Accessing Carbon Finance Workshop on Landfill Gas Development and the CDM

1. Accessing Carbon Finance Workshop on Landfill Gas Development and the CDM Denpasar, Indonesia. September 5-7, 2005. Sn. Environmental Specialist. Lasse Ringius. World Bank

2. Overview of Presentation Kyoto Protocol/CDM Baseline and monitoring methodologies CDM project cycle Overview of global carbon market

3. Kyoto Protocol: Industrial countries must reduce GHG emissions by 5.2% compared to 1990 levels in the period 2008-2012

4. Current Kyoto gaps

5. Emissions Allowance Market Joint Imple-mentation Clean Development Mechanism How to close the gap? Annex B Non-Annex B

6. Clean Development Mechanism (CDM) • Project-based mechanism • Projects in developing countries earn “credits” for reducing additional CO2, CH4, N2O emissions • Verified GHG emission reductions have become an internationally tradable commodity • Seller: Project investor • Buyer: OECD governments and companies facing GHG mitigation targets under the Kyoto Protocol

7. World Bank Carbon Finance Funds Total funds under management: ~ US$ 875 mill. Prototype Carbon Fund. $180 million (closed). Multi-shareholder. Multi-purpose. Netherlands Clean Development Facility. $180 million. Netherlands Ministry of Environment. CDM energy projects. Community Development Carbon Fund. $128.6 million (closed). Multi-shareholder. Small-scale CDM energy projects. BioCarbon Fund. $46.3 million (open). Multi-shareholder. JI and CDM LULUCF projects. Italian Carbon Fund. $15 million (open to Italian participation). Italian Multi-shareholder. Multipurpose. Netherlands ECF Netherlands European Carbon Facility. $60 million with IFC. Netherlands Ministry of Economic Affairs. JI projects. Spanish CF Spanish Carbon Fund. $200 million (open to Spanish participation). Spanish Multi-shareholder. Multipurpose. Danish CF Danish Carbon Fund. $64 million (open to Danish participation). Danish Multi-shareholder. Multipurpose.

8. Certified Emission Reductions Electricity $$ $$ Power Purchase Agreement Emission Reduction Purchase Agreement How Indonesia can benefit from the CDM LFG to Energy Project

9. Organic methane (CH4) • Forms when organic material decomposes under anaerobic conditions • Avoidance of CH4 emissions through: • Prevention • Capture & Combustion • When CH4 is avoided, CO2 is emitted • But: CO2 originating from the decay of organic material is considered neutral to the atmosphere

10. ER estimation The amount of credits that can be earned from LFG projects is dependant upon several factors: • Amount of waste; • Waste composition (organic fraction); • Waste management practices (e.g landfill covering, compacting of waste, depth of landfill); • Moisture; • Age of the landfill site; • Efficiency of LFG collection system; and • Amount of LFG collection mandated by law

11. A back-of-the-envelope-calculation* • Methane generation potential of 1 ton of waste ranges from less than 100 to more than 200 m3, depending on the waste composition (IPCC Good practice guidelines 1996) • With weight of methane equaling 0.7168 kg/m3: 150m3 of CH4 = 0.1 tons of CH4 • At a collection efficiency of 70%, 0.07 tons of CH4 can be recovered • Multiplied with the GWP for CH4 (i.e., 21), one ton of waste yields 1.47 t CO2e emission reductions (ERs) * based on gas yield methodology

12. Example: Carbon revenues from LFG recovery and methane destruction 1 mio. tons of waste 6 mio. m3 LFG/yr 2,140 ton CH4/yr 1 2 1,500 ton CH4 recovered/yr 31,500 tCO2e US$ 140,000/yr * 21 Underlying assumptions: - 1 m3 LFG contains 357 g methane - 70% collection efficiency - US$ 4.50/t CO2e

13. Opportunities in the MSW sector • CH4 is 21 times more potent than CO2. The “methane kick” significantly improves project economics. • Projects which reduce CO2 or CH4 emissions against the baseline are eligible, e.g. • Landfill gas recovery and utilization • Composting • Biodigestion

14. LFG methodologies

15. Approved LFG methodologies Biodigester

16. Elements of consolidated LFG methodology ACM0001 • Builds on approved methodologies for landfill projects • Does not replace previously approved methodologies • Applicable to both flaring-only and gas utilization projects

17. Elements of ACM0001 - Baseline • Baseline is release of gas to the atmosphere, considering gas captured for other reasons (safety, regulations, contractual requirements) • If no regulations apply, an Adjustment Factor shall be used and justified based on project context • Approved additionality tool applies • Step 2: Investment analysis: • For flaring projects: a straightforward investment economics test • For electricity generation projects: compare levelized electricity costs with least cost option in the system or show that IRR is below standard returns in the market. • Step 4: Common practice test can feed into Adjustment Factor

18. Elements of ACM0001 - Monitoring • LFG projects allow for direct monitoring of emission reductions following the simple rationale that all methane captured would have been released in the absence of the project • ER = (methane captured – x%) * 21 with x = Regulations or Adjustment Factor • Monitoring variables include: LFG recovered / flared through flow meters, methane content of LFG (continuous gas analyzer or periodic samples), flare efficiency, flare availability, electricity generation, etc. • Furthermore: monitoring of regulations and adjustment of baseline scenario if regulations tighten

19. Which methodology to choose?

20. MSW Project Examples in the Bank