Transcript Slide 1
CO2 emission trading –
systems for quantification and
verification
Results and experiences of cooperation with the World Bank
Trygve Røed-Larsen, Det Norske Veritas (DNV)
The Third Workshop Dialogue, Royal Norwegian Embassy, Washington D.C.,
Collaboration between Norway and the World Bank Group,
26 May 2005
Credibility, Trust and Confidence
What does it take to get universally trusted disclosures of greenhouse gas
emissions ? More stringent for emissions trading?
$
Monitoring
Reporting
Verification
Statement
¥
€
Clear and uniform definitions, requirements and rules for MR&V
Robust and transparent processes, systems and management
Verification by an Accredited Third Party
“Incentive” and/or “power” to apply and enforce common rules
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Clean Development Mechanism (CDM)
Registered CDM projects: 3 full-scale; 4 small-scale
22 full-scale methodologies approved, 15 small-scale
and 3 consolidated ones (pr May 2005)
50-60 methodologies under review
100 or more methodologies to come in 2005?
300 projects in the “CDM pipeline” (at Project Design
Document stage)
Increasing workload on methodologies, radical
“surgery” is required to speed up the methodology
approval process. Many industrial sectors with no
approved methodologies
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CDM project stages and Parties involved
1
2
Design
Validation
Stakeholder
consultations
Approval
Registration
Implementation
Monitoring &
Reporting
Project Participants
Designated Operational
Entity (DOE)
CDM Executive Board
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3
Parties, Stakeholders,
Accredited NGOs
Designated National
Authority (DNA) of host
and Annex I country
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Verification
Certification
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Overview of the JI determination process
Phase 1
Phase 2
Phase 3
Phase 4
Desk review
Interviews
Draft report
Final report
Customer
• Initial clarifications
• Assistance with logistics
Submit
Documentation
DNV
Preliminary
check
Identify risks
associated
with
assumptions
made and
data sources
used
Preliminary
determination
findings
Proposed
Interview and
site visit
schedule
• Clarifications
• Corrective Actions
Interviews
with relevant
stakeholders
Customized
draft
determination
report
Final
determination
report and
opinion
Publication of
determination
report on
www.dnv.com
Stakeholders
Approval from
host country
Stakeholder
comment
period of 30
days
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Host country and
donor country
can request
review for 45
days
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International GHG emissions trading
Cap-and-Trade System
Baseline-and-Credit System
If over Emissions Cap
emitter must buy
from the market
or transfer allowances
from another facility.
WB Prototype
Carbon Fund
projects
Emissions Cap
If under
Emissions Cap
may sell or bank
Allowances.
CO2 Emissions
Hypothetical Baseline Emissions
Verified Emissions Reductions
(Credits)
Annual Emissions Cap
vs. Real emissions
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Real Project Emissions
Time
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Institutional and market observations
8 Designated Operational Entities (DOEs) accredited, 20
plus applicant entities (pr May 2005)
Some DOEs have long experience in the climate change
field, most AEs do not:
- Calls for continued rigour in accreditation procedures
CDM has the attention of non-annex 1 Parties
The Russian ratification has energised the market
- The JI will become a competitor to the CDM
The CDM institutional framework is established, but does
not necessarily work optimised
- The market regulator needs to communicate with the
market, and act as a regulator!
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Slide 7
The Ilumex World Bank Project
Pilot project verification and certification to
establish transparent and trustworthy
procedures and processes for greenhouse gas
emission reduction projects (1998)
High efficiency lighting project in Mexico
AIJ Requirements and the Kyoto Protocol (JI/CDM)
Exchanged 2.4 mill. compact fluorescent lamps for standard
incandescent lamps in two cities
Duration May 1995 through 1998
Households in Guadalajara and Monterrey
Project idea
From lower electricity usage to reduced CO2 emissions
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Ilumex verification results
The Team (DNV, ICF and Cicero) verified that
171,169 tonnes of CO2 equivalent had been abated
from 1995-1998.
18,828 tonnes of CO2 equivalent relates to the
Norwegian financed AIJ component.
Project lifetime GHG reductions is estimated to be
939,102 tonnes of CO2 equivalent.
This pioneering exercise proved that it was
possible to have GHG emission reductions properly
verified according to the principles of the Kyoto
Protocol
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BP’s GHG emissions audit process
Understanding the business
BP Amoco’s
objectives and
strategies
Builds
on international
standards for financial &
environmental auditing
How the business
fits together
GHG emissions
Risks associated with reporting
GHG data (“Gross risks”)
Risk
based audit
approach
Management systems in place to
control data generation and reporting
Draws
on understanding
of risks with reporting
GHG data
Remaining areas of uncertainty
Detailed Audit
testing
AUDIT REPORT
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Internal & external
stakeholders
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IMPROVEMENT
OPPORTUNITIES
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Verification of emission reductions
Validation of project design,
baseline and monitoring plan
GHG emissions [t CO2-eq]
Emission baseline
Additional emission
reductions
With project emissions
Project
implementation
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Verification/
Certification of
emission reductions
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Typical validation experiences
For most projects the validator requests clarification
and/or changes to the project design:
- Insufficient discussion of additionality
- Possible baseline scenarios are not considered
- Insufficient assessment of leakage effects
- Necessary data not available (e.g. emission data for an
electricity grid)
- Insufficient provisions for monitoring and reporting
- Missing approvals by the DNA of the participating
countries
projects can – and do - learn from the mistakes of
early projects.
New
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Communications – Stakeholders
Works well. Comments that are provided demonstrates that the comment
mechanism works as intended and is a help to all parties involved.
It will improve the transparency and development of future CDM projects
Who Comments….
..on what:
NGO’s
Technical issues, calculations
Individuals
Project additionality
Representatives for
governmental institutions
Baseline selection
Leakage effects
Research agencies
…how much….
Some projects receive no comments ( landfills, renewable small-scale )
Some receive a lot of comments (Ref. multi-component, innovative )
Most receive one or two comments
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Nova Gerar LFG project
Collection of landfill gas (LFG) containing 50% methane and
utilization of LFG to produce electricity (12 MW)
Joint venture between EcoSecurities and S.A. Paulista
World Bank Prototype Carbon Fund project / DNV validator
Expected CERs volume: 500 000 tonne CO2e per year on the
average over a potential 21 year crediting period
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DNV GHG projects for the World Bank
South America:
Argentina, Brazil (2), Chile (2), Colombia and Ecuador
Central America:
Guatemala, Mexico (2) and Nicaragua
Asia/Africa:
China, India, Nepal and Mauritius
Europe:
Czech Republic, Hungary, Latvia and Poland
Others tasks:
Validation/verification manual
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The World Bank’s Carbon funds:
The World Bank's carbon finance initiatives
(http://carbonfinance.org/)
are part of the larger global effort to combat climate
change, and go hand in hand with the Bank's
mission to reduce poverty and improve living
standards in the developing world.
The World Bank’s carbon finance products include:
- The Prototype Carbon Fund (PCF)
http://carbonfinance.org/router.cfm?Page=NLClean
- The Community Development Carbon Fund (CDCF)
http://carbonfinance.org/cdcf/router.cfm
- The BioCarbon Fund
http://carbonfinance.org/biocarbon/router.cfm
- and several others
See also:
http://www.ifc.org/ifcext/enviro.nsf/AttachmentsByTitle/p_mib4_ff/$FILE/MIB4_FactsFigures.pdf
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GHG tools for industry
World Bank Prototype Carbon Fund (WB PCF)
& International Emission Trading Association
(IETA) , “Validation and Verification Manual”,
available at http://www.VVManual.info, 2004
World Business Council for Sustainable
Development (WBCSD) & World Resources
Institute (WRI), “The Greenhouse Gas Protocol:
A Corporate Accounting and Reporting Standard”,
revised edition, USA, 2004
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Summary points:
Capacity building and learning on CDM is moving forward Main weaknesses in the process are:
- Methodology approvals
- Communications between key players
- Lack of speed/capacity at CDM Executive Board
JI is in the starting block
Emission trading in European Union (EU) comprises 25
countries at start. Norway may join later this year
CDM/JI projects accepted in EU scheme and project
reductions can be converted to EU allowance credits
World Bank’s Ilumex and PCF projects given valuable
experince to secure credible verifications of GHG projects
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[email protected]
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