Public inputs on the baseline standard

1
Public inputs on the baseline standard

• Axel Michaelowa
• UNFCCC Practitioners Workshop
• Standards for baseline scenario identification
  and baseline emissions calculation
• Bonn, March 4, 2011

2
Overview of submitters
Ref. Submitter Affiliation Country
1 Jiwan Acharya Asian Development Bank Multinational organization
2 Ambachew F.Admassie Ethan Bio-Fuels Ltd. Ethiopia
3 Werner Betzenbichler DOEs and Independent Entities Association Multinational organization
4 Bruce Brook Lihir Gold Limited Australia
5 Ana Carnal Zero Emissions Technologies Spain
6 Henry Derwent IETA Multinational organization
7 Stephan Hoch Albert-Ludwigs-Universität Freiburg Germany
8 Dessalegne Messfin DNA Ethiopia Ethiopia
9 Klaus Oppermann World Bank Multinational organization
10 Gareth Philips Project Developer Forum Multinational organization
11 Karun Hriday Sharma Green Positive Consultants India
3
Overview of comments

• Comments are rather critical, with most
  commentators opposing the tools in their current
  form
• Comments relate to
• Purpose of tools
• Structure of tools
• Some comments are off scope
• Default grid emissions factor for grids in LDCs /
  below certain per capita energy supply
• CDM EB accountability for rule inconsistencies

4
Purpose of tools

• So far, tools treated specific aspects of
  methodologies
• New tools want to generalize the baseline
  section of all baseline methodologies.
• Are tools mandatory or optional?
• Most commentators prefer the latter
• Project developers could use own approach, if it
  is more accurate
• Are the tools applied as package or can one pick
  and choose?

5
Purpose of tools

• Are the tools independent methodologies or do
  they serve as guidance on meth development?
• Commentators prefer the latter
• Approved methodologies override tools as per the
  hierarchy of decisions and the tools thus could
  just be seen as guidance
• Well-established guidance could be superseded
• All existing methodologies would have to be
  revised
• Generally, comments stress inconsistencies
  between existing methodologies / guidance
  documents and the tools

6
Structure of tools

• Very (incredibly) complex
• Fear that transaction costs of project developers
  increase instead of decreasing
• Hurdle to recruit qualified auditors for DOEs
• Improve language and presentation
• Flow diagrams
• Annexes
• New terminology not always necessary

7
Tool for baseline identification

• Tool addresses definition of project
  alternatives and treatment of suppressed demand
• Introduces concept of five Methodological
  Approaches for Baseline Setting (MABS)
• Commentators want to limit new terminology or at
  least get an unambiguous definition
• General feeling that MABS 1 and 2 cannot be
  separated for all project types

8
Tool for baseline identification II

• Treatment of suppressed demand is generally seen
  as too conservative
• delivery of goods supply to cover previously
  suppressed demand should not be treated as
  capacity expansion
• assumption that historical consumption will first
  be displaced by other activities is problematic
• Commentators have difficulty with the
  requirement to prove that developers would /
  would not invest in an alternative

9
Tool for baseline calculation

• Tool specifies approaches for benchmark setting
• Commentators call for
• better guidance on how to choose between
  historical/actual emissions and the benchmark
• coverage of greenfield plants
• special treatment of LDCs

10
Tool for baseline calculation

• Commentators call for substantiation of
• choice of the number of 10 facilities for the
  definition of the relevant area
• global level for the industrial gas benchmark
• differentiation of stringency level of benchmarks
  across MABS
• Continuation of suppressed demand should be
  covered
• Term benchmark needs to be defined

11
Tool for determination of most attractive
alternative

• Defines alternative scenarios to the CDM
  projects, for which a barrier and then an
  investment analysis is done
• Some commentators do not see a need for this
  tool, as additionality tool is available
• Terminology problems
• Project under way
• Criteria for area expansion if less that 10
  comparable facilities are available

12
Tool for determination of most attractive
alternative

• Restriction of barrier analysis to those
  barriers really relevant for the project
• One comment heavily opposes investment analysis
  for all relevant alternatives due to excessive
  cost for project developers
• compare the most profitable ways of increasing
  production
• country or regional-level studies on marginal
  production cost increase provided by the EB in a
  top-down fashion

13
Options to improve the tools

• Tool for baseline identification include series
  of flowcharts explaining
• Choice of MABS
• Treatment of suppressed demand
• Concept of MABS
• MABS 1 Use of baseline instead of project
  efficiency might be appropriate in some cases
• MABS 2 Delete option without initial investment,
  or engage in a discussion whether behavioural
  changes should be included in the CDM

www.perspectives.cc michaelowa_at_perspectives.cc
14
Options to improve the tools II

• Concept of MABS (contd.)
• MABS 1 Use of baseline instead of project
  efficiency might be appropriate in some cases
• MABS 2 Delete option without initial investment,
  or engage in a discussion whether behavioural
  changes should be included in the CDM
• MABS 2 vs MABS 5 could overlap as energy
  efficiency improvement inevitably leads to a
  reduction of the emissions intensity of an output

www.perspectives.cc michaelowa_at_perspectives.cc
15
Options to improve the tools III

• Concept of MABS (contd.)
• MABS 3 should not exclude new industrial
  facilities they could be covered by a benchmark
  stringent enough to prevent perverse incentives
• GHG use avoidance related to cover gas
  alternatives does structurally not fit into MABS
  3, it would better fit into MABS 4, as the cover
  gas avoided will not be produced. MABS 3 also
  generally caps the CER production level without
  assessing the incentives for production increases
• Gas flaring reduction should belong to MABS 5

www.perspectives.cc michaelowa_at_perspectives.cc
16
Options to improve the tools IV

• Concept of MABS (contd.)
• Gas pipeline leak reduction is not covered by any
  MABS
• Mobile sources should not be excluded, as they
  can be covered by MABS 1 and 2
• Disaggregation of projects into components can
  be cumbersome combinations of MABS might be
  necessary
• Explain why combination of MABS 1 and 2 is not
  allowed for greenfield plants

www.perspectives.cc michaelowa_at_perspectives.cc
17
Options to improve the tools V

• Clarify why it is required to check whether
  project developers would invest in the absence of
  the CDM project
• Change sequence of paras 17-22, clarify that para
  20 only applies to greenfield projects
• Make clear that this check is required to prevent
  exclusion of all fossil power plant projects (AM
  0029, ACM 0013) that would otherwise have to
  apply a benchmark under MABS 5 that they could
  not beat
• Discuss openly about suppressed demand

www.perspectives.cc michaelowa_at_perspectives.cc
18
Options to improve the tools VI

• Tool for baseline emissions calculation
• All equations that determine baseline fuel or
  energy use contain a multiplicative term dividing
  project by baseline efficiency. It only makes
  sense if the project technology is less efficient
  than the baseline technology
• Consider spatial instead of administrative
  geographic delineation of markets
• Benchmark stringency should differentiated
  according to common practice in host country and
  techno-economical optimum of each project type

www.perspectives.cc michaelowa_at_perspectives.cc
19
Summary

• Tools are a commendable attempt to increase the
  consistency of baseline setting
• Stakeholders need for substantial revisions
• Optional character of the tools preferred
• Key challenges relating to the tools
• disaggregation of projects into components,
• evaluation whether a project developer will
  invest in the absence of the CDM project
• coverage of suppressed demand
• stringency of benchmarks

www.perspectives.cc michaelowa_at_perspectives.cc