Carbon Offsets, Renewable Energy and Additionality

Transcription

1 Carbon Offsets, Renewable Energy and Additionality I m Getting a Headache Rob Harmon Chief Innovation Officer Bonneville Environmental Foundation Presented to Renewable Energy Markets Conference Atlanta, GA September 15, 2009

2 A little history (4 minutes) Let s Try This An illustration of the problem for context (4 minutes) A discussion of approaches (20 Minutes) 2

3 A Little History : Worked for a US-based wind energy developer Could not get CA utilities to buy green power Utilities said the environmental benefits were not worth anything and they did not want them I could not get projects built 3

4 Solution - Go Around the Utilities 1999: Proposed the retail REC concept to BEF 2000: Closed the first retail REC transaction in the U.S. -- With EPA 4

5 First Carbon Calculator -- Allows the Purchase of RECs to Offset CO 2 Methodologies Endorsed by the Climate Neutral Network CO 2 reductions calculated by the NW Power Planning and Conservation Council (5-year grid simulation) Voluntary Renewable Energy has always been about CO 2 5

6 This All Seemed Like a Good And then. Idea 6

7 A Few Critics Raised Issues That Were Weird 7

8 And The Issues Got Weirder 8

9 And Weirder 9

10 And Weirder Still 10

11 If Only The Earth Could Speak 11

12 What is This Debate Really About? - Additionality A generally accepted approach for offsets: Does what you are buying meet the R-S-V-P-E Test? Real Surplus (Additional) Verifiable Permanent Enforceable 12

13 The Easy Part with Real - New Renewables Surplus - Surplus to what? Verifiable - Permanent - Enforceable Red Herring issue at this point Renewables back out fossil and fossil has no meaningful way to take credit for that 13

14 Surplus to What? National standards (Green-e) exclude all RECs and Green Energy that are delivered into mandates They also exclude anything delivered to the ratebase of utilities They exclude anything built prior to 1997, when the voluntary renewable energy market began (2005 for Green-e Climate) 14

15 Surplus to What? (cont ) Green-e Climate (The new Green-e standard) Uses RECs as verification tool (ownership) & for calculating carbon (based on project location) 15

16 So Why The Debate? The Battle: The Perfect vs.. The Good Soon to be known as: Small is Beautiful Vs. Scale Saves the Atmosphere 16

17 The Competing Tests Project-by- Project Financial Additionality Vs. Performance- Based Additionality 17

18 Project-by-Project Financial Additionality Financials of each project reviewed by outside consultants Used by Clean Development Mechanism Gold Standard Benefit Project Detail Purity? - assumes the financials are not manipulated 18

19 Financial Additionality (cont ) Problems Financial arrangements change as projects move forward (Conclusions are unreliable) Encourages falsification of documents Only scalable with a massive bureaucracy 19

20 Financial Additionality (cont ) Problems Adds costs (consultants and process) What project costs are okay? (Completion bonus? Profit?) Creates huge uncertainty for developers 20

21 Financial Additionality (cont ) Problems Incentivizes higher prices Does not take advantage of the power of a market 21

22 Financial Additionality (cont ) Our Critic s Arguments: Money goes to projects that have already been built! Precisely, just like every other market in the world (including the carbon market) The REC revenue is only a small part of the project cost! Right, it is the profit and the delta with coal 22

23 Financial Additionality (cont ) Problems Can t create an objective test 23

24 Performance-Based Additionality Projects that reduce GHG emissions: of a certain type (not business as usual) online after a certain date, and not mandated are eligible.. period Used by California Climate Action Registry Green-e US EPA Climate Leaders Chicago Climate Exchange 24

25 Benefits Performance-Based Additionality (cont ) Simplicity Hard work done up front, before projects begin Eliminates bureaucratic barrier to market entry Projects compete based on market principles Drives down the cost of emissions reductions Problems Potential for some free-ridership 25

26 Scopes Scope 1 - On-site emissions Scope 2 - Off-site electricity Scope 3 - Other (travel, embedded energy, etc) Good for counting footprint Irrelevant when it comes to offsets (which are, by definition, not about your emissions) 26

27 Scopes (cont ) The planet does not care about Scopes Scopes make the accounting easier Will we trade easy for more GHG reductions? Accountants should be able figure this out Scopes are like different currencies If they can t figure it out, we need negative Scope 2 reporting 27

28 In The End, The Legislators/ Regulators Will Decide Cap and trade will distribute allowances At that point, voluntary REC purchases will either result in allowance reductions, or they will not An allowance is a lot better than an offset, regardless of the additionality test 28

29 What Have Legislators/ Regulators Decided So Far? RGGI - Voluntary REC purchases result in carbon allowance retirement CARB - Examining an allowance set-aside to recognize voluntary RE purchases The Climate Registry - intends to provide a way to account for the direct purchase of RECS or other power certificates Feds? The question of the day 29

30 Conclusions Voluntary RE is, and has always been, primarily about CO 2 reduction The critique of our industry is weak and is self-serving for our critics Green-e standards align the rules with the market, and the market with the needs of the atmosphere 30

31 Conclusions (cont ) Financial additionality will not get us where our kids need us to go We created a market and it is working We should defend it It is in our collective interest to have regulators/legislators recognize the CO 2 benefits of renewable energy 31

32 Thank You Bonneville Environmental Foundation Portland, Oregon

33 Rob Harmon - Bio Rob Harmon serves as Chief Innovation Officer and Senior Vice President for the Bonneville Environmental Foundation (BEF), where he is credited with developing BEF's renewable energy certificate (REC) program (formerly known as Green Tags) which began in In 2000, Rob developed and launched the first carbon calculator on the Internet, and closed the first large retail REC transaction in the United States. In 2004, Rob was awarded the national Green Power Pioneer Award for his visionary leadership in establishing the retail market for renewable energy certificates and his ongoing efforts to ensure a thriving and credible voluntary market in the United States. Rob also conceptualized and directed the development of BEF s national Solar 4R Schools program. He recently contributed chapters to the book: Voluntary Carbon Markets: A Business Guide to What They Are and How They Work. Rob has worked in the fields of energy productivity and renewables since He previously held positions as Vice President of Renewable Energy Programs at BEF, Vice President of Marketing and Business Development for WindLite Corporation and as Business Development Manager for FloWind Corporation. Rob currently serves on the Boards of the Northwest Energy Coalition, Green-e, the Environmental Tracking Network of North America and is a founder, Board member and Federal Policy Committee Chair of the Renewable Energy Marketers Association. 33