Accessing Carbon Finance Workshop on Landfill Gas Development and the CDM
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Transcript of Accessing Carbon Finance Workshop on Landfill Gas Development and the CDM
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Accessing Carbon Finance
Workshop on Landfill Gas Development and the CDM
Denpasar, Indonesia. September 5-7, 2005.
Sn. Environmental Specialist. Lasse Ringius. World Bank
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Overview of Presentation
- Kyoto Protocol/CDM- Baseline and monitoring methodologies - CDM project cycle - Overview of global carbon market
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Kyoto Protocol: Industrial countries must reduce GHG emissions by 5.2% compared to 1990 levels in the period 2008-2012
90
95
100
105
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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
GH
G E
mis
sio
ns
(In
de
x 1
00
= 1
99
0)
EU15
Japan
Canada
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-8%
-6% -6%
-2%-3%
+20%
+12%
+9%
EU15
(228 MtCO2e)
Canada
(159 MtCO2e)
Japan
(214 MtCO2e)
Other Western Europe+ New Zealand
(19 MtCO2e)
Pe
rce
nt
of
19
90
em
iss
ion
s l
ev
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Kyoto Target
Current (2002) Emissions
Current Kyoto gaps
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Annex BNon-Annex B
How to close the gap?
Joint Imple-
mentation
Emissions Allowance
Market
Clean Development Mechanism
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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
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World Bank Carbon Finance Funds
Italian Carbon Fund. $15 million (open to Italian participation). Italian Multi-shareholder. Multipurpose.
Netherlands Clean Development Facility. $180 million.Netherlands Ministry of Environment. CDM energy projects.
BioCarbon Fund. $46.3 million (open). Multi-shareholder. JI and CDM LULUCF projects.
Community Development Carbon Fund. $128.6 million (closed). Multi-shareholder. Small-scale CDM energy projects.
Prototype Carbon Fund. $180 million (closed). Multi-shareholder. Multi-purpose.
Total funds under management: ~ US$ 875 mill.
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.
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How Indonesia can benefit from the CDM
Electricity
$$
Power Purchase Agreement
Certified Emission Reductions
$$
Emission Reduction Purchase Agreement
LFG to Energy Project
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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
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ER estimationThe 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
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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
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Example: Carbon revenues from LFG recovery and methane
destruction
1 mio. tons of waste
6 mio. m3 LFG/yr
2,140 ton CH4/yr
1,500 ton CH4 recovered/yr
31,500 tCO2e US$ 140,000/yr* 21
1
2
Underlying assumptions:- 1 m3 LFG contains 357 g methane- 70% collection efficiency- US$ 4.50/t CO2e
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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
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LFG methodologies
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Approved LFG methodologies
Project Reference
Presented by
Salvador da Bahia (VEGA), Brazil
AM0002 ICF Consulting
Durban, Africa del Sur
AM0010 PCF
Nova Gerar (NCDF)
AM0003 NCDF /Ecosecurities
Onyx, Brazil AM0011 CERUPT
ABIL, India AM0012 PCF / IDFC
Biodigester
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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
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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
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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%) * 21with 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
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Which methodology to choose?
Methodology Electricity generation
?
Baseline
Salvador da Bahia (VEGA)
no Mandated collection in concession contract (20% eff)
Durban (PCF)
yes Existing safety curtain wells (7% eff., declining) +
monitoring of regulations
Nova Gerar (NCDF)
yes, but not credited
Collection efficiency in bidding documents + safety
margin (20%)
Onyx (CERUPT)
yes, but on-site use only
Coll. mandated by law or economically attractive (0%)
Consolidated Methodology
yes Existing Regulations or Adjustment Factor +
monitoring of regulations
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MSW Project Examples in the Bank
Durban LFG-to-energy, RSA A. Sanghvi
Nova Gerar LFG-to-energy, Brazil
W. Kornexl
Shanghai LFG-to-energy, China
M. Anderson
Mexico LFG-to-Energy Umbrella
W. Vergara
Teheran LFG-to-Energy, Iran
A. Rotman
Olivarria LFG capture and flaring, Argentina
H. Terraza
Liepaja Energy Cell, Latvia A. Halldin
ABIL Biodigester, India D. Hoornweg