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Seminar on Mobilizing Funds for Destruction of Ozone Depleting Substances (Geneva, 2010/06/14) Clemens Plöchl

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Presentation on theme: "Seminar on Mobilizing Funds for Destruction of Ozone Depleting Substances (Geneva, 2010/06/14) Clemens Plöchl"— Presentation transcript:

1 Seminar on Mobilizing Funds for Destruction of Ozone Depleting Substances (Geneva, 2010/06/14) Clemens Plöchl

2 Presentation Overview Company Profiles Commercial Incentives to collect and destroy ODS Consideration of Carbon Markets Accomplishments to date

3 Company Profiles SEG Umweltservice GmbH Over 20 years of experience in recovering, transporting and destroying ODS from domestic refrigerators. SEG annually de-manufatcures Mio. domestic fridges in 15 countries on 30 sites. USG Umweltservice GmbH manages and trades commodities flows generated by SEG´s de-manufatcuring activities. Energy Changes develops and operates carbon reduction activities(CDM/JI/VCS/CAR) and renewable energy projects (e.g. first Kyoto landfill gas project ever, first CDM biofuel methodology, first VCS ODS destruction submission etc…)

4 Commercial Incentives to collect and destroy ODS Recycling (steel, copper and plastics) Management of hazardous materials – Ozone – Climate – Local Environment Energy Efficiency Programs In industrialized countries regulations such as WEEE are creating markets for end of life domestic refrigerator recycling in developing countries other financing mechanism are urgently required such as the carbon market Producer Responsibility Governmental responsibility Market mechanisms Utilities (Energy Efficiency) International Funding

5 GHG Markets Carbon Market at a Glance The overall carbon market continued to grow in 2008, reaching a total value transacted of about US$126 billion (86 billion) at the end of the year, double its 2007 value (Table 1). Approximately US$92 billion (63 billion) of this overall value is accounted for by transactions of allowances and derivatives under the EU Emissions Trading Scheme (EU ETS) for compliance, risk management, arbitrage, raising cash and profit- taking purposes. The second largest segment of the carbon market was the secondary market for Certified Emission Reductions (sCERs) Source: World Bank

6 VER = Voluntary Emission Reduction BUYERS are individuals that may wish to offset GHG emissions linked to their way of life (residential energy use, commuting, travel), to customer-facing companies that wish to offset GHG emissions from their operations or from specific products or events (sports, concerts, conferences but also travels, mortgages, utility bills, shipping and other goods and services their customer may wish to render carbon neutral) to high emitting companies that may wish to voluntarily offset the GHG emissions fromsome portion of their activities that they cannot immediately reduce through their operations. Problem of non-standardization The rising market for VERs GHG Markets

7 the additionality of the project (making sure the project is not claiming reductions that would already occur), the actual existence of the emission reductions (making sure the project activity is monitored and that emissions reduction claimed are verified), the exclusion of double-counting (making sure the same emission reductions are not sold to several buyers at the same time), the permanence of the reduction (making sure the emission reductions are not temporary) and the existence of community benefits. Value Drivers for VERs Reported Prices between USD 1-15/VER GHG Markets

8 Voluntary Carbon Standard VCS GHG Markets The VCS Program provides a robust, new global standard and program for approval of credible voluntary offsets VCS offsets must be real (have happened), additional (beyond business- as-usual activities), measurable, permanent (not temporarily displace emissions), independently verified and unique (not used more than once to offset emissions). The founding partners of the VCS are The Climate Group, the International Emissions Trading Association (IETA) and the World Business Council for Sustainable Development.

9 ODS Destruction in the VCS GHG Markets On January 26 th 2010 VCS has updated its scope to include Ozone Depleting Substances General rules on: Eligible ODS Regulatory Surplus Evidence of origin of ODS, Project start Date Destruction technology and efficiency, Monitoring of ODS GHG emissions from substitute Substances Eligible Products Imported products Thos rules must be specified in concrete methodologies The first methodology to the VCS was submitted by Energy Changes and USG on May 3 rd 2010 Greenhouse Gas Emission Reductions By Recovering and Destroying Ozone Depleting Substances (ODS) from Products Public stakeholder review was closed June 3 rd 2010

10 Climate Action Reserve CAR GHG Markets The Climate Action Reserve is a national offsets program working to ensure integrity, transparency and financial value in the U.S. carbon market. Carbon offset credits known as Climate Reserve Tonnes (CRT) generated from such projects; and tracking the transaction of credits over time in a transparent, publicly-accessible system. Adherence to the Reserves high standards ensures that emissions reductions associated with projects are real, permanent and additional, thereby instilling confidence in the environmental benefit, credibility and efficiency of the U.S. carbon market

11 ODS Destruction under CAR GHG Markets On February 3 rd 2010 CAR issued two Protocols Article 5 Ozone Depleting Substances Project Protocol Destruction of Article 5 Ozone Depleting Substances Banks and U.S. Ozone Depleting Substances Project Protocol Destruction of U.S. Ozone Depleting Substances Banks

12 Differences in Voluntary Standards GHG Markets To view all listed contracts click here. here VCSCARCCX TradingOver the Counter (OTC) OTCExchange MethodologiesProject based bottom up Top down Geographical coverage (projects) World WideUS/Article 5US (at least for ODS) ODS coverageWork in progress Yes Current expected prices EUR 3 EUR1 EUR

13 CFC-11 and CFC-12 NON KYOTO GASES CFC-11 Blowing agent PU foam GWP=4750 CFC-12 Refrigerant cooling circuit GWP=10900 Accomplishments to Date 2006 Start of Methodological Development 2007 Contacting VCS 2008 Submitting idea to CAR 2009 Finalizing standards under VCS and CAR 2010 (April) First projects start in Article 5 countries based on Carbon Trading

14 Emission Reductions Brazil Baseline CFC units/year 128g CFC-12/unit 90% technical recovery rate 0% Baseline recovery rate 1.26 t CO2/unit Baseline emissions Project Example 1

15 Emission Reductions Example Baseline CFC-11 Brazil (shreddering landfilling) units/year 315g CFC-11/unit 90% technical recovery rate 0% Baseline recovery rate AF= 1 (open burning) 1.35 t CO2/unit Baseline emissions Project Example 1

16 Emission Reductions Brazil Project emissions Theory Summary 0.02 t CO 2 /unit Project emissions 1.35 t CO 2 /unit Baseline emissions 1.26 t CO 2 /unit Baseline emissions CFC-11 CFC t CO 2 /unit Sum Total 2.59 t CO 2 /unit Project Example 1

17 Example Carbon Finance Carbon Finance – Structure I State (owned) Aid Bank Commercial Bank Letter of comfort + $ in case of project default Guarantee in case of loan default Buyers of CERs Owner 1 Project Developer Owner 2 Loan in case of project default Advance payment for investment + $/CER CERs Guarantee in case of project default Advance Payment by Buyer $ for Guarantee

18 Important (future) Issues Before ODS can be destroyed it has to be collected Specifics of the carbon markets (income vs. upfront, continuous vs. one time grant, rigorous monitoring and verification e.g RAL Standard RAL- GZ 728 ) Methdologies around the phase out of HCFCs Voluntary Carbon Market alone is not enough, we need compliance markets

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