Transcript Gas Flaring and CDM An Environmental Opportunity A Methodological Challenge Christophe de GOUVELLO Member of the MethPanel of the CDM World Bank, Energy Division for.

Gas Flaring and CDM
An Environmental Opportunity
A Methodological Challenge
Christophe de GOUVELLO
Member of the MethPanel of the CDM
World Bank, Energy Division for Africa - AFTEG
Views expressed by the author are not representing neither MethPanel nor WB positions
Summary of the Presentation
I. CDM Principles and Project Cycle
II. Implementation of the CDM:
– Where we stand
III.Gas Flaring and CDM :
– A major issue, comparable in size to HFC 23
IV.CDM and GGFR:
– Toward Synergy ?
I
CDM Principles and Project Cycle
CO2 Emissions (in 2ktCO
)
Reduction of Emissions achieved by a Project compared
to the scenario without CDM
Baseline Emissions
(to be determined ex ante)
200
150
Volume of
Certified Emissions Reductions
(CER)
100
Emissions of the CDM project
(to be monitored along crediting period)
50
0
1
2
3
4
5
6
7
8
9 10 11 12
Years of operation of the project
13 14
15
Methodologies required for : • Determination of Baseline Emissions
• Monitoring CDM Project Emissions
• Calculation of Emission Reductions
A key concept: ADDITIONALITY
• 1 CER = 1 more ton CO2 emitted in Annex 1 countries
• Only emission reductions that are ADDITIONAL to emission
reductions that would have occurred without CDM
Not all “Emission Reductions” are eligible to CDM
Ex: least cost hydro may or may not be eligible
Additionality established on the basis of:
• Financial Analysis : Additional cost, lower IRR, etc…
OR:
• Barriers preventing the “clean” project to take place:
–
–
–
–
Difficulties to achieve financial closure (no long term commercial loans)
Technology Risk: first of kind in the country (high pressure boilers Cogen)
Social / market acceptability (scavengers resettlement for landfill gas to power)
Etc.
Project Host
CDM Executive Board
Country
►Registers projects validated by OEs
►Approves Baseline and Monitoring Methodologies
►Accredits the Certifiers (Operational Entities)
►Letter(s) of Approval by
Participant Countries
Cycle Before Project
Project Developer
►Calculates "Baseline" and
prepares a PDD (Project
Design Document) using an
Approved Methodology
►Forwards the
Application for
Validation and
Registration
► validation report and registration
application
Designed Operational
Entities
►Validate proposed CDM
projects and forward
applications to EB for
registration
Project Host
Country
► Letter of Approval
►Shares issued
CERs according to
the agreement
between
Project Developer
and
Host Country
CDM Executive Board
►Registers projects validated by OEs
►Issues the Certificates (CERs)
► Approves Baseline and Monitoring Methodologies
► Accredits the Certifiers (Operational Entities)
Cycle during
Project
► validation report and registration
application
►verification & certification report and
request issuance of credits (CERs)
Project Developer
► Calculates "Baseline" and
prepares a PDD using approved
Methodology
► Monitor Emissions during the
project and calculates
Emissions Reductions
►Forwards the Application
for Validation and
Registration
►Requests validation of
Emission Reductions to
get the CERs
Designed Operational
Entities
►Validate proposed CDM projects and forward
applications to EB for registration
►Verify and certify emissions
reductions
Project Host
Country
►Letter of
Approval
►Shares issued
CERs according
to the agreement
between
Project
Developer
and
Host Country
Credits
(CERs)
forDeveloper
Sale
Project
►Calculates "Baseline" and
prepares a PDD using
approved Methodology
►Performs Monitoring of
Emissions during the
project and calculates
emissions reductions
CERs
$
Purchase
Agreements
Carbon
Funds
+ Technical
Assistance for
CDM project
cycle`(WB)
>30, 10 inside
WB
Carbon
Market
Place
Direct Sales
CERs
$
Carbon Finance
gives value to
Carbon Credits (CERs)
generated by
CDM Eligible Investment
Projects
II
Implementation of the CDM
Where we stand
Regulatory Bodies of the CDM
Mr. Rajesh Kumar Sethi (Chair)
Mr. Jean-Jacques Becker (ViceChair)
Mr. Amr Osama Abdel-Aziz
Mr. Felix Babatunde Dayo
Mr. Juerg Fuessler
CDM Executive Board
►Approves Procedures and Baseline and
Monitoring Methodologies
Mr. Christophe de Gouvello
Mr. Michael Lazarus
Mr. Jan-Willem Martens
Mr. Vijay Kumar Mediratta
recommendations
Mr. Daniel Perczyk
Mr. Braulio Pikman
Mr. Ashok Sarkar
Mr. Roberto Schaeffer
Mr. Lambert Richard Schneider
Mr. Christoph Sutter
Mr. Massamba Thioye
Mr. Kenichiro Yamaguchi
METH PANEL
Review, improve and consolidate
proposed methodologies
Prepare Technical Decisions for
approval by Executive Board
More than 200 proposed methodologies
processed so far
Expansion of the regulatory framework of the CDM
Pace of releasing new approved Methodologies by
Regulatory Bodies (EB+MethPanel)
45
40
35
30
25
20
15
10
5
0
y = 20.0403x - 1524.4
R = 0.9694
Cumulative Number of CDM Projects per Methodology
(projects that officially began validation process)
50
The Y axis has been
truncated at 50
Nb Proj under ACM0001
Nb Proj under ACM0002
40
Nb Proj under ACM0003
Nb Proj under ACM0004
Nb Proj under ACM0005
Nb Proj under ACM0006
Nb Proj under ACM0007
Nb Proj under ACM0008
30
Nb Proj under AM0001
Nb Proj under AM0002
Nb Proj under AM0003
Nb Proj under AM0004
Nb Proj under AM0005
Nb Proj under AM0006
20
Nb Proj under AM0008
Nb Proj under AM0009
Nb Proj under AM0011
Nb Proj under AM0013
Nb Proj under AM0014
Nb Proj under AM0015
Nb Proj under AM0016
10
Nb Proj under AM0018
Nb Proj under AM0021
Nb Proj under AMS-I.C
Nb Proj under AMS-I.D
Nb Proj under AMS-II.B
Nb Proj under AMS-II.C
0
Nb Proj under AMS-II.D
Nb Proj under AMS-III.B
Nb Proj under AMS-III.D
Nb Proj under AMS-III.E
Ch. de Gouvello - WB / AFTEG - May 2006
Member of the MethPanel of the CDM
Source: UNFCCC data
Each new approved methodology unleashes a new segment of CDM projects potential
Cumul Nb CDM Proj that have already
applied for Validation
750
700
Nb Proj under ACM0008
650
Nb Proj under ACM0006
Nb Proj under ACM0007
Nb Proj under ACM0005
600
Nb Proj under ACM0004
Nb Proj under ACM0003
550
Nb Proj under AM0021
Nb Proj under AM0018
500
450
400
The exponential growth of the number of projects is a direct
reflect of the timing of the processing and release of new
approved methodologies by the EB/MethPanel. As a result,
it can be expected that this growth may continue for a while.
Nb Proj under AM0008
Nb Proj under AMS-III.D
Nb Proj under AMS-III.E
Nb Proj under AM0015
Nb Proj under AM0014
300
Nb Proj under AM0011
Nb Proj under AM0009
250
150
Nb Proj under AM0013
Nb Proj under AMS-III.B
350
200
Nb Proj under AM0016
Nb Proj under ACM0002
Ch. de Gouvello - WB / AFTEG - May 2006
Member of the MethPanel
Source: UNFCCC data
Nb Proj under ACM0001
Nb Proj under AM0006
Nb Proj under AM0005
Nb Proj under AM0004
100
Nb Proj under AM0003
50
Nb Proj under AM0001
Nb Proj under AM0002
Nb Proj under AMS-II.D
-
Nb Proj under AMS-II.C
Nb Proj under AMS-II.B
Nb Proj under AMS-I.D
Nb Proj under AMS-I.C
Number of CDM projects that have already
applied for validation
Dec, 2006
N>1,500
Nb of Projects
900
800
The number of CDM projects that have begun or completed the
validation process increases as the following polynomial function of time
700
y = 1E-06x - 4E-05x + 0.004x
2
R2==0.99
0.9904
2
3
600
Ch. de Gouvello - WB / AFTEG
March 23, 2006
Source: UNFCCC data
500
400
300
200
100
-
Dec. 1rst, 2003
61
122
183
244
305
366
427
488
549
610
2004
2005
Nb of calendar days since Dec 1rst, 2003
671
732
793
2006
854
Annual value of project-based
Emission Reductions Transactions (million USD)
(up to 2012 vintages)
Already more than
5 billion dollars of
North-South net
transfer before end
of 2012
Jan March
(Source: State and Trends of the Carbon Market 2006, Ph. Ambrsoi and K. Capoor, World Bank, 2006)
However still some uncertainties for post 2012 (second commitment period)
III
Gas Flaring and CDM
Gas Flaring : A Major Issue for Kyoto/CDM
• Annual volume of natural gas being flared by non
Annex 1 > 250MtCO2eq/year (out of venting)
 Comparable to the total volume of committed
emission reductions by EU 15 under the Kyoto
Protocol for 2008-2012 (~ 317MtCO2eq/year)
 Comparable to the maximum emission
reductions that can be achieved through HFC23
CDM projects
(290MtCO2eq/year)
More than 90 percent of venting and flaring occurs in fewer
than 15 countries, most of them Non-Annex 1
Possible CDM activities related
to gas flaring / venting reductions
1.
2.
3.
4.
5.
6.
Gas Flaring to Pipeline
Gas Flaring to Power
Gas Flaring to Heat
Gas Flaring to LNG
Gas Flaring to LPG
Gas Flaring to Feedstocks (i.e. methanol, ethylene,
ammonia)
7. Gas Flaring to Re-injection
8. to 13. The same 7 categories but using Vented Gas
14. Improving flares efficiency to reduce CH4 content of flares
And any combination of the above activities…
Current Gas Flaring CDM Pipeline
• So far, there are only two approved
methodologies
 AM0009 : for “Gas Flaring to Pipeline”
 AM0037 : for “Gas Flaring to Energy or
to Feedstock”
• 15 different projects in the current UNFCCC
official pipeline (validation or registration stage)
AM0009 = 14 ; AM0037 = 1
Current Gas Flaring CDM Pipeline
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
Title
Use of Recovered Gas for Methanol Production
Flare gas recovery project at Hazira Gas Process Comp, (ONGC)
Gas flaring reduction project at Cauvery Asset, (ONGC)
Gas flaring reduction project at Mumbai High, (ONGC)
Gas flaring reduction project at Ankleshwar Asset, (ONGC)
Gas flaring reduction project at Assam Asset, (ONGC)
Gas flaring reduction project at Rajamundry Asset, (ONGC)
Gas flaring reduction project at Neelam and Heera Asset, (ONGC)
Flare gas recovery project at Uran plant, (ONGC) Limited
Gas flaring reduction project at Mehsana Asset, (ONGC)
Gas flaring reduction project at Ahmedabad Asset, (ONGC)
Recovery of associated gas Kwale oil-gas process plant, Nigeria
The Ovade Ogharefe Gas Capture and Processing Project
Al-Shaheen Oil Field Gas Recovery and Utilization Project
Rang Dong oil filed associated gas recovery and utilization (NM26)
Host country
Equat. Guinea
India
India
India
India
India
India
India
India
India
India
Nigeria
Nigeria
Qatar
Vietnam
ktCO2/yr .
2,356.03
73.58
33.36
201.34
136.64
21.12
26.85
109.46
96.35
16.74
13.04
1,496.93
2,531.70
1,457.81
677.00
9,247 MtCO2
Credit start
01-May-01
01-Sep-06
01-Sep-06
01-Sep-06
01-Sep-06
01-Sep-06
01-Sep-06
01-Sep-06
01-Sep-06
01-Sep-06
01-Sep-06
16-Oct-06
01-Jan-07
01-Jan-07
01-Dec-01
2012 ktCO2
23,560
466
211
1,274
865
134
170
693
610
106
130
10,521
14,505
9,120
6,910
69,274 MtCO2
Methodological Challenges
• Complexity of technical configurations:
(i) Boundary determination and emissions calculation in
case of complex projects where GFVR activities are only one
component of a larger investment;
(ii) Variability of gas composition, etc.
• Additionality:
(i) Economics of these projects :
May have different sources of direct (electricity sales) or
indirect (benefits of re-injection for improving oil extraction)
revenues, only one component of a larger project.
(ii) Nature and Vintage of Regulations and Policies
Additionality Issues
• Some gas flaring/venting reduction (GFVR)
projects are “low hanging fruits” that incur
immediate high benefits
(i.e. certain re-injection projects)
• However, some GFVR projects require costly
multi-stakeholders undertakings that are not
attractive enough compared to more profitable
investment opportunities
(i.e. expanding or developing new oil fields)
Additionality Versus
Regulations & Policies
• Decision of the Executive Board on National and/or Sectoral
Policies (EB22):
“ National and/or sectoral policies or regulations under
paragraph 6 (b) that have been implemented since the adoption
by the COP of the CDM M&P (decision 17/CP.7, 11 November
2001) need not be taken into account in developing a baseline
scenario (i.e. the baseline scenario could refer to a
hypothetical situation without the national and/or sectoral
policies or regulations being in place)”
• Regulations/policies alone may not be able to overcome barriers
that prevent GVFR projects to happen
• CDM alone may also not be able to overcome barriers
Combination of CDM incentives and regulations/policies is
often required, especially in Africa
CDM as
Development
How does it apply to Gas Flaring Reduction ?
• While the host country may be dramatically lacking of Power, in
number of cases, Gas to LNG is more attractive than Gas to Power
• In certain cases Gas to Power could have far more economic value
than LNG market price
• CDM has been negotiated in Kyoto to ensure the Host Country will
have a sovereign control on CDM projects
CDM projects require a Letter of Approval from the
Designated National Authority (DNA).
• Host countries can develop an Integrated Strategy to facilitate CDM
Gas Flaring Reduction and National Energy Development
Host Countries can use CDM as a Policy Tool to align
Gas Flaring Reduction with their own National Energy Strategy
IV
CDM and GGFR
CDM and GGFR
• Since beginning, GGFR mission includes exploring how CDM can
help overcome barriers that prevent flaring reduction projects
• Reciprocally, GGFR can contribute to overcome barriers that the
CDM alone may not be able to overcome
• GGFR has been launched after November 11, 2001
 activities promoted by GGFR could be seen as postMarrakech E – policies
(adoption of the “Global Voluntary Standard for Global Gas Flaring
and Venting Reduction”, elaboration of “Associated Gas Recovery
Plans”, etc.,)
• Specific GGFR expertise can contribute to address CDM
methodological challenges triggered by GFVR projects
CDM and GGFR : Complementary in promoting real additional
Gas Flaring Reduction projects ?