Putting the D into the CDM workshop Part 6: CDM vs Voluntary; Programmatic vs Non- Programmatic

Transcription

1 Making carbon history Putting the D into the CDM workshop Part 6: CDM vs Voluntary; Programmatic vs Non- Programmatic 15 June 2009!Prepared for the for the sole sole use use of Sindicatum of Climate InterChange Carbon Capital do not distribute to third parties!

2 Contents 1. Introduction Voluntary vs CDM 2. Project development complexity 3. Transaction costs 4. Available buyers 5. Prices 6. Upfront funding 7. Conclusions voluntary vs CDM 8. Programmatic vs Non-Programmatic 9. Programmatic theory vs reality

3 1. Introduction Voluntary vs CDM There are differences in a number of areas: Project development complexity Transaction costs Available buyers Prices and exposure to economic trends Ability to derive upfront funding

4 2. Project development complexity Project development document Validation (3 rd party check) Registration with a standard/ registry Verification of monitored emission reductions Credit issuance CDM Host Country (DNA) approval required UNFCCC Secretariat and CDM EB review projects CDM EB registers and issues CERs Voluntary Gold Standard VER has more requirements for stakeholder consultation and additional document GS Passport Gold Standard reviews documents; no review for VCS Gold Standard registry / VCS registry register and issue credits VCS: even large projects can choose the same body for validation and verification

5 3. Transaction costs Transaction costs are slightly lower for voluntary projects than CDM: PDD and methodology development (the same) Validation & Verif (slightly cheaper approx. 25%) Issuance (much cheaper 50% to 75% ) For very small scale projects (e.g. 1,000 to 5,000 tco2e) transaction costs are prohibitive For larger projects, transaction costs in aggregate relatively small

6 4. Available buyers Much easier to find a buyer for CDM than voluntary Volume traded, Mt CO2e , CDM Voluntary including CCX* 65 *CCX Chicago Climate Exchange trades Carbon Financial Instruments (CFIs), which are a mixture of offsets and allowances

7 5. Prices EUR/tonne CO2e CDM historic Gold Standard VCS VER+ CCX Recent voluntary (without GS) Recent CDM

8 6. Upfront funding Voluntary projects can receive upfront payment (less common) Voluntary projects are more difficult to finance than CDM projects Less likely to find buyers prepared to pay for transaction costs Almost impossible to locate funding for capital and other project costs

9 7. Conclusions voluntary vs CDM The choice is a trade off between: A voluntary approach that is (slightly) simpler and (slightly) cheaper and faster ; and A CDM approach that significantly increases the chance of finding a buyer and offers better prices A hybrid approach should be considered with CERs as primary focus and VERs as secondary

10 8. Programmatic vs Non-Programmatic Programmatic: Non-programmatic: Programme of Activities (PoA) is a Project activity is a coordinated action for implementing a policy, measure or stated goal Implemented via a number of CDM Programme Activities (CPAs) Multiple CPAs can be registered under one PoA; additional CPAs can be added at any point of time measure, operation or action Can be a bundle of activities but in a defined area not crossing national boundaries Each project would need to undergo separate validation, registration and verification process

11 9. Programmatic - theory vs reality In theory can generate significant volume of credits with very low transaction costs In practice not working yet because: Validators will not validate Buyers will not buy Investors will not invest UN and other entities trying to overcome problems