Carbon finance in ld cs hedon - public

Financing highly social and environmental project through the voluntary carbon market

Olivier Levallois

Household energy demand! Challenges.

• Rural Biogas tanks in Guizhou province, China• Implemented by French NGOs • Project activity: 8 m3 biogas tanks for individual households. Use of

waste for energy production and as fertiliser• Baseline: use of fire wood, charcoal, coal• 5,000 tCO2/y for 1,700 units


• Microsolar Lighting in Zambia• Implemented by SolarAid • Project activity: small LED lights powered by photovoltaic panels for

individual HH. Train solar entrepreneurs• Baseline: use of kerosene (common fuel for domestic lighting).

• Use of around 52-55 litres of kerosene / year. • 2.580 kg CO2/litre of kerosene. • 19% of their yearly spend

• 2,500 tCO2/y for 39,000 units ($20 each)


• Ceramic Water Purifiers in Cambodia• Implemented by Hydrologic• Project activity: use of ceramic water purifiers to treat contaminated

drinking water (10 L units)• Baseline: conventional water treatment (boiling water with NRB -

firewood)• 20,000 tCO2e / year for 40,000 units ($20 each)• Role of carbon: subsidy price of filters

Policy options to reduce GHG emissions

Objective:

reduce greenhouse gas emissions

Non-Market-based Mechanism(s)

Regulation/Tax

Market-Based Mechanism(s)

Regulated Carbon Market:Cap-and-trade + Offsetting mechanism

Voluntary Carbon Market:Offsetting mechanism

Voluntary Carbon Market: companies, individuals, and other entities and activities not subject to mandatory limitations that wish to offset GHG emissions

Carbon credits financing channels

How does it work? Bring (additional) revenues to an emission reduction project Cover the cost difference between an old and a new technology Act as an international subsidy to clean energy in developing

countries Obtain core funding

Where do they grow? In a well taken care of tree Validated by auditors Issued by Standard bodies

Eligibility assessment

Project document drafting

Validation by independent auditor

Registration by the standard committee

Monitoring/Verification/Issuance

How do you obtain carbon credits from your project?

Let’s use the Clean Development Mechanism…

• International agreement (KP):• CERs accepted by signatory countries• Included in the EU-ETS and JV-ETS

• Goal:• Emission reduction cost-effectiveness• Sustainable development in host countries

• Benefits:• 1 billion tCO2e (source: UNFCCC)• Increase knowledge on emission reduction opportunities• Constructivism

• Limits:• Transaction cost• Sustainable Development• Price volatility/decrease• No LULUCF activities This is where voluntary market

can help

Compliant vs Voluntary market

• Project NOT registered/certified with UNFCCC:• Private standards: Verified Carbon Standard, Gold Standard

Foundation, Carbon Fix, Climate Action Reserve, etc.• Similar certification that CDM, same or similar

methodology/approaches

• Buyers of offsets are not obliged:• Various purposes: climate change engagement, communication

strategy, pre-compliance readiness, etc.

Voluntary carbon market’s main drivers

Demand Offer

WhoService/financial companies, manufacturers, retailers

Project owner/developers, intermediaries

ObjectiveReducing environmental impact, carbon footprint offsetting

Reducing/avoiding GHG emissions, improving environmental impact

Standard Recognised and credible Valuable

GeographyLink with the offsetting company' activities

Project located in developing countries. Growing sources of GHG

TechnologyLink with the offsetting company' activities

Industry or household energy-related, transportation, land-use, forestry

Price GBP 0.5 to GBP 12 / tCO2e GBP 1 to GBP 20 / tCO2e

Voluntary Carbon Market: 93 M tCO2 exchanged in 2011

Large companies offsetting

Google: 1,5 M tCO2e/y

Aviva: 130,000 tCO2e/y

Marriott: 3 M tCO2e/y

JLR: 700,000 tCO2e/y

Voluntary market! Objectives.

• Broaden parties involved in emission reduction activities• Voluntary initiatives

• Reduce transaction costs• Shorter process• Simplified methodologies• Lighter interpretation of the UNFCCC guidance

Voluntary market! Objectives.

• Account for Sustainable Development criteria• MDG Matrix:

• Air quality• Water quality and quantity• Soil condition• Biodiversity• Quality of employment• Livelihood of the poor• Access to affordable energy• Etc…

• During validation and verification

Voluntary market! Pros.

• Price level: according to the social and environmental value of the project:

• Household level energy demand (6 – 10 GBP)• Forestry projects (4 – 8 GBP)• Small scale renewable energy (2 – 4 GBP)• Large scale renewable (1 – 3 GBP)• Industrial gases (< 1 GBP)

• Lower price volatility


• Working with households in LDCs• Technologies eligible: rural biogas, cook-stoves, water filters, solar

heater

• Larger number of participants (households, NGO, financing party, etc.)

• Introduction of the suppressed demand concept


• Offer balance demand equlibrium

2007 2008 2009 2010 2011 20120

2

4

6

8

10

12

14

OfferExponential (Offer)DemandLinear (Demand)

Demand: Marketing budget cut: Slowing of increase

Offer: Massive issuance from HH energy demand Forestry project first issuances


• Higher cost of emission reduction• Less commercial incentive (not for profit)• Heavier management structure• More complex monitoring

• Surveys• Quantitative tests• Equipment

• Valuation of NRB

• Spot transactions

Controversies and credibility building

What is a credible emission reduction? ICROA: Code of good practice Financing meaningful projects

Additional

Real

Permanent

Measurable/Independently verifiable

Enforceable/Unique

What makes a credible & valuable offset credit ?

Industry association grouping 11 companies Offering Carbon management and offsetting Setting a code of good practice

Carbon Management: Use international standards (e.g. WRI/WBCSD GHG Protocols and

ISO 14064) Prioritise emission reduction strategies

Offsetting: ACR, UNFCCC, CarbonFix, Gold Standard, VCS, CAR Working with standards Building market credibility

Promote meaningful projects

Avoid industrial gases Avoid large hydro power plants Provide client with a story

Global Burden of Disease Study 2010 (THE LANCET)

Largest ever systematic effort to describe the global distribution and causes of a wide array of major diseases, injuries, and health risk factors

Household air pollution from cooking with solid fuels kills 4 million people annually

Wood fuelSupply/Demand balance

Partnership with Practical Action

Low smoke project in El Fasher, North Darfur, Sudan

Over 5 years, Carbon Clear has been providing

- Funds for micro-facility- Project management costs (Rugby, Khartoum, El Fasher):

- Staff- Logistics- Training- Workshop- Equipment- Indemnity from Women Development Associations

- Technical capacity building on Monitoring and Evaluation- Monitoring equipment

2008-2012: Objectives

Distribute up to 10,000 LPG stoves in El Fasher (North Darfur)

Reduction in indoor air pollution in households

Reduction of overall household energy expenditures for low-income families

Reduction of pressure on dwindling forest resources in the Darfur (NRB ~ 80-95%)

Strengthening of the managerial capacity of the community-based Women’s Development Association

2008-2012: Achievement/ Challenges

- 3,500 LPG stoves distributed in El Fasher- Part of it is outside El Fasher- (Price of stove + canister) x 3 - Price of LPG increased by 30%- Emission reduction (5-6 tCO2e / stove / year)

- Long delays- Validation lasted 3 years (no DOE available, then visit delayed many

times, then auditor not available, high turnover with DOE, etc.)- End of the 1st agreement period

Switching to a better energy

Carbon finance in ld cs hedon - public

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