1 Spalding-Fecher: Jt Workshop 2011 - SBLs

Two new ideas on Standardised Baselines

Randall Spalding-Fecher CDM EB Joint Workshop: “current developments in standardised baselines” 13 March 2011 Pöyry Management Consulting

Two new ideas • Mandatory vs voluntary SBLs: the relationship with stringency and environmental integrity • “Normative” service level benchmarks: suppressed demand and providing for basic human needs 2 Spalding-Fecher: Jt Workshop 2011 - SBLs

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Voluntary vs mandatory SBLs: stringency and environmental integrity 8 7 6 2 1 0 5 4 3 Historical emissions BAU emissions Project emissions A B C D E F Source: Poyry 3 Spalding-Fecher: Jt Workshop 2011 - SBLs

Voluntary vs mandatory SBLs: stringency and environmental integrity 8 7 6 2 1 0 5 4 3 Historical emissions BAU emissions Project emissions A B C D E F Source: Poyry 4 Spalding-Fecher: Jt Workshop 2011 - SBLs

Project approval under traditional approach to additionality 8 7 6 2 1 0 5 4 3 Historical emissions BAU emissions Project emissions A B C D  E  F  Source: Poyry 5 Spalding-Fecher: Jt Workshop 2011 - SBLs

Project approval under SBL set below industry average 5 4 3 2 8 7 6 1 6 0 A  B  Spalding-Fecher: Jt Workshop 2011 - SBLs C  D  E  F  SBE(1) SAT(1) Historical emissions BAU emissions Project emissions Source: Poyry

Voluntary SBLs could inflate credits even if set at industry average – must be mandatory 5 4 3 2 8 7 6 1 7 0 A  B  Spalding-Fecher: Jt Workshop 2011 - SBLs C  D  E  F  SBE(1) SAT(1) Historical emissions BAU emissions Project emissions Source: Poyry

Implications of lack of stringency – CER volume, not just approved projects 5 4 3 2 8 7 6 1 8 0 A  B  Spalding-Fecher: Jt Workshop 2011 - SBLs C  D  E  F  SBE(2) SAT(2) SBE(1) SAT(1) Historical emissions BAU emissions Project emissions Source: Poyry

“Normative” service level benchmarks are the best way to address suppressed demand for basic household services 9 • Suppressed demand, due to lack of access and high unit cost of services, means historical energy use is not a reasonable baseline • – E.g. switching from kerosene hurricane lamp to CFL gives 40 times the light for 2% of the unit cost! • • • SSC WG have noted cases where this happens, and issues around how it could be addressed • • Project activity service level has major limitations – difficult to measure service directly – and may not initially reflect “satisfied demand” “Normative” service level benchmark is defined as minimum of level of service household should have and sets cap on service as well Convert this to emissions by identifying baseline technology Eliminates the need to monitor baseline while providing reasonable, objective baseline Not appropriate for all sectors/technologies and still have to agree the level Spalding-Fecher: Jt Workshop 2011 - SBLs

“Suppressed demand” means historical energy use is not a reasonable baseline • Includes both an “income effect” and “price effect”, but the latter is much more important – Lack of access and high cost of energy services relative to household budget suppresses demand for energy services • – Access to project technology dramatically increases energy service – “satisfied demand” = minimum level that households would demand given reasonable price Project may not realise “satisfied demand” right away 10 Spalding-Fecher: Jt Workshop 2011 - SBLs

Understanding suppressed demand – energy service demand 2,4 2,2 2 1,8 1,6 1,4 1,2 1 0,8 Historical energy service with income effect with income and energy cost effects Satisfied demand Project service level 1 2 3 4 5

Time

6 7 8 9 10 Source: Poyry 11 Spalding-Fecher: Jt Workshop 2011 - SBLs

Understanding suppressed demand – energy consumption 2,4 2,2 2 1,8 1,6 1,4 1,2 1 0,8 Historical energy use with income effect with income and energy cost effect Satsified demand Project energy use 1 2 3 4 5

Time

6 7 8 9 10 Source: Poyry 12 Spalding-Fecher: Jt Workshop 2011 - SBLs

“Normative” standardized approach

13 • Use “reasonable, adequate” service level as baseline activity level – reflect social view of development needs (i.e. MDGs, minimum water and energy requirements) • Example: minimum lighting needed per day, minimum ambient indoor temperature for comfort, minimum potable water requirements • Convert service level to energy and emissions using technology choice that is accessible to poor household – the next technology step (e.g. kerosene pressure lamps, not diesel generators) • Advantages – No monitoring necessary for certain services because baseline is fixed – No baseline energy survey needed for these services – Recognises need for adequate services – no penalty for being poor – Does not require exhaustive data gathering process to establish SBL • Challenges – How to define minimum service (both units and level) – still need some form of stakeholder input and policy decision – How to define baseline technology to deliver that service Spalding-Fecher: Jt Workshop 2011 - SBLs

Possible service standards for household energy services

Energy Service Lighting TV Radio Cooking Water heating Space heating Degree of Suppressed Demand

High

Current appliance

hurricane lamp, candle High High Low?

Med

Current energy source

DC TV DC Radio none, or basic stove kerosene car battery, generator?

dry call, car battery biomass, kerosene similar to cooking biomass, kerosene

Possible service standard

lumens x rooms hours/week hours/week ??

Med similar to cooking biomass Litres of hot water Ambient temperature indoor 14 Spalding-Fecher: Jt Workshop 2011 - SBLs

15 Spalding-Fecher: Jt Workshop 2011 - SBLs

Thank you!