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Reflections on cost issues , Kristian Brüning

NEFCO’s concept study and pilot project on utilization of voluntary carbon markets to finance destruction of ozone depleting substances in Russia. Reflections on cost issues , Kristian Brüning Seminar on Environmentally Sound Management of Banks of ODS, June 14 2010. Project Background.

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Reflections on cost issues , Kristian Brüning

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  1. NEFCO’s concept study and pilot project on utilization of voluntary carbon markets to finance destruction of ozone depleting substances in Russia Reflections on costissues, Kristian Brüning Seminar on Environmentally Sound Management of Banks of ODS, June 14 2010

  2. Project Background • Interest by NEFCO in financing sound management of Russian ODS Banks • Long-term objective  creation of a viable domestic state-of-the-art unwanted ODS management and terminal destruction alternative. • Need to understand and explore the link between the climate benefit of ODS destruction and carbon markets. • The “value proposal” offered by voluntary carbon markets remain untested  evaluate the viability of a private sector solution in the carbon market • Practical evaluation: NEFCO, Swedish EPA, Swedish International Development Cooperation Agency (Sida) and the Finnish Ministry of Environment supported the conceptualization of a carbon finance-based pilot ODS management and destruction project for household refrigeration appliances in Russia. • Aim is to establish the procedural and methodological foundation for co-financing an ODS management and destruction project in Russia with proceeds from the sale of GHG emission reduction credits.

  3. Role of Climate Wedge • An independent carbon management and investment advisory firm providing carbon finance and emissions trading related advisory and asset management services. • Working across carbon markets (Kyoto, EU, voluntary, US) • Authored the first version of the Voluntary Carbon Standard and helped set up the first custodial / registry service for voluntary emission reductions with Bank of New York • Member of TEAP XX/7 Task Force .

  4. From concept study to real investment project Project ConceptStudy • Identify needs imposed by voluntary market ODS methodology (using EOS Climate/CAR) • Identify pilot project, local partners, cost estimates • Evaluate VCM financing possibilities and prerequisities. • Real test of localpartnerships/logistics for sourcing, transporting and destroyingsmallvolume of ODS • 3t R12 and R22 fromrefrigerationequipment in Moscowregion • Documentprojectin-linewith VCM standard, realcost data . Pilot Project • Construction of a new municipalwastetreatmentfacility • Option to integrate ODS management and destruction into plans • Use VCM to co-financeadditionalinvestment into ODS management process and destructiontechnology? . Investmentproject

  5. Pilot project details • Initial pilot project considered destruction at facility in Finland, changed to “simpler” case • Destruction of 3t of ODS in the Russia • Identification of sources undertaken by local partner: searching and selecting the enterprises/owners of obsolete refrigeration equipment and ODS banks. Picture: Kremlin and Moscow River (Source: Wikimedia) • Collection on ODS: use dedicated coolant collection equipment to transfer ODS into 5 600kg transport cylinders. • Transfer of ODS: assuming up-to 500km land transport to destruction site using standard 6t 2-axis truck. • Disposal: to be evaluated, one option is to undertake destruction at the plant for toxic wastes thermal treatment of PJSC “TechEnergoChimprom”

  6. Voluntary Russian ODS destruction project Indicative cost estimates for planned pilot project Acquisition ($10/kg х 3000 kg) $30,000 Collection equipment $2,500 Transfer containers (5 ea. Х 700) $3,500 Transfer (3000 kg for 500 km) $500 R12 /R22 Disposal cost $10,500 Overhead $9,500 Total $56.500 • Based on quotes from local parties, not yet confirmed • Independent of any requirements imposed by VCM methodology / process • Collection and recovery costs embedded in the acquisition cost of bulk ODS • Small, one-off volume – no capacity issues .

  7. Indicative cost estimates for planned pilot project (II) • Cost estimates for ODS management and destruction are almost 50% less than average estimates in TEAP studies. Representative?? • Acquisition not priced on a “sole” ODS basis - the cost is included in the service cost of maintaining old equipment.

  8. Indicative cost estimates for planned pilot project (III) • Using TEAP sector specific average GWPs of recovered ODS

  9. Indicative cost estimates for planned pilot project (III) • Additional cost impact of carbon project development: table below assumes a fixed cost of €60,000 and a variable cost of €0,1/t CO2e.

  10. Indicative cost estimates for planned pilot project (IV)

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