2 Background on the Climate Action Reserve Non-profit organization, chartered by California state legislation in 2001 –Mission is to encourage voluntary actions to reduce emissions and to have such emissions reductions recognized Balances business, government, and environmental interests
3 What We Do Develop High Quality Standards –Convene stakeholders and lead development of standardized protocols for carbon offset projects Manage Independent Third Party Verification –Training and oversight of independent verification bodies Operate a Transparent Registry System –Maintain registry of approved projects –Issue and track serialized credits generated by projects
Listed & Registered Projects
5 Reserve stats CRTs registered~5.2 million (~1 million ODS) Account holders325 Projects350 (3 ODS) Exchanges CRT futures are traded on: Chicago Climate Futures Exchange (CCX) Green Exchange (NYMEX) Recent prices$5-8 per CRT
6 Performance Standards Why a performance standard is different –The hard work is upfront –Assess industry practice as a whole, rather than individual project activities Less subjective determination to qualify More certainty in amount of credits Lower risk for developers and investors Faster project processing
7 ODS Project Definition All ODS destroyed within a twelve month period by a single project developer at a single destruction facility –May come from a single or multiple sources Includes only gases for which production is completely phased out Excludes halons –Refrigerants Collection and destruction of ODS refrigerant from residential, commercial and industrial equipment, systems and appliances, or stockpiles –Foam Extraction and destruction of ODS blowing agent from foam; or Destruction of intact foam sourced from building insulation
8 Sources and Destruction Acceptable sources –US sources: Must originate from US sources for destruction in US –Imported sources: Must originate from (one or more) Article 5 countries for destruction in US Why only U.S. destruction? –Role of destruction facility is very important. We only permit destruction at U.S. facilities that are regulated for ODS destruction by U.S. EPA. If there were a similar mechanism for overseeing ODS incinerators globally, we would be pleased to collaborate with it.
9 Additionality Legal requirement test Performance standard test: Must exceed a standard of common practice for ODS management
10 Performance standard test Must exceed a “common practice” standard for managing ODS –US: ODS destruction is not common practice, so all ODS destruction activities are considered additional –Article 5 Countries: ODS destruction is not common practice, so all ODS destruction activities are considered additional
11 Calculating reductions Emission reductions = baseline emissions – project emissions Baseline emissions: Sum of all emissions in the baseline scenario over 10 years Project emissions: Sum of all emissions in the project over 10 years
12 Baseline scenarios US –Refrigerants: Recovered and used to charge existing equipment –Appliance foam: shredded and landfilled –Building demolition foam: landfilled Article 5 countries –Virgin stockpiles of refrigerants: used to recharge existing equipment –Refrigerants from end-of-life equipment: 100% vented –Appliance foam: shredded and landfilled –Building demolition foam: landfilled
13 Project emissions Sum various sources such as –Transportation of gases for destruction –Losses from extraction of foam –Losses from incomplete destruction –Energy use at destruction facility –Emissions from non-ODS substitutes
14 So what does all this mean? Destruction of one kg CFC 12 –Article 5 source Government stockpile: ~10 tonnes CO2e End of life: ~10.9 tonnes CO2e –U.S. source End of life: ~9.58 tonnes CO2e
15 Project Examples Project Developer: EOS Climate –Partnered with firm that gathers and recycles U.S. refrigerators –Instead of reuse, CFC-12 is destroyed –To date, issued ~250,000 CRTs Project Developer: Coolgas –Ships ODS to US from private Indian stockpiles for destruction –To date, issued ~650,000 CRTs
16 Who are the buyers? Large industrial firms that expect to be regulated under state or federal climate legislation. Financial firms hoping to buy now and sell to regulated entities later. –Banks, hedge funds, private equity funds Pure voluntary buyers
17 How does financing work? We do not get involved in financial transaction Currently, most transactions are through a broker –There are a handful of active CRT brokers –Can be exchange-traded –Common for project developers to pre-sell some CRTs and get some upfront financing— depends on risk profile Helps pay for verification and project costs
18 The bottom line today We currently accept Article 5 sourced ODS projects for U.S. destruction from: –Government stockpiles; –Equipment end-of-life.
19 Going forward For destruction elsewhere, we are very interested to work with the Ozone Secretariat and others to develop an oversight mechanism for destruction in Article 5 countries.
20 Would a facility be useful? In the short-term, voluntary and pre- compliance buyers are generating moderate demand. Looking out several years, federal program will have large demand Over next 1-3 years, a facility could ramp projects up to scale –Administration would be very simple for projects registered with the Reserve
21 Contact Information Joel Levin 523 W. 6th Street, Ste. 428 Los Angeles, CA (213)