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Evaluating approaches to ghg offset aggregation c-agg


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Evaluating approaches to ghg offset aggregation c-agg

  1. 1. Evaluating Approaches to Aggregating GHG Offsets<br />Peter Weisberg<br />C-Agg<br />Chicago, Il<br />July 21th, 2011<br />
  2. 2. Disclaimer<br />Research supported by the Electric Power Research Institute (EPRI)<br />Does not reflect the views of the EPRI or its members.<br />
  3. 3. C-Agg Round Table Purpose<br />Discuss<br />Inaccuracies<br />Gaps<br />Lessons learned<br />Next steps<br />
  4. 4. Outline<br />Introduction<br />Methods of aggregation<br />Case Studies<br />Lessons learned<br />Next steps<br />
  5. 5. Introduction: Definition of Aggregation<br />Aggregation groups<br />geographically and/or temporally dispersed project activities<br />that reduce emissions in a similar way<br />to streamline the process of qualifying and quantifying those activities as offsets<br />
  6. 6. Introduction: Why?<br />Source: Fenhann, Jorgen. CDM Pipeline. July 2011.<br />
  7. 7. Source: Eagle et al. “Greenhouse Gas Mitigation Potential of Agricultural Land Management in the United States.” T-Agg Report. March 2011. <br />
  8. 8. Introduction: Why?<br />Future of offsets:<br />Domestic<br />Forestry<br />Agriculture<br />International<br />Household scale<br />Photo Source: Adam Ferguson, The New York Times <br />
  9. 9. Introduction: Why<br />Reduce transaction costs<br />Simplify monitoring and verification<br />Facilitate financing at scale<br />Streamline commercialization<br />Reduce risks<br />Project activity<br />Buyer<br />
  10. 10. Outline<br />Introduction<br />Methods of aggregation<br />Case Studies<br />Lessons learned<br />Next steps<br />
  11. 11. Methods of Aggregation<br />Programmatic<br />CDM PoA<br />VCS Grouped Projects<br />CAR Forestry Aggregation Guidelines<br />Business Model Based<br />Sectoral<br />
  12. 12. Clean Development Mechanism’sProgramme of Activities (PoA)<br />PoA<br />Coordinating and Managing Entity<br />CPA<br />CPA<br />CPA<br />CPA<br />
  13. 13. PoA<br />Registration<br />Issuing Credits<br />Host Country Approval<br />Monitoring and Verification<br />Design<br />Documents<br />Registering the PoA<br />Registration<br />Credits Issued<br />Validation<br />Including new CPAs<br />CPA Design Document<br />CPA Design Document<br />Verification<br />2nd CPA<br />Verification<br />3rd CPA<br />
  14. 14. PoA: Key distinction from bundling<br />PoAs allow for<br />Temporal flexibility<br />28 years to include new CPAs <br />The use of small-scale methodologies at scale<br />Scale measured at the CPA-level<br />
  15. 15. PoA Pipeline<br />8 registered PoAs, with 73 projects at validation<br />50% = “household scale”<br />90% = small-scale methodologies<br />Source: Fenhann, Jorgen. CDM Pipeline. March 2011.<br />
  16. 16. PoA Barriers<br />Enforcement<br />Verifier Liability for Erroneous Inclusion<br />Additionality<br />CPA or PoA level?<br />
  17. 17. PoA Case Study:Sadia Brazilian Swine Digester<br />Sadia- Brazil’s largest meat producer<br />Scale: 1,050 swine digesters, delivering 1 million CERs/year<br />(25 swine digesters in US)<br />Methodology: Small-scale CDM<br />Revenue: Carbon only<br />
  18. 18. PoA Case Study:Sadia Brazilian Swine Digester<br />Carbon Market<br />-<br />European Carbon Fund purchased 2.7 million CERs at fixed price<br />Financing<br />- <br />Brazilian Development Bank lends $38 million in debt<br />Swine Producers<br />
  19. 19. PoA Case Study:Cool NRG CFL Distribution<br />Cool NRG- Australian efficiency company<br />Scale: 1 million CFLs distributed per CPA, delivering 24,000 CERs/year<br />30 CPAs planned in Mexico, 720,000 CERs/year<br />Methodology: Small-scale CDM<br />Revenue: Carbon only<br />
  20. 20. VCS Grouped Projects<br />
  21. 21. CDM PoA vs. VCS Grouped <br />VCS<br />Grouped<br />CPA<br />PoA<br />Program of independent projects<br />Grouped Projects <br />Many independent projects working together as one<br />CDM<br />PoA<br />CPA<br />CPA<br />CPA<br />CPA<br />CPA<br />CPA<br />CPA<br />
  22. 22. VCS Pipeline<br />5 renewable projects in China and India<br />17,000 – 770,000 credits/year<br />
  23. 23. CAR’s Aggregation Guidelines<br /><5,000 acres<br />Transaction cost reduction<br />Less frequent verification<br />Statistical certainty of inventory established at aggregated rather than individual project level<br />
  24. 24. CAR’s Aggregation Guidelines<br />Cost Savings: A 2,000 acre landowner joins a 9 project aggregation pool; <br />nominal costs for 2016 through 2070<br />
  25. 25. CAR’s Aggregation Guidelines<br />3,000 acre landowner generates 270,000 carbon credits at $6/credit<br />Carbon NPV Unaggregated: $800,000<br />Carbon NPV Aggregated: $950,000<br />Aggregation = 20% increase in carbon value<br />Source: “Aggregated price savings of CAR’s Forestry Aggregation Guidelines.” Steve Dettman, Ecotrust, Portland, OR: May 11, 2010.<br />
  26. 26. CAR’s Aggregation Guidelines:Enforcement<br />
  27. 27. CCX’s Soil Carbon Protocols<br />CCX’s Conservation Tillage and Conversion to Grassland and Rangeland Protocol<br />Minimal guidance to aggregators<br />
  28. 28. CCX’s Soil Carbon Protocols<br />Simplified, streamlined process for qualifying and quantifying a project<br />Permanence – five years, 10-20% discount for later reversals<br />Essential to land leasers<br />
  29. 29. CCX’s Soil Carbon Protocols<br />Monitoring – Standardized, practice-based regional crediting<br />
  30. 30. Case Study: North Dakota Farmer’s Union CCX Soil Carbon<br />Aggregator for the National Farmers Union<br />From 2006 to 2010, the NDFU aggregated 3,900 producers with 5.5 million acres<br />Sold $7.4 million credits under CCX<br />
  31. 31. Case Study: North Dakota Farmer’s Union CCX Soil Carbon<br />Landowners<br />Implement practice<br />Map acres online<br />Fax standard contract<br />10% are verified<br />
  32. 32. Business Model Approach:Ducks Unlimited<br />Pilot with no methodology<br />North Dakota in 2008<br />100 landowners with 50,000 acres of avoided grassland conversion projects<br />DU pays for perpetual grasslands easement with USF&WS<br />Additionality:<br />Bio economic model <br />26%, or 13,000 acres, are additional<br />384,000 mtCO2e over 10 years<br />Photo Source: Amy Taborski. Ducks Unlimited. Sheridan County, North Dakota. June 2010. <br />
  33. 33. Performance Risk<br />Aggregator can eliminate performance risk too:<br />Source: Steven De Gryze, C-Agg,. March 29-30, 2011 Sacramento, CA.<br />
  34. 34. Business Model Approach:AgCert<br />Swine digesters in Brazil and Mexico<br />Between 2002 and 2008, AgCert bundled over 816 project sites into 92 CDM project activities<br />3.5 million CERs/year<br />Examinership in 2008<br />Single crediting period limited temporally dispersed projects<br />Methodology delays disrupted needed credit generation and sales<br />
  35. 35. Governmental Approaches:International Sectoral Crediting<br />Business as usual<br />GHG Emissions<br />Developing country contribution to global emission reductions (supported and non-supported)<br />Emission baseline<br />Credits/allowances for sale<br />Actual emissions<br />Time<br />Image Source: Diamant, Adam. Opportunities and Challenges of Implementing Sectoral GHG Emissions Offsets Programs. EUEC 2011. Jan. 31st, 2011. Phoenix, Arizona.<br />
  36. 36. Governmental Approaches:Domestic Sectoral Crediting<br />Operated by USDA or state agency<br />Target specific commodity/sector in specific region<br />Regional adjustments for additionality, leakage, permanence, <br />Credit commercialization<br />Retired for US inventory?<br />Price control reserve?<br />Sold to regulated entities?<br />
  37. 37. Outline<br />Introduction<br />Methods of aggregation<br />Case Studies<br />Lessons learned<br />Next steps<br />
  38. 38. Lessons Learned:Consider Aggregation Upfront<br />Aggregation enables<br />Proportional additionality assessments- discounts credits according to that project type’s general level of common practice.<br />
  39. 39. Lessons Learned:Consider Aggregation Upfront<br />Aggregation enables<br />Modeling<br />Source: Salas, William. Using Biogeochemical Process Models to Quantify Greenhouse Gas Mitigation from Agricultural Management Projects. Nicholas Institute for Environmental Policy Solutions, Report NI R 11-03. Page 22.<br />
  40. 40. Lessons Learned:Reduce Risks<br />
  41. 41. Lessons Learned:Reduce Risks<br />
  42. 42. Lessons Learned:Reduce Risks<br />
  43. 43. Outline<br />Introduction<br />Methods of aggregation<br />Case Studies<br />Lessons learned<br />Next steps<br />
  44. 44. Next steps<br />Registries develop programmatic rules for US projects<br />Temporal flexibility<br />Additionality rules<br />USDA/P-Agg/other pilot US sectoral crediting<br />
  45. 45. Questions for C-Agg Roundtable<br />Report Feedback<br />What are the major gaps (methods, case studies, etc.) in the information presented? <br />What are other potential next steps for ensuring successful aggregation?<br />Market<br />How focused should next steps be on a system that works within the cap-and-trade framework? <br />Will aggregators be willing to absorb carbon market risks and insulate landowners and buyers from risks? If not, what can be done to reduce the risks that all market participants face?<br />Protocol<br />What methods of aggregation are you considering for methodologies and protocols that are not yet public?<br />Is aggregation being sufficiently considered as new agricultural protocols are designed? If not, what changes need to be made?<br />Modeling and Quantification<br />What changes need to be made to existing and emerging models to prepare them for aggregation?<br />What sectors work particularly well for practice-based standardized crediting rates (like those in the CCX soil carbon protocols)? What sectors require performance-based monitoring?<br />
  46. 46. Thank you!<br />Peter Weisberg<br />Senior Project Analyst<br />The Climate Trust<br /><br />(503)238-1915 x207<br />