ODS Destruction and the Voluntary Carbon Market

Transcription

1 ODS Destruction and the Voluntary Carbon Market 1 Considerations in Developing an ODS Destruction Program Montreal Protocol/POPs Team Environment Department 14 th Annual Financial Agents Workshop 8-9 April 2010 Washington, DC

2 Considerations in Developing an ODS Destruction Program 2 Identifying objectives Creating an inventory or baseline of unwanted CFC Developing a strategy Financing an ODS destruction program Possible roles of government

3 Identifying Objectives 3 Classifying the amounts, type, and source of unwanted ODS Is there a continued demand for CFCs in the servicing sector? Should and can the unwanted ODS be addressed at one go? What will be the long-term requirements for managing ODS use in the servicing sector? What are the Government s national and sector priorities climate change mitigation, energy efficiency, waste management. Who will be responsible for ODS management?

4 Creating an ODS Inventory Define parameters (categories and origin of ODS) Installed ODS Bulk ODS Privately and/or publicly owned Utilize existing infrastructure/private sector relationships from National ODS Phaseout Plans and national ODS programs to get actual and estimated amounts and locations (manufacturers, large service shops, importers, etc) Quantify amounts of unwanted ODS as well as short to medium-term demand for recycled, reclaimed ODS. 4

5 Developing a Strategy Data and analysis Appliance and bulk ODS inventory Identify current ODS/end-of-life appliance/waste management initiatives Review existing regulations and policies (including international and regional) on waste management, auctions and fees, taxation, etc Identify disposal options Integrating objectives, expected outcomes and timeline Establishing roles and responsibilities 5 Financing approach for inflows and outflows Business plan development - to establish a self-sustained program if the endeavor is not a one-off Possible financial mechanisms to manage flow of funds, such as a national fund for environmental/sustainable initiatives

6 Financing an ODS Destruction Program Upfront Financing Multilateral Fund Dec. 58/19 - ODS Pilot Projects (collection, storage, transport, destruction) 6 Demonstrated savings from national ODS phaseout plans (collection) as per ExCom discussion GEF?? Revenue from the voluntary carbon market Directly Indirectly (taxation, auctions, etc.)

7 Financing an ODS Destruction Program 7 Integrating ODS destruction into waste management programs or energy efficiency programs through appliance replacement and take back schemes Pooling voluntary carbon market offset projects (within a country and/or a regional country grouping) Establishing producer responsibility schemes which rely on levies or licensing fees from import of ODS containing equipment or rebates for surrendering recovered ODS

8 Possible Roles of Government Option 1 Facilitator 8 Option 2 Project Developer Option 3 Free Market Project Responsibility 1. Identify unwanted ODS 2. Develop inventory 3. Collection and testing 4. Develop terms of reference for collection, storage, transport, disposal, per a methodology 5. Auction or sell unwanted ODS to qualified parties that offer max. revenues 6. Issue proper licenses for disposal 1. Identify unwanted ODS 2. Develop inventory 3. Collection and testing 4. Develop ODS methodologies (in the case of VCS) 5. Develop a project design document and register project with a standard (VCS, CAR, CCX) 6. Develop standard operating procedures for proper collection, storage, transport, destruction 1. Inform the public about potential revenue from CO 2 reduction credits/ ODS disposal 2. Issue proper licenses for ODS disposal or transboundary movement 3. Register ODS destroyed or exported for destruction and report to the Ozone Secretariat

9 Possible Roles of Government Project Responsibility Option 1 Facilitator 7. Register ODS destroyed or exported for destruction and report to the Ozone Secretariat 8. Issue documentation for ODS disposal or export for final disposal, per VCM requirements 9. Collect and manage revenues from voluntary carbon credits 9 Option 2 Project Developer 7. Issue licenses for unwanted ODS disposal or transboundary movement 8. Obtain proper permits from importing countries where ODS will be destroyed 9. Monitor ODS disposal performance of any local ODS destruction facility in line with international standards 10. Register ODS destroyed or exported for destruction and report to Ozone Secretariat 11. Issue documentation for ODS disposal or export for final disposal per VCM requirements 12. Verify ODS disposal credits by independent verification team 13. Register credits with a standard 14. Package registered credits for retail markets; identify buyers; conduct sales; collect and manage revenues Option 3 Free Market

10 Possible Roles of Government Option 1 Facilitator 10Option 2 Project Developer Option 3 Free Market Pros 1. Regulatory mandate of Gov. fulfilled 2. No upfront funding required for project development and implementation 3. No financial risk (risks transferred to private sector) 4. No conflict of interest 5. Less admin. burden 6. Opportunities to abuse the system are minimized 1. Potential revenue stream is highest 2. Government has flexibility to work with local or international project developer if local, builds national capacity in carbon finance/cdm 3. Chain of custody of unwanted ODS can be tightly controlled 4. Opportunities to abuse the system are minimized 1. Government s involvement is limited 2. No conflict of interest as the Government only provides regulatory roles to support the project 3. No financial risk to the Government (Ministry of Environment) 4. No new technical capacity required

11 Possible Roles of Government Option 1 Facilitator 11 Option 2 Project Developer Option 3 Free Market Cons 1. In the case of unwanted ODS owned privately, the burden is on the facilitator to ensure a fair and clear revenue distribution system 2. Contractual issues can arise between the Government and a project developer or by the ODS owners 3. Technical capacity to analyze unwanted ODS quality is required (admin. burden) 1. It is difficult to raise funds for upfront costs 2. Financial risk to the Ministry of Environment due to uncertainty of prices in the carbon market 3. Possible conflict of interest if Gov. serves as both the regulator and a beneficiary of the project. 4. High level of technical/admin capacity needed 5. Admin and marketing costs can be high 1. It is difficult to monitor the chain of custody of unwanted ODS and hurt credibility of the credit (lower prices) 2. Owners of small amounts of ODS may be excluded from participating in the market

12 Option 1 Facilitator Gov. Owned ODS Government- Owned ODS Privately Owned ODS Unwanted ODS Unwanted ODS Auction Process Upfront Revenue Project Developer ODS Disposal Sale of ODS Disposal Credits Auction Project Developer ODS Disposal Sale of ODS Credits Revenue

13 Option 2 Project Developer 13 Gov./Privately -Owned ODS Ministry of Environment Revenue ODS Disposal Cost of ODS Destruction Sale of ODS Offset Credits

14 Option 3 Private Market Privately-Owned ODS Virgin ODS Unwanted ODS ODS Contained in Equipment What role should Government play? Project Developers