Public transport and Carbon Trading some reflections

1. Public transport and Carbon Trading � some reflections Prepared by Heather Allen Senior Manager Sustainable Development

2. Overview 1 An overview of GHG and the Kyoto Mechanisms 2 EUTS and other cap and trade emission trading systems � a global approach? 3 UITP activities in this field 4 Potential for Public Transport actors 5 Debate

3. An overview of GHG and the Kyoto Mechanisms - 7 Gases covered � Methane and Carbon dioxide most important to the transport sector The Kyoto protocol came into force in Feb 2005 and will run out in 2012 and the next agreement period will be a key output of the UNFCCC meeting in December in Copenhagen. Three main financing mechanisms within the protocol are: Clean Development Mechanism (CDM) Joint Implementation (JI) Emissions trading such as the EUTS The difference between the Kyoto mechanisms and the EUTS is Kyoto is a based on offsetting (financing an equivalent of emission reductions with another actor in another place) EUTS is a cap and trade system based on setting the level of emissions allowed from a particular sector The voluntary market requires different verification such as �Gold Standard� Transactions and gains are usually higher from this market CDM � the Clean Development Mechanism � allows industrialised countries to buy credits from approved projects in the developing world. JI � joint implementation � allows two countires in the developed world to buy credits (eg a less rich European country can sell credits from an approved project to a rich European countiry) EUTS = European Emissions Trading Scheme. This is the largest carbon market in the world and it is seen to be a possible �prototype� for a global carbon market. Emissions from major sectors are estimated and �capped� � which correspond to major facilities and installations. The necessary reductions according to the rules (differing for each sector) must be achieved � this may be done in part by buying credits from cleaner better performing industries or selling credits. CDM � the Clean Development Mechanism � allows industrialised countries to buy credits from approved projects in the developing world. JI � joint implementation � allows two countires in the developed world to buy credits (eg a less rich European country can sell credits from an approved project to a rich European countiry) EUTS = European Emissions Trading Scheme. This is the largest carbon market in the world and it is seen to be a possible �prototype� for a global carbon market. Emissions from major sectors are estimated and �capped� � which correspond to major facilities and installations. The necessary reductions according to the rules (differing for each sector) must be achieved � this may be done in part by buying credits from cleaner better performing industries or selling credits.

4. The Carbon Market is a �virtual� marketplace where emissions are traded for money The Carbon Market is a �virtual� marketplace where emissions are traded for money. Other sectors such as energy, power generation or cement are already trading several mechanims. Over the past two years the carbon market has doubled in value reaching 120 billion US$ (twelve times its value in 2005) (Source World Bank Carbon Finance Unit report Carbon Finance for Sustainable Development 2008) The European Trading Scheme is the largest market in volume and value but the voluntary market is growing fastest and now represents about 18 billion US$ The Carbon Market is a �virtual� marketplace where emissions are traded for money. Other sectors such as energy, power generation or cement are already trading several mechanims. Over the past two years the carbon market has doubled in value reaching 120 billion US$ (twelve times its value in 2005) (Source World Bank Carbon Finance Unit report Carbon Finance for Sustainable Development 2008) The European Trading Scheme is the largest market in volume and value but the voluntary market is growing fastest and now represents about 18 billion US$

5. Usual priority initiatives for managing PT to reduce future GHG emissions Strategies generally fall into two categories: technical solutions (e.g. vehicle efficiencies) and behavioural change solutions (e.g. mode shift). The �Avoid, Shift, Improve and Finance� model is often quoted (ASIF � F is usually used for fuel � source Shipper and Fulton) The most expensive but most straightforward way to reduce emissions is via major technology changes such as hybrid buses yet there is much that can be done with modal shift and improving the efficiencies of the system. (See presentation comparing technologies made at the Making Tomorrow Today Conference, Milan October 2009) The �Avoid, Shift, Improve and Finance� model is often quoted (ASIF � F is usually used for fuel � source Shipper and Fulton) The most expensive but most straightforward way to reduce emissions is via major technology changes such as hybrid buses yet there is much that can be done with modal shift and improving the efficiencies of the system. (See presentation comparing technologies made at the Making Tomorrow Today Conference, Milan October 2009)

6. Examples of Carbon Schemes Voluntary offset schemes � covers a wide range of schemes (note: the Kyoto mechanisms of JI, CDM and trading are also a sort of offset) and occur mainly at organisational/company levele.g. Selling/ auctioning credits or offsetting carbon from air travel Carbon exchanges � Bluenext; Chicago Climate Exchange CCX usually at a county or provincial level (eg King County USA) National Schemes � Switzerland - CO2 tax (+/- 7.6�) applicable if CO2 reductions are not achieved or companies can opt to join a C&T scheme Canada � covering large stationary emitters (power-thermal electricity; oil and gas; mining and manufacturing) a mandatory credit and baseline system with relative targets at an entity level or the recent revenue neutral carbon tax introduced in British Columbia Japan � small voluntary trading scheme have been introduced but huge opposition from industry USA � not ratified Kyoto but will certainly play a major role in the post 2012 regime and already there are a variety of voluntary or mandatory local and regional schemes (Regional GHG Initiative RGGI and the Climate Action Registry) � Australia, New Zealand, UK and France all at various stages �.

7. Main type of �credits� available depending on the scheme

8. Public transport and carbon trading In general transport is �excluded� and urban public transport in particular, however: - Aviation will be included into the EUTS (2011) Almost no JI projects from transport and only 2 in CDM Both the CDM and the JI projects need support at national governmental level but the �The Bali Road Map� approved in Dec 2007 opened the way for a sectorial approach. Stationary transport infrastructure will most likely be included in some national schemes (e.g. UK). Major hurdles on setting the base line and agreeing the boundaries of calculating the emissions (only �tailpipe� or scope 1 based on energy use for operations, or to include stationary facilities or should co benefits be included such as displaced trips, health, air quality etc). Main focus is on technology based reductions and there is limited methodologies available to monitor, measure and report long term behaviour change such as �eco driving�. Transport in not included in the EUTS but aviation will be included from 2012. This will mean that all airlines operating to and from Europe will be required to surrender carbon allowances covering their emission at the end of each calendar year. A total amount of emission credits will be issued at the beginning of the year and allocated to those companies operating in and around Europe based on 97% of the estimated annual emissions from the sector. This will be calculated on the 2004-2006. 85% of these allowances will be issued free of charge and the remaining 15% will be auctioned (EUTS). Airlines not based in Europe and not able to benefit from receiving any free credits will have to buy allowances, however a percentage of the funds generated by this should be put into low carbon industries outside of Europe. NB The whole EUTS will be subject to review in the year 2015 when it is thought that other gases may be brought in. Transport in not included in the EUTS but aviation will be included from 2012. This will mean that all airlines operating to and from Europe will be required to surrender carbon allowances covering their emission at the end of each calendar year. A total amount of emission credits will be issued at the beginning of the year and allocated to those companies operating in and around Europe based on 97% of the estimated annual emissions from the sector. This will be calculated on the 2004-2006. 85% of these allowances will be issued free of charge and the remaining 15% will be auctioned (EUTS). Airlines not based in Europe and not able to benefit from receiving any free credits will have to buy allowances, however a percentage of the funds generated by this should be put into low carbon industries outside of Europe. NB The whole EUTS will be subject to review in the year 2015 when it is thought that other gases may be brought in.

9. What are the stumbling blocks for transport and PT in particular? Calculation of CO2 emissions � in absolute terms or for offsetting Difficulties in setting the baseline and in showing additionality to apply for UNFCCC approved projects Verification and costs of registration (range for a CDM project is 5 000 � 30 000� just for registration and sometimes if it is verified by the UNFCCC it can cost more to verify than the credits generated�making smaller projects more attractive as costs are lower) often accompanied by a two year wait in the �pipeline�. At present the amount of money generated is minimal The issue of permanence of emission reductions is not resolved Guarantee of single sale of emission reductions (reductions should not be double counted i.e. in voluntary market and at a national level � is not resolved (not only for transport) �Additionality� means that the project goes outside a �Business as Usual� scenario � ie it would not have happened in normal circumstances and the financing from carbon has allowed it to happen. �Additionality� means that the project goes outside a �Business as Usual� scenario � ie it would not have happened in normal circumstances and the financing from carbon has allowed it to happen.

10. Barriers to setting the base line and comparing CO2 emissions Occupancy Rate/Load Factor: As emissions are generally calculated as g/pkm, overestimating the occupancy rate can radically reduce the emissions per passenger. Accurate occupancy rates are therefore required to give a realistic estimations of tonnes of CO2 avoided but there are difficulties in collecting actual occupancy/load data. Vehicle Fleet Composition and Characteristics: Even within modes, the many variables ultimately affect the amount of CO2 emitted. These variables include engine size, fuel type, tyre pressure etc. As a wide variety of vehicle makes and models are often used by an operator, making collecting and managing data a resource intensive job. Using average emissions over a fleet means that this cannot be correlated with the driving routes for a high or lower emitting vehicle leading to inaccuracies. Driver Characteristics: The way in which a vehicle affects the fuel consumption, and therefore CO2 emissions. This includes driving speed, speed variations, accelerating and decelerating, cruising and breaking sometimes to do with driving style or traffic conditions. Whole Life Costs: Full life cycle analysis can includeCO2 emissions including vehicle manufacture, operation, maintenance, the manufacture of raw materials and energy generation. It is often easier to calculate and then compare the emissions that are created during operation. However, this will have implications when comparing modes where one has little or no direct emissions (see �energy generation� below). It should be clear which of these elements are included within a comparison. Energy Generation: The energy generation element is extremely important in inter-modal comparisons of emissions, particularly for modes with little or no direct emissions during the operation stage (e.g. rail). Electricity sources may also vary greatly, including hydroelectric (low CO2), nuclear (low CO2) and coal-fired (high CO2). Public transport operators do not necessarily have any influence over power generation. CO2 versus Greenhouse Gases: CO2 makes up a large proportion of the greenhouse gases emitted from transport. Care that the larger impact of other greenhouse gas emissions are not neglected (methane).

11. Risks and opportunities for the Public Transport sector RISKS As an actor in the transport sector we may be penalised due to the poor performance of others (road, air, maritime) so we should be well prepared so we do not end up �paying for others��. We don�t have the proper information to influence�. Urban transport does not yet benefit from the Carbon funds�.. We need to better understand the risks or opportunities in this complex but emerging market �� There seems widespread agreement that there will be a price on carbon, it is a matter of when and how much�. Setting the base line is a key feature of almost all cap and trade schemes. Yet if we put on a service our baseline will be compromised as that may take a few years to build up strong passenger Setting the base line is a key feature of almost all cap and trade schemes. Yet if we put on a service our baseline will be compromised as that may take a few years to build up strong passenger

12. Risks and opportunities for the Public Transport sector OPPORTUNITIES The market is immature giving an opportunity to influence �.. The Bali Road Map opens the door to sector/ programmatic possibilities and �First in kind� approaches. Urban transport could benefit from city wide measures �. The developing world sets to gain most as � We need to leverage arguments to gather statistics following a common methodology �bundling� similar projects to gain economies of scale �..(Call for action to UITP members) Opportunity to engage with the carbon funds, the voluntary market and other actors �. The voluntary market is growing faster than the primary market and may provide the most interesting opportunities �

13. Outlook The Future ? Carbon dioxide emissions from the world�s transport sector have risen by 36.5% ? Road transport emissions have risen by 29% in industrialised countries and 61% in the other countries (mainly developing countries or countries in transition (IEA, 2006) ? World CO2 emissions from the transport sector are projected to increase by 140 % from 2000 to 2050, with the biggest increase in developing countries. ? Challenges ? Greenhouse gas emissions are very likely to be the main cause of current and future climate change ? The proportion of emissions being produced in developing countries is increasing rapidly, particularly in countries such as China, India and Indonesia. World CO2 emissions from the transport sector are projected to increase by 140 % from 2000 to 2050, with the biggest increase in developing countries. There are real risks for PT not to be recognised as being part of the solution!

14. UITP playing a role in the climate change debate - Attended the UNFCCC meetings ( exhibition stand and side events) COPs 2002 - 2007� present active partnership Bridging the Gap (see presentation on Climate Change) Focus Paper � a Low Carbon Future with Public Transport (Oct 2006) UITP working group on Communications and Climate Change (SD Commission) and the Climate Change Communications Gallery A climate change inventory in preparation � linking city or metropolitan climate change action plans with transport measures European Activities � Priority 2 of response to the Green Paper on Urban Transport �Binding requirement to regulary measure CO2 emissions in agglomerations (job-catchment areas) Creating a partnership with the EU Covenant of Mayors Ongoing ..

15. Join us! For more information contact Heather.allen@uitp.org