Climate Action Reserve ODS Project Protocols

1. Climate Action Reserve ODS Project Protocols Geneva, Switzerland June 14, 2010

2. Background on the Climate Action Reserve • Non-profit organization, chartered by California state legislation in 2001 • Mission is to encourage voluntary actions to reduce emissions and to have such emissions reductions recognized • Balances business, government, and environmental interests

3. What We Do • Develop High Quality Standards • Convene stakeholders and lead development of standardized protocols for carbon offset projects • Manage Independent Third Party Verification • Training and oversight of independent verification bodies • Operate a Transparent Registry System • Maintain registry of approved projects • Issue and track serialized credits generated by projects

4. Listed & Registered Projects

5. Reserve stats

6. Performance Standards • Why a performance standard is different • The hard work is upfront • Assess industry practice as a whole, rather than individual project activities • Less subjective determination to qualify • More certainty in amount of credits • Lower risk for developers and investors • Faster project processing

7. ODS Project Definition • All ODS destroyed within a twelve month period by a single project developer at a single destruction facility • May come from a single or multiple sources Includes only gases for which production is completely phased out • Excludes halons • Refrigerants • Collection and destruction of ODS refrigerant from residential, commercial and industrial equipment, systems and appliances, or stockpiles • Foam • Extraction and destruction of ODS blowing agent from foam; or • Destruction of intact foam sourced from building insulation

8. Sources and Destruction • Acceptable sources • US sources: Must originate from US sources for destruction in US • Imported sources: Must originate from (one or more) Article 5 countries for destruction in US • Why only U.S. destruction? • Role of destruction facility is very important. We only permit destruction at U.S. facilities that are regulated for ODS destruction by U.S. EPA. • If there were a similar mechanism for overseeing ODS incinerators globally, we would be pleased to collaborate with it.

9. Additionality • Legal requirement test • Performance standard test: Must exceed a standard of common practice for ODS management

10. Performance standard test • Must exceed a “common practice” standard for managing ODS • US: ODS destruction is not common practice, so all ODS destruction activities are considered additional • Article 5 Countries: ODS destruction is not common practice, so all ODS destruction activities are considered additional

11. Calculating reductions • Emission reductions = baseline emissions – project emissions • Baseline emissions: Sum of all emissions in the baseline scenario over 10 years • Project emissions: Sum of all emissions in the project over 10 years

12. Baseline scenarios • US • Refrigerants: Recovered and used to charge existing equipment • Appliance foam: shredded and landfilled • Building demolition foam: landfilled • Article 5 countries • Virgin stockpiles of refrigerants: used to recharge existing equipment • Refrigerants from end-of-life equipment: 100% vented • Appliance foam: shredded and landfilled • Building demolition foam: landfilled

13. Project emissions • Sum various sources such as • Transportation of gases for destruction • Losses from extraction of foam • Losses from incomplete destruction • Energy use at destruction facility • Emissions from non-ODS substitutes

14. So what does all this mean? • Destruction of one kg CFC 12 • Article 5 source • Government stockpile: ~10 tonnes CO2e • End of life: ~10.9 tonnes CO2e • U.S. source • End of life: ~9.58 tonnes CO2e

15. Project Examples • Project Developer: EOS Climate • Partnered with firm that gathers and recycles U.S. refrigerators • Instead of reuse, CFC-12 is destroyed • To date, issued ~250,000 CRTs • Project Developer: Coolgas • Ships ODS to US from private Indian stockpiles for destruction • To date, issued ~650,000 CRTs

16. Who are the buyers? • Large industrial firms that expect to be regulated under state or federal climate legislation. • Financial firms hoping to buy now and sell to regulated entities later. • Banks, hedge funds, private equity funds • Pure voluntary buyers

17. How does financing work? • We do not get involved in financial transaction • Currently, most transactions are through a broker • There are a handful of active CRT brokers • Can be exchange-traded • Common for project developers to pre-sell some CRTs and get some upfront financing—depends on risk profile • Helps pay for verification and project costs

18. The bottom line today • We currently accept Article 5 sourced ODS projects for U.S. destruction from: • Government stockpiles; • Equipment end-of-life.

19. Going forward • For destruction elsewhere, we are very interested to work with the Ozone Secretariat and others to develop an oversight mechanism for destruction in Article 5 countries.

20. Would a facility be useful? • In the short-term, voluntary and pre-compliance buyers are generating moderate demand. • Looking out several years, federal program will have large demand • Over next 1-3 years, a facility could ramp projects up to scale • Administration would be very simple for projects registered with the Reserve

21. Contact Information Joel Levin jlevin@climateactionreserve.org www.climateactionreserve.org 523 W. 6th Street, Ste. 428 Los Angeles, CA 90014 (213) 891-1444