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CDM baseline standardization – key policy questions Axel Michaelowa

CDM baseline standardization – key policy questions Axel Michaelowa Center for Comparative and International Studies (CIS), University of Zurich and ETH Zurich; Perspectives axel.michaelowa@pw.uzh.ch , michaelowa@perspectives.cc Joint Workshop , Bonn, March 13, 2011.

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CDM baseline standardization – key policy questions Axel Michaelowa

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  1. CDM baseline standardization – key policy questions Axel Michaelowa Center for Comparative and International Studies (CIS), University of Zurich and ETH Zurich; Perspectives axel.michaelowa@pw.uzh.ch, michaelowa@perspectives.cc Joint Workshop, Bonn, March 13, 2011

  2. Harnessing emissions reduction potential CDM  CDM  CDM  CDM  CDM  CDM  CDM  Potential 2030, bottom-up studies Source: IPCC (2007)

  3. Preventing emissions take-off Critical level of HDI Source: Michaelowa and Michaelowa (2009)

  4. What can be standardized? • Use of pre-defined values / parameters applicable to many projects at once • Baseline setting • Additionality determination • Criteria, emission factors, calculation methods, equations, models feeding into baseline methodologies • Across project types • E.g. all electricity related projects • Within individual project types • E.g. benchmark for N2O from adipic acid

  5. Why standardization? • Administrative improvements to the CDM: • Increased efficiency of registration process • Greater objectivity, consistency and predictability • Reduced transaction costs • Increased project flow • Broader systemic improvements: • Guaranteeing and improving environmental integrity • Improved distribution across host countries and project types • Trade-offs between these goals?? • Careful implementation and regulatory oversight !

  6. Potential risks • Subjectivity is not really eliminated, but shifted from project registration process to the baseline setting stage • One off decision, difficult to reverse • Gaming with standard setting can lock in too lenient baselines / non-conservative parameters • High costs for public administrations, especially if frequent updating • Aggregation level is crucial • Too high: risk for environmental integrity, and of reaching all mitigation potential • Too low: data confidentiality issues

  7. Types of standards • Emissions intensity benchmarks (add. /bl.) • X t CO2 / amount of product or service • Homogeneous products, large number of entities, normal performance distribution • Technology / practice standards (add./bl.) • Average of top X % performance • Reference technology that is common practice • Project technology that is highly innovative • Market penetration rates (add.) • X percentage of installed capacity • Economies of scale and learning are important • Model (add/bl)

  8. Types of standards II • Deemed savings defaults (emission reduction) • X t CO2 reduced per installation and year • Requires good understanding of usage patterns • Utilization defaults (add.) • X % plant load factor / x hours average daily use • Limited variability of parameters influencing plant load factor • Positive lists (add.) • Technology • Applicable if no other revenues than CERs or if technology clearly faces a cost gap to alternative technologies providing the same service

  9. Key issues for benchmarks Type of benchmark Updating frequency Aggregation level Stringency level e.g tCO2 / t output Process? Product or service? Vintage? Geographic area? Average? Best 20%? Best used? Best available? Fixed improvement factor? According to data?

  10. Decision on stringency Emission intensity (tCO2 / t output) C Plants B A D Baseline benchmark CERs Additionality benchmark    

  11. Greenfield vs brownfield

  12. Vintages count!

  13. Technology shifts

  14. Benchmark development

  15. Benchmark development II

  16. Policy questions • Which sectors and project types should be prioritized for standardization? • Highly homogeneous, large-scale industries? • Small, dispersed emissions sources? • How stringent should standardized approaches be to guarantee a sufficiently high environmental integrity? • More stringent than project-based approaches? • Role of experts? • What lessons can be drawn from existing use of standardization in offset programmes? • US programmes (CAR, RGGI, CCX)

  17. Policy questions • Who should administer and develop standardized methodologies? • CDM EB? • Project developers? • Should there be a Baseline Standard rulebook? • How can we prioritize countries and regions? • Underrepresented regions? • Regions with highest potential? • How can DNAs be enabled to decide whether to apply standardized baselines? • Capacity building required • Can distortions be prevented?

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