GHG Programs:Compliance, Voluntary, What Next?

16 de febrero 2011Escuela de Organización IndustrialMadrid, España

Jerry SeagerVCS Association

Agenda• The Clean Development Mechanism

Overview Achievements Shortcomings Cancún

• The Verified Carbon Standard Structure Recent developments

• Next Generation Crediting Models Standardised approaches to baselines and additionality Jurisdictional and Nested REDD

Carbon markets - why bother?

Registered CDM Projects by Country

Projects: 2798

Certified Emission Reductions by Country

CERs: 548m

Energy Industries (re-newable - / non-renew-able sources); 65.13%

Energy Demand; 1.12%

Manufacturing Industries; 4.68%

Chemical Industries; 2.08%

Transport; 0.18%

Mining/Mineral Production; 1.18%

Metal Production; 0.24%

Fugitive Emissions from Fuels (solid, oil and gas);

4.65%

Fugitive Emissions from Production and Consump-tion of Halocarbons and Sulphur Hexafluoride;

0.72%

Waste Handling and Disposal; 15.40%

Afforestation and Reforestation; 0.57%

Livestock, 4.05%

Project Types

Methodology Types

Energy Industries (re-newable - / non-renew-able sources), 27.59%

Energy Distribution; 0.99%

Energy Demand; 8.37%

Manufacturing Industries; 13.30%Chemical Industries; 9.36%

Transport; 5.42%

Mining/Mineral Production; 0.49%

Fugitive Emissions from Fuels (solid, oil and gas);

3.94%

Fugitive Emissions from Production and Consump-tion of Halocarbons and Sulphur Hexafluoride;

3.94%

Waste Handling and Disposal; 10.34%

Afforestation and Re-forestation; 9.36%

Livestock, 3.45%

Methodologies (92)(large scale)

CDM - achievements• Significant emission reductions achieved

2798 projects, 548m tCO2e

• Investment in developing countries India – wind power, biomass Brazil – biogas, biomass Mexico – landfill gas, biogas

• Capacity building, development of expertise Project development Validation, verification, accreditation Registries, exchanges

• Carbon price established, confidence in carbon trading

Conservative and Discouraging Mechanism?• Volume and ability to scale• Speed of project registration and CER issuance• Evaluation on a project-by-project basis (additionality)• Scope (project types)• Transparency (project developer access, Executive

Board decision making, appeals process)

CDM reform - Cancún• Executive board – improved communications with stakeholders,

appeals process• Crediting of projects – can begin from date project submitted for

registration, rather actual date of registration• Standardization in methodologies – default factors, standardized

approaches to baselines and additionality• Carbon capture and storage – green light if permanence and

safety issues can be addressed

Fragmentation of Carbon Markets

Agenda• The Clean Development Mechanism

Overview Achievements Shortcomings Cancún

• The Verified Carbon Standard Structure Recent developments

• Next Generation Crediting Models Standardised approaches to baselines and additionality Jurisdictional and Nested REDD

The Verified Carbon Standard (VCS)• Established by leading NGOs (IETA, WBCSD, The

Climate Group, WEF) to: Provide a global benchmark and framework for the

voluntary carbon market Foster innovation within a context of quality, credibility and

transparency Demonstrate workable frameworks that can be incorporated

into compliance regimes worldwide

The VCS Association• Non-profit organization

Headquartered in Washington, DC• Single focus – to manage and develop the platform:

No consulting No project development No methodology development No validation/verification No proprietary positions in the VCU market

• Funded primarily by VCU levy ($0.10 per VCU) Foundation grants help supplement special initiatives

Development of the VCS Program• VCS Version 1 released in March 2006

Further consultation version released in October 2006– Released for broad public stakeholder input– Over 60 sets of comments submitted– Steering committee appointed to draft VCS 2007

• VCS 2007 released November 2007 VCS 2007.1 released November 2008 fully integrated AFOLU

requirements into the VCS Program• VCS Version 3 will be released March 2011

60-day public comment period concluded (10 October 2010) 38 submissions, with a total of 480 comments Focus on further improving the clarity of the program rules Further specification on certain areas (eg, appeals, grouped projects)

VCS Program

VCS registry system

• 3 registries that meet key criteria: Financial standing Insurance requirements Insolvency protection

• Registries agree to: Conflict of interest requirements Replacement of VCUs issued in error

• Registry system is expandable• VCUs can be certified against other

standards (e.g., CCBS, Social Carbon)

New VCS registry?

Registration and issuance process

Verified Carbon Units (VCUs)

Recent developments• 52 million VCUs issued to date, from 557 projects

First REDD credits issued last week• New project types

Peat rewetting and conservation (PRC) out in March Avoided conversion of ecosystems (ACE) out in 2011 Wetlands under study Carbon capture and storage under study

Recent developments - methodologies

Methodology Category Project Type Approved Under Development Energy

(Sectoral Scopes 1-3)

Energy industries (renewable - / non-renewable sources)

1 4

Energy demand 1 1 Transport

(Sectoral Scope 7)

Gasoline substitution - 1

Energy delivery - 1

Bike sharing - 1

Agriculture, Forestry and Other Land Use (AFOLU)

(Sectoral Scope 14)

Afforestation, Reforestation and Revegetation (ARR)

- 1

Reduced Emissions from Deforestation and Degradation (REDD)

4 5

Improved Forest Management (IFM)

2 4

Agricultural Land Management (ALM)

- 4

Total 8 22

Agenda• The Clean Development Mechanism

Overview Achievements Shortcomings Cancún

• The Verified Carbon Standard Structure Recent developments

• Next Generation Crediting Models Standardised approaches to baselines and additionality Jurisdictional and Nested REDD

Technology tests• Technology test (positive list) – for demonstrating additionality• CDM tool - “Guidelines for demonstrating additionality of

renewable energy projects <= 5MW and energy efficiency projects with energy savings <= 20 GWh per year”: LDC or SIDS; Off-grid; < 750 kW capacity; or Host country or CDM EB approved

Performance benchmarks

Source: Strengthening the CDM - A Cement Industry Perspective, WBCSD

• Performance benchmark – for demonstrating additionality and quantifying emission reductions

Why are standardized approaches useful?• Increase efficiency and reduce transaction costs• Create certainty for investors by removing the

subjectivity of current project specific additionality tests

• Allow crediting of a range of measures within a single methodology

• Provide a stepping stone to crediting mechanisms using national/sectoral baselines and Nationally Appropriate Mitigation Actions (NAMAs)

What are the challenges?• What are the data requirements?• What is the appropriate level for the benchmark?• Should the benchmark be different for new vs. existing

facilities?• Is the benchmark adjusted during the project crediting

period?

VCS steering committee• The VCS is developing guidelines and rules on performance

benchmarks and technology tests• A steering committee has been established via an open call

for members and was convened in October• Four working groups are tackling the issues

lessons from existing work overarching principles technology tests the broader context

• Output will be subject to peer review and public stakeholder consultation; first deliverables in second half of 2011

Regional baseline used by projectVCS:

Approval process for regional baseline

Crediting to project activities

Credits

Jurisdictional REDD - regional baselines

Region

Projects

Regional baselines – process• Approval, registration and use of regional baselines for

VCS project activities VCS would set out requirements, informed by project

developers, states, provinces, technical experts Multi-stakeholder process to develop regional baseline Project-based accounting and crediting

Jurisdictional accounting and crediting

Sub-national accounting, MRV

VCS: Approval process for

program Crediting to jurisdiction

and project activitiesCredits

Jurisdiction (state, province): Develops program Sub-national accounting

and MRV

Projects

Region

Jurisdictional accounting and crediting

• VCS to set high level requirements (options), and jurisdictional programs would need to address: Accounting mechanism for emission reductions across the

jurisdiction Monitoring, reporting and verification (MRV) for issuing

credits at the jurisdictional level Risk management to address potential underperformance

and non-permanence risk Accounting for leakage from project and non-project

activities Ensuring additionality

Thank you... Questions?

Jerry Seager Director of Strategic InitiativesTel: +1 202 296 2407jseager@v-c-s.org

VCS Association1730 Rhode Island Avenue, NWSuite 803Washington, DC 20036www.v-c-s.org