Beyond offsetting: Ambitious SBL as a national contribution to combat climate change

2. Beyond offsetting: Ambitious SBL as a national contribution to combat climate change Malin Ahlberg „Designated Focal Point/Designated National Authority“ German Emissions Trading Authority BMU Side-Event: “Building blocks for NAMA development” 02 June 2011, Barcelona

3. Background: Definition of SBL CMP6 definition: baseline established for a Party or a group of Parties to facilitate the calculation of emission reduction and removals and/or the determination of additionality for clean development mechanism project activities, while providing assistance for assuring environmental integrity.

4. Types of standards With a standardized approach a baseline scenario could be established, baseline emissions and/or the additionality could be determined. Different types of standards are possible: Emissions intensity benchmarks (t CO2 / t product) Technology /practice standards Default values Positive Lists

5. Standardized baselines may: • - Improve efficiency by reducing transaction costs, complexity and uncertainty for project participants; • - Enhance transparency and objectivity and thus reduce inconsistency of decisions on project registration; • - Facilitate access to the CDM; • Reduce the overall transaction costs - especially if high numbers of projects are developed using the same standardized approach; • - Promote the scaling-up of mitigation actions while ensuring environmental integrity.

6. Furthermore, standardized baselines may: • ... go beyond offsetting if the baseline is sufficiently ambitious. • Emissions reductions below the defined baseline could be accounted for a national appropriate mitigation action by the host country. • CMP 6: “Decides that the application of the SBs shall be at the discretion of the host countries DNA.” • As far as the baseline is consistent with the past EB decisions the host country may use the CDM as a policy instrument in order to promote the implementation of climate protection projects.

7. Advantages of ambitious baselines • SBL can allow host countries to better align the use of carbon financing with wider public policy goals (e.g. energy policy). • The development of SBL by the DNA could have a steering function, and support the development of CDM projects in certain sectors. • SBL will reduce the supply of CERs but at the same time it may increase the number of projects and thus the price won’t necessarily be influenced. • SBL is beneficial for PD since it reduces project implementation risks and transaction costs.

8. I. Example: Default grid emission factor • An advanced developed country could define an ambitious benchmark for the grid emission factor (and define a technology positive list for additional project activities.) • Once such a standard for the baseline and additionality is approved by the EB, PDs have a higher ex-ante certainty, the CDM procedures are more streamlined (validation, LoA issuance etc.) and thus the transaction costs decrease significantly. • The financial flows from developed countries to developing countries could be increased and moreover the host country can account for a certain amount of emissions reductions to its national goal (no zero-sum game).

9. II. Example: Default grid emission factor • Ambitious baseline is not appropriate for LDCs where a high degree of suppressed demand exist. • With SBL obstacle of lack of data for calculating the grid emissions factor can be overcome by using benchmarks (eg. most efficient gas power generation). • In low-income countries such a benchmark should reflect suppressed demand (e.g. by defining the electricity demand per capita). • Level of stringency: With a high level of stringency non-additional projects will be weeded out, but fewer projects will be able to beat the performance standard.

10. Which sectors should be prioritized? Defining priority areas for the development of standardised baselines: • Definition of the system boundaries: Sector or single activity, country wide or regional (comparability). • Identification of key performance indicators (t CO2e per product, heat or fuel). • Data avalability - Inhomogeneous sectors are more feasible for not credited NAMA where a higher degree of uncertainty is acceptable (no offsetting in Annex I countries).

11. Examples for possible sectors/project types • In general it is highly dependent on the regional circumstances: • Household consumption of heating and lightning • Off-grid energy supply • Certain transport project with clear system boundaries • Agriculture

12. Conclusion • Efforts to reduce GHG emissions by developed countries alone will not be sufficient to reach 2°C objective. Also substantially enhanced NAMAs by other Parties are required. • This implies that commitments by developed countries need to be completed by (advanced) developing countries. • Additional international financing (to supported NAMAs) is needed to allow developing countries to go beyond their own action and to promote the transition towards a low-carbon economy. Ambitious SBL can path the way to the new market-based mechanism.

13. Thank you for your attention • Malin Ahlberg • E-Mail: German.DNA.DFP@uba.de • Internet: www.dehst.de