Value Maximization and Risk
Management Strategy in Biodiesel
 projects through Carbon Finance



                 Snehashi...
Context for Biodiesel
    National Energy Security

    Forex Savings

    Livelihood generation for people

    Improv...
Biodiesel Value Chain
Risks
    Risks to Farmers

     Weather, Catastrophe, Seasonality
     Little income in the first 4 -5 years
     Non...
Risks

    Risks to Industry players

     Highly variable results reported by different
      agencies
     Results ar...
Risk Minimization Strategy

Farmers
 Portfolio of Agri-produce with Energy crop
 Pre-purchase Agreement
 Minimum Suppor...
Risk Minimization Strategy

Industry
 Crop Insurance for Energy Crops
 Weather Insurance
 Pre-purchase Agreement with t...
Value Maximization Approach

    Generate revenue at every step of the value chain



    Link a number of Supply Chain t...
CDM options
    Value-chain based approach


    (No stone left unturned)
        Maximization of Carbon Credit benefits
...
CDM options
    Afforestation / Reforestation


    Methane Recovery and subsequent co-generation


    from the methane...
Approved Methodologies
    Afforestation / Reforestation


     1.AR-AM0002


    “Restoration      of    degraded      ...
Approved Methodologies
     3.AR-AM0006


    “Afforestation / Reforestation with Trees supported
    by Shrubs on Degrad...
Approved Methodologies


     5.AR-AMS0002


    “Simplified baseline and monitoring methodologies for
    small-scale af...
Approved Methodologies
    Methane Recovery and co-generation from the


    methane (AMS III.R and AMS I.C)
    “Methane...
Approved Methodologies
    Methane Avoidance


    AMS III.F
    “Avoidance of methane production from   decay of
    bio...
Approved Methodologies
    Fuel Switch


    1.AM0047
    “Production of biodiesel based on waste oils and/or
    waste f...
Approved Methodologies
     Fuel Switch


    2. Draft revised AM0047 version 03
    “Production of biodiesel based on wa...
Methodologies on the progress table


    Fuel Switch


    SSC NM009 (Draft AMS-I.F)
    “Substitution of fossil fuel in...
Strengths
    Carbon Finance can get the biodiesel projects which

    are often financially unviable, financed.
    The ...
Weakness & Limitation
    Use of some methodologies can restrict simultaneous

    use of another or harnessing Carbon be...
Risk Matrix
    R1. Feedstock yield/ Resource supply risk

    R2. Technological risk

    R3.Volumetric risk

    R4. ...
Participatory Risk Mapping
    Risks are to be ranked by the CDM consultants, project


    developers and financiers thr...
Risk Map
Risk Index




R1, R2, R3.....R11 from left to right
snehashiss@gmail.com
  Ph: +919977719174
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"Value Maximization and Risk Management Strategy in Biodiesel projects through Carbon Finance" presented by Snehashis, Climate Change & Environmental Core Competency Cell (C2-E-C3), IIFM in ASSOCHAM International Conference - "Climate Change: Business Sus

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"Value Maximization and Risk Management Strategy in Biodiesel projects through Carbon Finance" presented by Snehashis, Climate Change & Environmental Core Competency Cell (C2-E-C3), IIFM in ASSOCHAM International Conference - "Climate Change: Business Sustainability & Society", Nov 11, 2008

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"Value Maximization and Risk Management Strategy in Biodiesel projects through Carbon Finance" presented by Snehashis, Climate Change & Environmental Core Competency Cell (C2-E-C3), IIFM in ASSOCHAM International Conference - "Climate Change: Business Sus

  1. 1. Value Maximization and Risk Management Strategy in Biodiesel projects through Carbon Finance Snehashis Sarkar Climate Change & Environmental Core Competency Cell Indian Institute of Forest Management snehashiss@gmail.com / cceccc.iifm@gmail.com
  2. 2. Context for Biodiesel National Energy Security  Forex Savings  Livelihood generation for people  Improved social well-being  Oxygenated compound   No SOx emission  No CO and unburnt Hydrocarbon Carbon Neutral fuel  Restoration of degraded land, check in soil erosion  and overall soil improvement
  3. 3. Biodiesel Value Chain
  4. 4. Risks Risks to Farmers   Weather, Catastrophe, Seasonality  Little income in the first 4 -5 years  Non-performance of Energy Crop due to unknown reasons  Risk of non-procurement by industry
  5. 5. Risks Risks to Industry players   Highly variable results reported by different agencies  Results are highly site-specific  Competition with the existing conventional fuel  Risk of Market failure Risks to the end-user   Price risk  Technology failure
  6. 6. Risk Minimization Strategy Farmers  Portfolio of Agri-produce with Energy crop  Pre-purchase Agreement  Minimum Support Price  Portfoltio of related diversified Activities  Intercropping  Controlled Grazing  Honey Bee rearing in the field
  7. 7. Risk Minimization Strategy Industry  Crop Insurance for Energy Crops  Weather Insurance  Pre-purchase Agreement with the OMCs  Minimum Support Price
  8. 8. Value Maximization Approach Generate revenue at every step of the value chain  Link a number of Supply Chain to existing value chain   Fruit pulp Juice of Simarouba  De-oiled Cake  Glycerol Carbon Finance 
  9. 9. CDM options Value-chain based approach  (No stone left unturned) Maximization of Carbon Credit benefits  Securitization of underlying project finance  Maximize revenue generation  Promote sustainable development 
  10. 10. CDM options Afforestation / Reforestation  Methane Recovery and subsequent co-generation  from the methane Methane avoidance through composting  Fuel Switch 
  11. 11. Approved Methodologies Afforestation / Reforestation  1.AR-AM0002  “Restoration of degraded lands through afforestation / reforestation” 2.AR-AM0005  “Afforestation and reforestation project activities implemented for industrial and/or commercial uses”
  12. 12. Approved Methodologies 3.AR-AM0006  “Afforestation / Reforestation with Trees supported by Shrubs on Degraded Land” 4.AR-ACM0001  “Afforestation and reforestation of degraded land”
  13. 13. Approved Methodologies 5.AR-AMS0002  “Simplified baseline and monitoring methodologies for small-scale afforestation and reforestation project activities under the CDM implemented on settlements”
  14. 14. Approved Methodologies Methane Recovery and co-generation from the  methane (AMS III.R and AMS I.C) “Methane recovery in agricultural activities at household/small farm level” & “Thermal energy for the user with or without electricity”
  15. 15. Approved Methodologies Methane Avoidance  AMS III.F “Avoidance of methane production from decay of biomass through composting”
  16. 16. Approved Methodologies Fuel Switch  1.AM0047 “Production of biodiesel based on waste oils and/or waste fats from biogenic origin for use as fuel”
  17. 17. Approved Methodologies Fuel Switch  2. Draft revised AM0047 version 03 “Production of biodiesel based on waste oils and/or waste fats from biogenic origin or from oil seeds cultivated in dedicated plantations for use as fuel”
  18. 18. Methodologies on the progress table Fuel Switch  SSC NM009 (Draft AMS-I.F) “Substitution of fossil fuel in combustion engines through biofuel from degraded land”
  19. 19. Strengths Carbon Finance can get the biodiesel projects which  are often financially unviable, financed. The farmers can be compensated for the limited or  no returns from plant produces during the first few years by upfront payment of Carbon Credits. Carbon credits as earned in hard currency, can attract  otherwise unwilling parties to finance the project. Potential for multiple CDM projects as well as  harnessing multifarious developmental benefits from a Value-chain based approach.
  20. 20. Weakness & Limitation Use of some methodologies can restrict simultaneous  use of another or harnessing Carbon benefits from multiple sources across the value chain at the same time. Because of high risk of the projects, the CER prices  discovered in the market may be very small. CERs from A/R CDM are not tradable in the EU  market as per provisions of the linking directive.
  21. 21. Risk Matrix R1. Feedstock yield/ Resource supply risk  R2. Technological risk  R3.Volumetric risk  R4. Biodiesel price risk  R5. Registration risk  R6. Risks in monitoring, verification and issuance of CERs  R7. Risks of additional policy of CDM EB  R8. Political risks in host country  R9. Risk of non-renewal of project land lease  R10. CER price risk  R11. Environment, Health and Safety risk 
  22. 22. Participatory Risk Mapping Risks are to be ranked by the CDM consultants, project  developers and financiers through collective deliberation in order of their respective Risk Index, which is the product of its likelihood of materializing (L)  severity of impact (I)  This will help in prioritizing risks and adopt suitable  mitigation strategies for them.
  23. 23. Risk Map
  24. 24. Risk Index R1, R2, R3.....R11 from left to right
  25. 25. snehashiss@gmail.com Ph: +919977719174

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