Unit Scenario, where climate benefits
are maximised allowing additional funding according to a
cost-effective limit based climate criteria (i.e. $/tonne CO2
saved)
the Technical Potential Scenario, aimed at maximising
climate benefit on the basis of technical options
irrespective of the costs associated with those options
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Climate benefits (2)
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TEAP Response to XVIII/12 Report provided a
comprehensive overview of technology options for the
HCFC phase-out both by sector and sub-sector
Most significant development since 2007 is the emergence
of low GWP HFC (HFO) options for both refrigeration and
foam blowing
At present the scope of applications is unclear
It reminds Parties that the technological landscape is
continuously changing and these changes need to be
factored into future transition strategies (reducing leakage,
while postponing transition in R/AC ?)
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Climate benefits (3)
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The TEAP response to the request for climate (cost-related)
considerations has been targeted at identifying methods for
evaluating costs and benefits
It is still premature to make reliable cost abatement curves
in a rapidly changing technological landscape
Timing of transitions will also impact potential climate gains
It needs to be mentioned in this context that:
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Priorities under XIX/6 will be set first by ozone compliance
Every transition should be fully evaluated for climate impact
More innovative funding mechanisms are emerging but these need to be
governed by appropriate methodologies
Potential climate benefit will depend on choices under the MLF
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Exports and multinational ownership
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The original TEAP report considered 20% exports in the
determination of the cost effectiveness factor for
refrigeration and AC; this was done on a global basis
Exports could be larger; no reliable information available
Each 10% more yields a reduction of US $6 million (IOC 2Y)
Especially the multinational component in foam enterprises
was not considered in the May 2008 report
This may introduce an extra US $6 million reduction in the
funding requirement for 2009-11 per 10% “multinational”
This issue can be further dealt once HPMP info is known
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Demonstration projects
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TEAP was requested to reconsider the funding for
demonstration projects; Parties mentioned that these
projects normally contribute to compliance and should
therefore be considered under “non-servicing HCFC”
TEAP and its RTF believe that demo-projects are needed
and will be twice as expensive as normal projects
The US $5.4 million (May 2008 report) was therefore split
into two equal parts, one specifically for the demonstration
aspect and one part brought to normal HCFC projects
This will slightly reduce the funding requirement for the
triennium 2009-2011
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China resubmission of (2005)-06 data
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UNEP originally considered the Chinese (2005) 2006 HCFC
data without export and import data for specific HCFC
chemicals (due to transmission or interpretation problem)
This resulted in incorrect values for the net consumption of
the different HCFCs; May 08 report based on these values
China resubmitted data for production, im- and exports
This resulted in slightly lower estimates for the baseline of
HCFC-141b and -142b, higher estimates for HCFC-22
The impact on the 2009-2011 HCFC funding (for China) is a
decrease of about 3%; the change has been considered for
both funding scenarios in the Supplement report
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Funding requirement
2009-2011
ODS (non HCFC cons.)
Destruction
Supporting activities
HCFCs (baseline funding)
(US $million)
83.7
27
92
(2012 funding)
HPMP preparation
3.9
HCFC demo-projects
2.7
HCFC, servicing
63
HCFC, non-servicing (CE var.)
66.5-115.0 238.3-357.5
TOTAL
338.7-387.2 510.6-629.8
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Summary
Estimated funding requirement
For 2009-2011:
US $339-630 million
Indicative funding requirements
For 2012-2014:
US $421-635 million
For 2015-2017:
US $536-658 million
(the last two trienniums include production phase-out)
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High growth until 2012; risk analysis (1)
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TEAP had extrapolated the growth for the period 20072010 and used decrease in growth during 2010-2012
9% growth mentioned for 2010-2012 by Group 1 Party at
OEWG Bangkok; Parties requested a risk analysis by TEAP
2013-2015: 5% reduction in total consumption per year
Servicing will be about 1% of this 5%; efforts for
reductions will start after the approvals of HPMPs (even
when baseline can only be estimated), incl. service plans
If, as of 2010, 9% growth will occur, the 2012
consumption will be 25% higher than the baseline
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High growth until 2012; risk analysis (2)
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Approvals occur based on baseline consumption; this can
be estimated in 2010, but will not be known until end 2011
It implies that a 5-7 times higher reduction has to be
realised in one year (2012/2013) compared to the strict
reduction from the baseline in 2013
Independent of the consumption which will occur in 2012,
approvals have to be done in 2009 (implementation delay)
when baseline and 2012 consumption are not yet known
Phasing out amounts in the order of 25% of the baseline
(versus 5% in 2013) implies an enormous increase in
workload for all entities involved
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High growth until 2012; risk analysis (3)
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This in particular if the 25% reduction applies to the
largest consuming Party, and could well be 80,000 tonnes
This will directly impact the funding requirement to be
agreed upon at MOP-20, which would then even be
larger than following the “high” 2012 funding scenario
The risk that this reduction cannot be addressed via
projects in time to reach the 2013 freeze level (even when
sufficient funding would theoretically be available) is very
probable, is likely to result in non-compliance in 2013, and
could continue for much more than one year
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