Carbon Finance Instrument to Improve Coastal Zone Solid Waste Management

MEDITERRANEAN WORKSHOP ON INTEGRATED COASTAL ZONE MANAGEMENT (ICZM) POLICY Alghero, Sardinia (Italy), May 19-21, 2008 World Bank/METAP

Waste and ICZM

• Situation for solid waste? – Collection of municipal solid waste; – Waste separation/recycling; – Controlled sanitary landfills & Composting

Collection of MSW

Waste separation / recycling

Controlled sanitary landfills

The real world is different

Challenges

• Need to design and enact adequate

financial and economic

incentives to encourage behavioral changes in human activities in the coastal areas.

• Self-standing ICZM capacity building interventions often do not accomplish much.

• Support for institutional strengthening, restructuring, and policy reform works best in the context of a holistic, longer-term programmatic operation that links policy interventions with tangible benefits on the ground. • Catalyzing and sustaining ownership at the national, local, and community levels.

How can CF solve some of these problems?

• Promoting environmental protection and sustainable economic activities • By providing revenues for: – Improvements in solid waste management; – Improvements in sewage systems.

• By channeling revenues at the local level (Municipalities)

The Kyoto Protocol

• Kyoto commitments – In 1997, 38 Industrialized Countries committed to reduce GHG emissions by 5% below 1990’ levels (entered into force in 2005) • Kyoto targets are basically achieved by – Domestic reduction of GHG emissions – Trading emission permits (“allowances”) among companies (EU-ETS) and Assigned Amounts Units (“AAUs”) among governments – Purchase GHG emission reductions from projects » In developing countries (Clean Development Mechanism – CDM) » In economies in transition (Joint Implementation)

Carbon Finance is NOT about

… • CF is NOT about carbon only, but 6 Greenhouse Gases (GHGs): – Carbon dioxide (CO2), – Methane (CH4) = 21x more potent than CO2, – Nitrous oxide (N2O) – Sulphurhexafluoride (SF6) = 310x, = 23,900x, – Hydrofluorocarbons (HFCs) HFC23 = 1,300x, – Perfluorocarbons (PFCs) CF = 46,500x, C2F = 69,200x – To promote understanding and facilitate calculations, all GHGs are measured in tons of CO2 equivalents (CO2-e): 1 ton CO2 e = 1 “carbon credit” • CF is NOT about Finance: – No loan, no grant, no line of credit, but PURCHASE • CF is NOT about Financing (i.e., promoting) Carbon, but: – Purchase of GHGs REDUCTION, mainly through long-term agreements (ERPAs) • GHGs can be avoided (e.g., CH4 avoidance in composting projects), • GHGs can be mitigated (e.g., CO2 mitigation in RE/EE projects) or • GHGs can be sequestered (e.g., CO2 sequestration in LULUCF activities)

Developing country/economy in transition with no emissions cap

Carbon credits

Industrialized country with an emissions cap

Domestic action Emission Reductions (ERs)

ER Baseline Scenario Project Scenario Developing country/economy in transition benefits from technology and financial flows

Purchase of ERs

Emissions target

• • • • • •

How does Carbon Finance work for a landfill?

Baseline Scenario = generation of CH4 – Capture of CH4: Avoided emissions = emission reductions (ER) ER will be generated during the lifetime of the landfill ER can be sold: additional revenues to improve IRR and cashflow Works also with composting, wastewater treatment, etc.

Incentive to collect and operate the landfill adequately, otherwise no ER will be generated

BORG EL ARAB AND EL HAMMAM LANDFILLS, ALEXANDRIA, EGYPT

• Before

Landfills

• After © Veolia Propreté/Onyx

Description of the project

• 18 districts within the city covering a total area of 7,200km2 • The services provided under the contract include: – Street Cleaning Program: daily manual and mechanical sweeping covering over 12,000 km of city streets and roadways – Household waste collection: collection of 1 million tons of waste per year – Waste Transfer: 3 transfer stations have been put in service to limit the number of vehicles transporting waste from the city to the treatment centers – Landfills : 2 modern landfills have been constructed – Composting : 3 composting centers are operated and produce over 120,000 tons of compost per year

Environmental Benefits of controlled landfills

• Flaring of the collected LFG does not only destroy methane, but also destroys compounds in the LFG, such as volatile organic compounds and ammonia. • Prevention of risks associated with landfill gas at uncontrolled landfills: – Risk of explosion – Risk of fire – Unpleasant odor nuisances – Potential atmospheric pollution – Damage to vegetation by asphyxia

Benefits of the project

• Environmental Benefits: – Preservation of water resources – Uncontrolled dumps have been replaced by engineered modern landfills with fully lined disposal areas for leachate (wastewater produced by the landfill) containment.

– Fight against desertification and depleted soil – The local production of compost provides much needed organic soil amendments.

• Social benefits: – Improvement of environmental health – Employee training • Economical benefits: – Creation of 4500 job opportunities – Retrocession of a percentage of the value of the generated credits to the Governorate of Alexandria.

•

CF: What is next ?

Project by project:

higher transaction costs, lower predictability for project owners, and non transformational impact on emissions •

Programmatic:

larger scale, better planning environment for project owners, and transformational impact on emissions

Future of Carbon Finance

• New methodologies, including small scale • Post 2012 regime?

• Carbon Partnership Facility: sustaining the market under transitional phase and increase investments by ensuring long term C-revenues. Open to consider future assets and regimes

Thank you Questions ?

Gaël Grégoire [email protected]