Standardized Approaches An overview

1. Standardized ApproachesAn overview Anja Kollmuss, head of consulting a.kollmuss@southpolecarbon.com

2. Content • Framing the issue • Main points of standardization • Learning from existing experience

3. Context: Keeping warming below 2°C About 75% probability, if cumulative CO2 emissions between 2000-2050 are kept below 1000 gigatonsof CO2 and comparable reductions are made in non-CO2 GHGs. Figure shows recent emissions (1990 – 2009), our “representative 350 ppm pathway “ (2010 – 2050) and, for comparison, business-as-usual pathway that’s consistent with the International Energy Agency’s standard “no climate policy” projections. Source: Sivan Kartha, SEI http://sei-us.org/publications/id/309

4. Context: Where are we at? Consumed between 2000-2009: nearly one-third of the 2°C budget (330 out of 1000 gigatons CO2) Global emissions currently about 50 gigatonsCO2e per year Expected CERs 1.4 gigatonsRemember: CDM currently zero sum Source: Sivan Kartha, SEI http://sei-us.org/publications/id/309

5. We need… • Scaling-up mitigation • Building and preserving capacity for post 2012 mechanisms • Going beyond offsetting: beyond zero-sum • New BetterBigger • Ensure environmental integrity • Ensure equity between rich and poor • Improve efficiency: e.g. reduce transaction costs • Ensure attractiveness for investors • Improve regional and sectoral distribution • ….

6. The lofty goals of standardization • Improved efficiency: e.g. reduce transaction costs and streamline procedures for project implementation • Greater objectivity, consistency and predictability at project implementation stage. • Reduced transaction costs at project implementation stage  reducing barriers for project implementation • Improved regional and sectoral distribution  access to underrepresented areas (e.g. LDCs) and sectors (e.g. transportation and buildings) •  Ensured environmental integrity and attractiveness for investors

7. What can be standardized? • Offset Programs • Baseline emissions and/or • Additionality determination and/or • Certain parameters for project emission calculations • Standartization can also be used in other contexts (e.g. allowance allocation, voluntary programs)

8. Terms, definitions, types

9. Terms, definitions, types

10. Project-based vs standardized approaches

11. Key Points • Subjectivity is not eliminated, but shifted from project registration process to the baseline setting stage. • Who decides? • Risks: One off decision, difficult / costly to reverse • Gaming with standard setting can lock in too lenient baselines / non-conservative parameters

12. Key Points • Cost is not lowered but shifted from project developer / project stage to standardization stage. • Who pays? • Are the ones who pay the ones who decide on stringency? • Much detailed data is necessary. Who will ensure reliability of such data? Who will pay to collect the data? • How will the data be checked for accuracy and conservativeness? • Data collection and analysis USD 1.7-6.3 million • Design of Performance Standard: USD 0.3-0.7 million • Cost estimates taken from: Hayashi, D., N. Müller, S. Feige and A. Michaelowa (2010). "Towards a More Standardized Approach to Baselines and Additionality Under the CDM." Perspectives Climate Change, May 2010.)

13. Key Points • Can efficiency and environmental integrity really be improved?

14. Average intensity Non-normal distribution of BAU generation emission intensity Output Emission intensity (tCO2 / t output)

15. Average intensity BAU generation Output • Free riders Emission intensity (tCO2 / t output)

16. Key Points Additionality benchmark and crediting baseline • Can efficiency and environmental integrity really be improved? BAU generation Benchmark-induced generation Uncredited Reductions Output Credited Reductions • Free riders Emission intensity (tCO2 / t output)

17. Additionality = awarded credits = project emission intensity = BAU emission intensity Additionality threshold Crediting baseline Plant A: project emissions intensity lower than additionality threshold  receives credits up to baseline Plant B: project emissions intensity higher than additionality threshold  receives no credits Plant C: project emissions intensity higher than additionality threshold  receives no credits Plant D: project emissions intensity lower than additionality threshold  receives credits up to baseline Plant E: No project activity,BAU emissions intensity lower than additionality threshold  receives credits up to baseline BAU intensity higher than crediting baseline BAU intensity lower than crediting baseline = emission intensity reductions due to project activity No change from BAU intensity Emission intensity (tCO2 / t output)

18. Lessons learned from existing standardizations CDM JI Climate Action Reserve

19. Experience under the CDM • Large, concentrated emission sources • ACM13: Efficient fossil power generation • 21 projects in pipeline since 2007 (mostly in China and India, where data is readily available) • Benchmark emissions: top 15% power plants (same fuel) • NM302: Cement sector • Methodology in evaluation since 2009 • CSI database offers a great potential for scaling up • Challenge in determination of benchmark stringency levels • Small, dispersed emission sources • AM70: Efficient refrigerators for households • Average of top 20% of performers • No project since 2008 due to heavy data requirement • NM328: Whole-building energy efficiency and fuel switch • Methodology in evaluation since 2010 • Data requirement may become extensive

20. Performance Standards under JI • Example: N2O abatement in Nitric and Adipic Acid Production • Baseline emissions benchmark: • nitric acid: 1.85 or 2.5 kg of N2O per t of nitric acid. • adipic acid: 90% abatement  avoid risk of leakage

21. To maintain environmental integrity, standardized baselines may need to be conservative Use of standardized assumptions, emission factors, and parameters may lead to inaccuracy at the project level Protocols generally compensate by adopting conservative assumptions, factors, parameters CAR Lessons Learned

22. CAR Lessons Learned Standardized protocols work better for some project types than for others Standardized baselines are more difficult with complex systems, where performance is subject to multiple drivers, or where multiple baseline alternatives are possible (e.g., forestry!) All protocols rely on project-specific details and parameters to some degree

23. CAR Protocol Development Internal research and scoping Kick-off/scoping meeting Multi-stakeholder workgroup formation The Reserve drafts a protocol Draft protocol considered by workgroup Provides technical expertise and practitioner experience Period meetings and individual consultation when needed Revised draft released for public comment Public workshop Final version adoption by Reserve board in public session

24. Questions, questions, questions... • What data is available? • What should the stringency be? • Who should pay for what? • Which sectors should be targeted? • Who should develop standardized methodologies? • What role will DNAs play? •  What is the goal of standardization? And who decided what the goals should be?