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TEAP Replenishment Task Force Report

TEAP Replenishment Task Force Report. Assessment of the Funding Requirement for the Replenishment of the Multilateral Fund for the Period 2012-14. T E A P , R e p l e n i s h m e n t T F , P r e s e n t a t i o n a t O E W G - 3 1. 1. Funding requirement 2012-14.

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TEAP Replenishment Task Force Report

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  1. TEAP Replenishment Task Force Report Assessment of the Funding Requirement for the Replenishment of the Multilateral Fund for the Period 2012-14 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 1

  2. Funding requirement 2012-14 The TEAP Replenishment Task Force estimates the total funding requirement for the triennium 2012-14 to be in the range of US $390 to US $477 million The parameters involved in determining this range for the funding requirement are elaborated in the following slides. T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 2

  3. Replenishment Task Force Membership Lambert Kuijpers Netherlands Co-chair Shiqiu Zhang China Co-chair Daniel Colbourne UK Sukumar Devotta India Katerina Gargalasis Greece Tony Hetherington Australia Fred Keller USA Erik Pedersen Denmark Roberto Peixoto Brazil Miguel Quintero Colombia T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 3

  4. Outline presentation Introduction – Timeline and relevant decision Comparison of previous estimate with actual commitment HCFC consumption and production data Cost effectiveness Methodology Estimates for ODS funding not including HCFCs Non-investment activities Funding requirement for all ODS for 2012-2014 and outlook 2015-2020 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 4

  5. Time-line Report Sept 2010: First discussions of RTF co-chair with MLFS Oct 2010: Questionnaires sent out to all Parties and IAs Nov 2010: RTF co-chair attends ExCom-62 First quarter 2011: RTF members circulate drafts April 2011: All RTF members attend ExCom-63 Review by Review Panel, Ozone Secretariat and MLFS Report discussed and adopted at TEAP Meeting in May 2011; final circulation for last edits and additions by RTF members T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 5

  6. Decision XXII/3 Decision XXII/3 requests to prepare a report for submission to the 23rd MOP, through OEWG-31, for the funding required for the replenishment of the Multilateral Fund for the period 2012-14, taking into account: All control measures and relevant decisions taken by the Parties and the Executive Committee, particularly those for low and very low volume consuming countries, and decisions taken that will necessitate MLF expenditures during 2012-14 The need to allocate resources for maintaining compliance with Articles 2A-2E, 2G and 2I The need to allocate resources .. to meet 2013-2015 compliance obligations in respect of Articles 2F-2H of the Protocol; T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 6

  7. Decision XXII/3 (cont’d) Rules and guidelines of the Executive Committee on Determining eligibility of activities for the funding…. Measures to combat illegal trade Sectoral or national phase-out plans, including HPMPs Measures to manage ODS banks and ODS destruction The impact that the international market, ODS controls and country phase-out activities are likely to have on the supply of and demand for ozone-depleting substances…… In addition, the Panel should provide indicative figures for the periods 2015-2017 and 2018-2020 in order to provide information to support a stable level of funding that would be updated in subsequent reports T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 7

  8. Decision XXII/3 Decision XXII/3 is related to XIX/6, which defines the accelerated HCFC phase-out, with specific emphasis on the accelerated schedule for Article 5 Parties To agree that the funding available through the Multilateral Fund in the upcoming replenishments shall be stable and sufficient.. To agree that the Executive Committee …. give priority to cost effective projects and programmes which focus on, inter alia: Phasing out first HCFCs with higher ODP,....national circumstances Substitutes and alternatives that minimize other impacts on the environment, including on the climate, taking into account GWP, energy use and other relevant factors. T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 8

  9. Commitment MLF 2009-2011 Activity (US $ million) 2008 RTF 2009-11 estimate actuals & BP Non-HCFC ODS consumption 64.6 52.0 Non-HCFC ODS production 19.1 18.1 HPMP preparation 7.7 11.5 HCFC consumption 131.0-428.0 277.0 HCFC production 0 0.1 Destruction 27.0 11.2 Supporting activities and IS, ExCom, MLFS, Core 92.0 90.8 TOTAL 342.8-639.8 460.6 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G – 3 1 9

  10. Elements for funding 2011-14 Commitments from CFC phase-out plans Methyl bromide remaining consumption and production phase-out (2012-2014, phase-out 2015) HCFC commitments and HPMP preparation activities Destruction Technical Assistance (TAS) Institutional Strengthening (IS) Compliance Assistance Programme (CAP) Core Unit and Operating Costs, Treasurer T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 10

  11. Which HCFCs The major HCFCs taken into account in this report are HCFC-22 (refrigeration and AC, foam) HCFC-141b (foam and solvent) and HCFC-142b (foam and some refrigeration) Quantities of HCFC-123, -124 and -225 are very small (less than 1%) The shares of consumption of the three major HCFCs: (tonnes) (ODP tonnes) HCFC-141b 20% 33% HCFC-142b 7% 6% HCFC-22 73% 61% T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 11

  12. HCFC-141b Over 2000-2009, production decreased in non-Article 5 Parties from 128 to 10 ktonnes, but increased from 12 to 92 ktonnes in Article 5 Parties Over 2000-2009, consumption decreased in non-Article 5 Parties from 114 to 7.5 ktonnes, but increased from 38 to 104 ktonnes in Article 5 Parties Global consumption is 9,500 tonnes larger than global production (due to inconsistent reporting of pre-blended polyols ?) T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 12

  13. HCFC-142b Over 2000-2009, production decreased in non-Article 5 Parties from 40 to 6 ktonnes, but increased from 0 to 25 ktonnes in Article 5 Parties Over 2000-2009, consumption decreased in non-Article 5 Parties from 35 to 17 ktonnes, but increased from 2 to 34 ktonnes in Article 5 Parties Global production peaked at 54,000 tonnes (2008), fell to 31,000 tonnes (2009); global consumption went from 43,000 (2008) to 51,000 tonnes (2009) T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 13

  14. HCFC-22 Over 2000-2009, production decreased in non-Article 5 Parties from 225 to 75 ktonnes, but increased from 117 to 371 ktonnes in Article 5 Parties Over 2000-2009, consumption decreased in non-Article 5 Parties from 175 to 96 ktonnes, but increased from 156 to 378 ktonnes in Article 5 Parties Consumption in Article 5 Parties is more or less equal to production over 2007-2009 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 14

  15. HCFCs in Article 5 Parties Group Size Parties Consumption 1 Very large 1 >25,000 t 2 Large 33 1,000-25,000 t 3 Medium 25 360-1,000 t 4 Small 86 <360 t The consumption in Group 4 is only for HCFC-22 servicing China HCFC consumption increased from 5,000 ODP tonnes in 2000 to more than 40,000 ODP tonnes in 2009 Total Article 5 HCFC consumption was larger than 500,000 metric tonnes in 2009 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 15

  16. Cost effectiveness: foams Alternatives PU HCFC blown foam: HCs, preblended HCs, CO2 (water), methyl formate, methylal, high GWP HFCs, low-GWP HFCs Approvals yield an average CE value of US$ 7.21/kg Looking at all sub-sectors and sectors a weighted average CE of US$ 7.27/kg can be calculated For XPS blown foam not enough practical information is yet available to analyse the incremental costs The weighted average from three projects approved to date (isobutane, HFC-152a/DME) is US$ 2.56/kg T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 16

  17. Cost effectiveness: R/AC Subsectors, uptake variables and penetration values studied for various options IOCs capped in Decision 60/44, ICCs studied 3 scenarios: (1) high-GWP; (2) high-low GWP (75-25%); (3) low-GWP Based on scenario (2) and a share of 30% for commercial refrigeration and 70% for AC, while adding 25% for low-GWP, yields an average CE for all R/AC (sub-) sectors of US$ 11.1/kg T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 17

  18. Methodology – input parameters Spreadsheet analysis for all countries in Groups 1 and 2: Baseline, average of 2009-2010, 8% higher consumption assumed in 2010 (virtually no 2010 data available) 10% reduction in ODP-tonnes by 2015 in principle CE of US$ 4.5/kg used for servicing operations Percentage use for servicing 70%; it varies between 60 and 80-85% for specific countries A certain distribution over the consumption sectors foam, refrigeration and AC and servicing T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 18

  19. Methodology – input parameters (2) Very small amounts of HCFC-141b reported by countries are assumed for cleaning purposes Very small amounts of HCFC-142b reported by countries are assumed to be used in refrigerant blends HPMP funding is done in annual tranches Specific ExCom guidelines are used for estimating the funding for LVCs (Decision 60/44) Foreign ownership data are applied where known, otherwise 30% foreign ownership is assumed for larger manufacturing countries T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 19

  20. Funding requirement Funding requirement for existing (approved) HPMP commitments after ExCom-63 for 2011-2014 is known Funding for all subsequent HPMPs are estimated Three funding scenarios were chosen for the approval of funding for phase-out, equivalent to reductions from the baseline of 10, 15 and 20% Two reduction packages with an emphasis on foam: Foam-RAC-Servicing: 90-0-10% Foam-RAC-Servicing: 75-15-10% Six scenarios in total T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 20

  21. Methodology 4-year period calculated for the funding requirement There is a balance of US$ 252.2 million for 2011 according to the MLF Consolidated Business Plan In this way the 2012-2014 funding can be derived For the subsequent triennia: 15% reduction 2015-2017, 16.5% reduction 2018-2020 Composition of reduction package and cost effectiveness likely to vary; lacking information they are kept constant Funding tranches are all assumed to be disbursed within the triennium T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 21

  22. HCFC production HCFC production is for dispersive use and for feedstock, but cost estimates are only for phase-out of production for dispersive uses Production phase-out via closures is assumed to go in parallel with HCFC consumption reductions as of 2013 (2013 and 2014 in next triennium) at costs of US$ 3/kg All the funding for the 2015 phase-out in production is assumed to be approved (and disbursed) during 2012-2014 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 22

  23. Funding requirement 2012-2014 Total funding requirement is determined for the period after ExCom-63, through 2011 and until end-2014 Subtracting the funding available programmed for commitments available in 2011 gives the 2012-2014 funding requirement for the MLF replenishment Any funding not committed in 2011 will be automatically needed in the next triennium (2012-2014) and would therefore not affect the funding estimate (no carry-over impact, there might be an impact from interest accrued etc.) T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 23

  24. Funding 2011-2014 US$ 195.2 M without new HPMPs and closure costs: ODS phase-out plans 2.36 MB consumption and production 10.74 Destruction 9.00 Technical assistance 0.50 HCFC preparation stage II activities 4.80 HCFC, existing HPMP commitments 40.80 Institutional Strengthening 32.70 CAP 41.92 Core Unit and Operating Costs, Treasurer 52.46 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G -3 1 24

  25. Totals for six scenarios (US$ million) Funding scenarioHPMPs Prod Sector Est. costs 2011 Total 2012-2014 (% reduction from baseline consumption funded in HPMP)Reduction package75-15-10% 10 240.7 112.6 (195.2) 252.2 306.1 15 354.6 181.2 (195.2) 252.1 481.3 20 471.3 239.7 (195.2) 252.1 653.5 Reduction package 90- 0-10% 10 190.3 112.4 (195.2) 252.1 245.2 15 277.9 165.7 (195.2) 252.1 386.1 20 367.6 219.2 (195.2) 252.1 529.3 Note: a substantial amount of the total goes to production closure (37-46%) T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 25

  26. Results Proportion of baseline consumption funded for phase-out varies from 10-35% in the HPMPs so far approved Percentage is very much dependent on company type, servicing and other country specific circumstances The 15% reduction from baseline - funding scenario has been selected as mid-point for all countries, this with a +/- 10% spread This yields a total funding requirement range for the triennium 2012-2014 of US$ 390.2 - 477.0 million T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 26

  27. Supporting activities Institutional Strengthening amounts approved for two year periods; amounts continue without adjustments CAP programme continues with 3% growth/year Core unit funding for agencies (except UNEP) continue with annual increases Operating costs for ExCom, MLFS and Treasurer remain unchanged with adjustments for inflation (US$ million) 2011-2014 2015-2017 2018-2020 IS 32.700 25.757 23.300 CAP, Core, Sect. 95.275 77.571 83.951 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G – 3 1 27

  28. Funding 2015-17 (US$ million): HPMPs, existing 9.75 Destruction 0 Institutional Strengthening 25.76 CAP, Core, Secret., Treasurer 80.00 HPMPs new 75-15-10% 90- 0-10% 395.6 297.0 Production closure 141b/142b 96.0 115.2 Production closure HCFC-22 79.5 45.2 TOTAL 686.6 572.9 Average 629.8 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 28

  29. Funding 2018-20 (US$ million): HPMPs, existing 3.44 Destruction 0 Institutional Strengthening 23.30 CAP, Core, Secret., Treasurer 86.65 HPMPs new 75-15-10% 90- 0-10% 430.3 321.5 Production closure 141b/142b 105.6 126.8 Production closure HCFC-22 126.8 49.7 TOTAL 776.1 611.4 Average 693.7 T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 29

  30. Funding overview for three triennia Best estimate for 2009-2011 US $461 million (2008 RTF: US $342.8-639.8 M) Estimated funding requirement for 2012-2014: US $390-477 million Indicative funding requirements for 2015-2017: US $573-687 million for 2018-2020: US $611-776 million T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G - 3 1 30

  31. Production closure funds have a significant influence on overall replenishment levels Consists of 37-46% of total funding in first triennium 2012-2014 Lower percentages in later triennia Production closure assumed at a cost level of US$ 3/kg Experience value from the CFC production closure agreements When should production closure start compared to production capacity decrease for small decreases in consumption Further technical studies on closure required Concluding remarks (1)Funding production closure T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G – 3 1 31

  32. Concluding remarks (2)Funding stability The funding requirements for the three triennia show an increasing trend Lower funding requirement for 2012-14 is in part due to high level of funding available in 2011 for HPMPs funding levels in second and third triennium have to deal with larger consumption reductions Options for smoothing “triennium funding” include funding reductions in consumption greater than the 10% commitment included in most Stage 1 HPMPs so far approved increasing relevant cost-effectiveness thresholds to encourage adoption of low-GWP alternatives in sectors where this is currently feasible Practical challenges to smooth funding remain T E A P, R e p l e n i s h m e n t T F, P r e s e n t a t i o n a t O E W G – 3 1 32

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