LEADING CARBON LTD. Keith Driver, M.Sc., P.Eng., MBA President, Leading Carbon Ltd. Consulting and Project Development

Transcription

1 Providing leadership in a carbon constrained economy Keith Driver, M.Sc., P.Eng., MBA President, Leading Carbon Ltd. September 2010

2 About Leading Carbon Canadian GHG Frameworks Participating in Carbon Markets Developing Projects Case Studies Biomass Diversion Tillage Management Final Thoughts

3 About Leading Carbon

4 Providing leadership in a carbon constrained economy Areas of Expertise Bio- and Renewable Energy Fossil- Based Energy Energy and Fuel Efficiency Agriculture and Forestry Consulting Project Assessment Protocol Development GHG/REC Credit Development Strategy and Policy Support Market Assessment Project Development Project Design Structure and Strategy Business Plan Development Project Execution

5 Defining the Commodity

6 Allowances under Cap and Trade Government issued permits (auction or grants) Emission Performance Credits (EPCs) under Emission Intensity Scheme For those regulated facilities that reduce on-site emissions below target Offsets under both systems Emission reductions achieved at unregulated facilities Called VCUs, CRTs, Offsets, ERUs, AAUs, CERs Trading in all units is possible focus on offsets

7 Voluntary Demand Company commitments e.g. Chicago Climate Exchange Green products e.g. green gas/electricity Low Price $1/tonne to $8/tonne How You pick the rules Transaction specific rules for eligibility and measurement Compliance Demand Government mandated reductions creates demand E.g. large emitters must reduce by x%/yr Higher Price AB: $8 to $14 BC: $10 to $20 How Government creates the rules Each jurisdiction creates specific rules for offset eligibility/measurement

8 Mt CO 2 E Potential Supply/Demand Analytics in Canada 2006 Baseline Emissions Growth Credits from Renewable Electricity CCS/EOR Credits Eligible Offset Credits Net Demand for Compliance Units

9 Overview of North American Carbon Markets

10 Western Climate Initiative Regional GHG Initiative Midwestern GHG Reduction Accord AB Specified Gas Emitters Regulation SK Bill 95 Canada s Regulatory Framework The American Clean Energy Security Act

11 Canadian Federal Program

12 Progress in Canada has been halted pending US action Two opposition bills working their way through as political positioning NDP - Bill C-311, Liberal motion April 13 th Formal statements by Prentice on harmonization with US Confirmed in internal discussions at Env. Canada I've consistently stressed the importance of working together with the United States to reduce our greenhouse gas emissions. Jim Prentice, Official Speech April 1, 2010 "The Government is committed to the Copenhagen Accord and pledges to help fight climate change by leading the world as a clean energy superpower. There's also an undertaking to pursue further progress with the Clean Energy Dialogue with the United States to ensure the alignment of a continental climate change approach. Jim Prentice, Official Statement March 3, 2010

13 Regional Programs

14 Western Climate Initiative Ontario, BC, Quebec and Manitoba (and Saskatchewan) Midwestern Greenhouse Gas Reduction Accord Limited activity outside of advisory group Most analogous to Alberta Regional Greenhouse Gas Initiative Low pricing and limited impact Cross-regional activity Important for Ontario as they border RGGI and MGGRA, and are partner in WCI

15 Canadian Provincial Programs

16 Alberta GHG Emissions in the Canadian Context

17 Third Compliance Cycle Completed Geo- Compliance Mechanisms sequestration 6% Facility Improvements % Carbon Offsets Emission Performance Credits Waste and Fund Payments Wastewater Total Management Agriculture 17% Industrial Gases 39% Resource constrained at Alberta Environment with reviews Appear to be scaling back offsets through verification standards and protocol reviews CCEMF at $187million ($63 million in 2009 $83 million in 2008) Misinformation in the media (offsets up 40%, price) Bioenergy, Renewables and EE 32%

18 Management and Reduction of Greenhouse Gases Act - Bill No. 126 Target is a 20% reduction below 2006 levels by 2020 Emissions threshold for regulated facilities is 50,000 tco 2 e reporting threshold is 25,000 tco 2 e Baseline year is 2006 opportunity for negotiation Regulated facilities must reduce by 2% per year from 2010 to 2019 Baseline year is set at 2006, with the option to plead your case to the minister for an alternative Regulated facilities early action back to Jan 1, 2004 recognized Compliance payments to a fund as price mechanism Performance credits contemplated

19 BC Regulatory Tapestry GHG Reductions Target Act GHG Reductions Cap & Trade Act GHG Reductions Vehicle Emissions Standards Act GHG Reductions Statutes Amendment to Regulate LFG Utilities Commission Amendment Act GHG Reductions Renewable and Low Carbon Fuel Requirements Act Local Governments Green Communities Statues Amendment The Carbon Tax Act BC role and link to WCI cannot be overstated Tim Lesiuk has triple role WCI Chair, WCI Offsets, BC Regs Projects outside BC eligibility for offsets based on BC criteria as per WCI

20 Spending considerable time on WCI obligations Focus of attention on key developments in WCI Discussed in more detail in WCI section Quick-Start Early Action Program Moving forward with LoU program likely before end of 2010 Not a financial back-stop or purchase program manage liability Wrestling with how to ensure compatibility with WCI (CAR / VCS / Other) Consultation with industry planned on LoU language likely informal Key announcements / issues Fit Program from OPA announces two tranches of projects 184 contracts for green energy signed - 2,500 MWs (April) 510 contracts for green energy signed 112 MWs (March)

21 Deliver quality BC-based carbon offsets to clients, and support growth of low-carbon economy in BC New BC Crown corporation, capitalised at $24 million Exclusive supplier of up to 1,000,000 annual tonnes for the public sector» Pressure to build broad portfolio up to 1.5 million annual tonnes» Acquiring clients outside of government Aggressively sourcing offset projects to meet this demand» Projects must be in BC (some opportunities to extend reach) Acquired 330,000 tonnes from 15 offset projects and more soon 21

22 Developing Projects

23 Quantification Protocols Project Documentation Validation and Registration Monitoring and Verification Offset Issuance Project / Baseline Description Monitoring Plan and Methodology GHG emission calculation Review Approve Registration Implement Monitor Verify Issuance of tradable units Driven by Reporting Guidance Transparency Market Oversight 3 rd Party Verification Monitoring Requirements Tradable Commodity

24 Protocol Development Requires.. Protocols as Sausage Making Good Practice Guidance (eg, recognized criteria, methodologies, tools and guidance on how to do it) Relevant Standards (eg, recognized criteria, rules, methodologies, equipment) Considered Technical Review Within the context of the ISO Standard Part 2 of ISO (ie, auditable standard general process requirements) Quantification Protocols: identifying preferred methodologies to quantify GHG reductions/removals Markets for GHG Units Applicable GHG Program (eg, additional requirements, criteria, rules and policies) National Emissions Inventory Tier II Quantification Science Stakeholder Consultation (eg, communication with interested parties) Relevant Legislation (eg, regulatory requirements)

25 Renewables Manure Management Biofuels Energy from Biomass Modal Shifting Road Rehabilitation Composting Aerobic Landfill Bioreactor Energy from Waste (pending) Enhanced Oil Recovery Engine Fuel Management and Vent Gas Capture Landfill Gas Instrument Gas Conversion to Instrument Air Wastewater Treatment Waste Heat Recovery Acid Gas Injection Afforestation/Reforestation Tillage System Management Pork Protocol Energy Efficiency Anaerobic Biodigesters Beef Feeding Nitrous Oxide Abatement from Nitric Acid Production Asphalt Production and Use

26 Project Identification Protocol Development Project Documentation Marketing Contracting Annual Reporting and Verification Project identification Current, new, future projects, assessing the size of the prize Protocol? Existing protocol or development Project documentation and registration Validation process Marketing Realizing full value for the transaction Contracting Value creation and risk management Annual reporting and verification

27 Opportunity Scan Reviewing project possibilities Impact of regulatory framework Assess project eligibility Market eligibility rules Existing protocol? Project size (possible volume of offsets) Large, single site Small, dispersed sites: aggregation model Project Identification Protocol Development Project Documentation Marketing Contracting Annual Reporting and Verification

28 Aggregation Model Overcomes economic and process inefficiencies with small, dispersed sites. Opportunity for small projects to obtain value

29 Protocol development process varies among systems Developing protocol Conversion from other market New protocol Partnerships Government, marketplace Expertise Quality, ease of development, cost Project Identification Protocol Development Project Documentation Marketing Contracting Annual Reporting and Verification

30 Confirm project eligibility/incrementality Could involve project validation phase Quantification and Documentation Establish baseline Quantify project conditions Project reporting and notices of creation Verification Process Managing process Verification Statement Government submission Project Report, Notices & Verification Statement Project Identification Protocol Development Project Documentation Marketing Contracting Annual Reporting and Verification

31 Offset market choices / eligibility Existing Markets Alberta Offset System / PCT / VCS Voluntary markets Emerging Markets Canada s Offset System (2010) Individual Provinces WCI, RGGI, MWGGA, US Federal Getting the right deal Balancing price, certainty and relationships Project Identification Protocol Development Project Documentation Marketing Contracting Annual Reporting and Verification

32 New markets, new processes Learning-by-doing process Sophistication of counter-parties can vary Managing risk Policy and quantification risks largely unknown Challenges around how to share risk between parties Project Identification Protocol Development Project Documentation Marketing Contracting Annual Reporting and Verification

33 Ongoing learning process all parties (buyers, sellers, government) all learning Improvements occurring Better processes to manage information and smoother transactions Uncertainty still Policy evolution and creation Project Identification Protocol Development Project Documentation Marketing Contracting Annual Reporting and Verification

34 Case Study: Energy from Biomass

35 Biomass Diversion for Energy Project Wood waste recycling and processing facility in Edmonton Primarily C&D wastes Shipped waste to generation facility once processed Generation facility is retrofit of a peat facility Feedstock also includes diverted from beehive burner Electricity generated for the grid

36 Protocol and Technical Issues Project Level GHG Accounting Data Capture Mass of biomass diverted / combusted Volume of fossil fuels consumed Thermal and electrical energy produced Landfill characteristics

37 Challenges Documentation of the difference between operational control and managerial control of the reservoir Translating commercial data capture systems into GHG systems Use of a grid emission intensity factor GIF = w * BM + (1-w) * OM

38 Challenges Documentation on the biomass sources Mass diverted and from where diverted Mass of non-diverted biomass also required Storage of biomass at the site Documentation of LFG collection Proof of diversion Proof of LFG system characteristics Impact of biogenic emissions

39 Renewables can find their value (only once) but across multiple markets Offset eligibility from renewables is dependent on policy regime Value assigned to the grid emission intensity value provides wide range of value National factor Provincial factors Increased LFG project implementation erodes baseline Regulation on landfill gas capture Offset project implementation Impact of on-site biogenic emissions

40 Case Study: Tillage

41 Tillage Management Continuation of management of the sink Various levels of adoption of the practice Risk of reversal is high perverse incentive to reset baseline

42 Data Capture Area Proof of practice Crop insurance, field notes, aerial photographs, equipment Other

43 Emission reduction factors generated from Century model Based on 10,000 model runs Generally accepted model

44 Tonnes / ha Dealing with Permanence Use of assurance factor Account for reversals All offsets are permanent No liability for project proponents ex-post Risk born by government Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10

45 Evolving approaches to permanence Not all governments willing to accept role in managing liability Data requirements to meet reasonable level of assurance Data capture and management need to evolved Increasing adoption rates will reduce GHG offset value Adjustment of baseline Practice vs. performance basis of offset tonnages Public perception

46 Quantification and documentation are key components to successful project implementation Data capture and management requirements Opportunities may require aggregation Role of small protocol details on offset yield Requirements to support: Transaction due-diligence, validation / verification Meeting project delivery requirements Public disclosure Project types all have issues - from the simple to the complex Our challenge is to address these requirements, support project development and generate offsets of suitable rigor without eroding commercial value.