Clean Development Mechanisms and New Market Developments Presentation at the Regional Conference on Gas Flare Reductions Tashkent, 15 th June 2012

Carbon Limits AS2 1.The CDM and Flare Reduction – Current Status 2.Prospects for carbon co-financing of petroleum sector investments 3.Regional initiative on flare reduction (EBRD & GGFR study) Outline

Dramatic decline since summer of 2011 The problem is demand - market rebound not likely by market forces alone Current price levels insufficient to justify most GHG mitigation investments Figure: EU ETS developments – CER prices Carbon prices have collapsed and outlook is uncertain.. Source: BlueNext

.. but there is continued growth in the CDM project pipeline.. > 4,000 registered CDM projects «Pre-notification» for > 10,000 projects submitted to the UNFCCC > 900 million CERs issued (CDM) Figure: Number of projects and CER issuances (cummulative) Source: UNEP Risøe/CL

Gas flare projects Few countries (and companies) have more than one CDM project.. = Countries with at least 1 registered gas flare recovery project = Countries with at least 1 gas flare recovery project under validation/registration x = # registered projects in country x = # projects under validation/registration in country CDM/JI pipeline: (validation ->) ~50 mill tCO 2e /yr ~26 BCM/yr

Despite low carbon prices and uncertainty about market access for CERs from non-LDCs, new CDM projects are put forward.. = Additonal countries with at least 1 project in «pre-notification» stage x = # projects in «pre-notifications» stage in country = Countries with projects under development (validation/registration/issuance) known projects 77 companies 28 countries CDM/JI pipeline: Source: UNEP Risøe/CL Submission rate to UNFCCC («Pre-notifications» per month)

Gas flare projects High failure rate for CDM project submissions.. = Countries with at least 1 gas flare recovery project terminated/rejected/no issuance after >2 years Only 3 CDM projects have had CER issued!

The Durban Platform: Towards a new broad agreement The Durban Platform: The Ad Hoc Working Group on the Durban Platform on Enhanced Action to start its work in the first part of 2012 Work to be completed no later than 2015 in order to adopt a protocol, legal instrument or legal outcome and for it tom come into effect in 2020 Commitments: Not clear what the commitments will be: Quantitative emission limitations/reductions (QELROs) Financial Monitoring, Reporting and Verification (MRV) Not clear what countries/parties will have what type of commitments from 2020

Scale-up from the CDM POA Program of Activities under CDM CDM Clean Development Mechanism SMP Scale-up mitigation programs ETS ”cap-and-trade” Emissions trading system Voluntary participationAgreement between authorities and companies Mandatory based on national (international legislation) Institutions and regulations at national level Project owner in charge of project development and documentation. National approval by DNA, otherwise modest requirements Several actions/activities coordinated by a private or public entity. Can be a “policy/measure or stated goal” but must be voluntary At the initiative of authorities and/or companies. Negotiations on distribution on carbon credit benefits. Companies/installations are faced with an emission cap and are allocated allowances that can be traded. International regulations and institutions Part of the Kyoto Protocol. Reforms and amendments made by Parties to the Protocol. UN approves projects and issue credits Similar to the CDMNo legal basis, may be developed under a new international agreement and/or may emerge as part of bilateral agreements. Allowances to be traded between countries under new international agreement and/or bilateral agreements. Existing mechanism New mechanisms

Regional study on flare reduction Review and analyze the existing flaring situation Identify and analyze gas utilization options Develop bankable investment projects Disseminate the results of the study ObjectivesSEI Tasks and timeline Project Team Review flaring situation in the four countries Establish collaboration with potential partners Economic and technical analysis of gas utilization projects Results dissemination Project Management Sustainable Energy Initiative Launched by EBRD in 2006, now at phase 3 Focus: energy efficiency and climate change SEI investments since 2006: €8 billion

Results Country Overview Reports Review for the 4 countries: Flaring estimates Flaring policies, regulation and market conditions Ongoing gas utilisation projets and future prospect

Next steps Establish cooperation with companies Focus of the phase 2 Based on the result of phase 1, the activities of phase 2 are focused towards: Fields where there are currently some gas utilization challenges Clusters solutions Number of companies contacted per countryCurrent process ongoing Introduction letter sent Organization of meetings with the different companies Establishment of formal collaboration (NDA) Technical collaboration on specific gas utilization projects

Thank to: Torleif Haugland, Managing Director Carbon Limits AS