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CDM baseline standardization – key policy questions Axel Michaelowa Center for Comparative and International Studies (CIS), University of Zurich and ETH Zurich; Perspectives [email protected] , [email protected] Joint Workshop , Bonn, March 13, 2011.

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CDM baseline standardization

– key policy questions

Axel Michaelowa

Center for Comparative and International Studies (CIS), University of Zurich and ETH Zurich; Perspectives

[email protected], [email protected]

Joint Workshop, Bonn, March 13, 2011


Harnessing emissions reduction potential

CDM 

CDM 

CDM 

CDM 

CDM 

CDM 

CDM 

Potential 2030, bottom-up studies

Source: IPCC (2007)


Preventing emissions take-off

Critical

level

of HDI

Source: Michaelowa and Michaelowa (2009)


What can be standardized?

  • Use of pre-defined values / parameters applicable to many projects at once

    • Baseline setting

    • Additionality determination

    • Criteria, emission factors, calculation methods, equations, models feeding into baseline methodologies

  • Across project types

    • E.g. all electricity related projects

  • Within individual project types

    • E.g. benchmark for N2O from adipic acid


Why standardization?

  • Administrative improvements to the CDM:

    • Increased efficiency of registration process

    • Greater objectivity, consistency and predictability

    • Reduced transaction costs

    • Increased project flow

  • Broader systemic improvements:

    • Guaranteeing and improving environmental integrity

    • Improved distribution across host countries and project types

  • Trade-offs between these goals??

    • Careful implementation and regulatory oversight !


Potential risks

  • Subjectivity is not really eliminated, but shifted from project registration process to the baseline setting stage

    • One off decision, difficult to reverse

    • Gaming with standard setting can lock in too lenient baselines / non-conservative parameters

  • High costs for public administrations, especially if frequent updating

  • Aggregation level is crucial

    • Too high: risk for environmental integrity, and of reaching all mitigation potential

    • Too low: data confidentiality issues


Types of standards

  • Emissions intensity benchmarks (add. /bl.)

    • X t CO2 / amount of product or service

    • Homogeneous products, large number of entities, normal performance distribution

  • Technology / practice standards (add./bl.)

    • Average of top X % performance

    • Reference technology that is common practice

    • Project technology that is highly innovative

  • Market penetration rates (add.)

    • X percentage of installed capacity

    • Economies of scale and learning are important

  • Model (add/bl)


Types of standards II

  • Deemed savings defaults (emission reduction)

    • X t CO2 reduced per installation and year

    • Requires good understanding of usage patterns

  • Utilization defaults (add.)

    • X % plant load factor / x hours average daily use

    • Limited variability of parameters influencing plant load factor

  • Positive lists (add.)

    • Technology

    • Applicable if no other revenues than CERs or if technology clearly faces a cost gap to alternative technologies providing the same service


Key issues for benchmarks

Type of benchmark

Updating frequency

Aggregation level

Stringency level

e.g tCO2 / t output

Process?

Product or service?

Vintage?

Geographic area?

Average?

Best 20%?

Best used?

Best available?

Fixed improvement factor?

According to data?


Decision on stringency

Emission intensity

(tCO2 / t output)

C

Plants

B

A

D

Baseline benchmark

CERs

Additionality benchmark







Policy questions

  • Which sectors and project types should be prioritized for standardization?

    • Highly homogeneous, large-scale industries?

    • Small, dispersed emissions sources?

  • How stringent should standardized approaches be to guarantee a sufficiently high environmental integrity?

    • More stringent than project-based approaches?

    • Role of experts?

  • What lessons can be drawn from existing use of standardization in offset programmes?

    • US programmes (CAR, RGGI, CCX)


Policy questions

  • Who should administer and develop standardized methodologies?

    • CDM EB?

    • Project developers?

    • Should there be a Baseline Standard rulebook?

  • How can we prioritize countries and regions?

    • Underrepresented regions?

    • Regions with highest potential?

  • How can DNAs be enabled to decide whether to apply standardized baselines?

    • Capacity building required

    • Can distortions be prevented?


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