Issue #3 | SB - 13 | 09 - 15 September | Lyon, France.

Thursday 14 September 2000

Title: The World Bank climate change programmes
Sponsor: The World Bank
Contact: Patrick Karani <pkarani@worldbank.org>
Internet: http://www-esd.worldbank.org/cc/

Johannes Heister, The World Bank, introduced the Bank's climate change programmes. He outlined the National Strategic Studies (NSS) on Activities Implemented Jointly (AIJ) / Joint Implementation (JI) / and the Clean Development Mechanism (CDM) through which the Bank helps countries to assess their options and strategies. He described the Burkina Faso AIJ Project on Sustainable Energy Management which aims to meet the growing urban wood fuel demand for domestic use while maintaining forest biodiversity and ecosystems, without reducing their carbon sequestration capacity. He concluded with a briefing on the 2000 CDM Assist Programme for Building Capacity in Africa which aims to enable African countries to benefit from the CDM by, for example, enhancing their capacity to negotiate, generate and transfer CERs.

Thomas Black-Arbelaez, Ministry of the Environment, Colombia, (photo above right) presented a Review of the NSS studies on the CDM. The review analyzes the potential effects of proposed supplementarity limits, on Zimbabwe and Colombia and the effects of proposed transaction costs on the viability of the CDM. He concluded that under increasingly strict supplementarity restrictions, the CDM is reduced to a low-profit, low-benefit option. On the effects of potential transaction costs, he concluded that they may minimize net resource inflows to developing countries and reduce or eliminate the "financial additionality" of many projects.

Ambassador Erik Bjørnebye, Norway, briefed participants on the Norway-World Bank AIJ Programme, designed to maximize the participation in, and lessons learned from, the AIJ pilot phase of the FCCC. The Bank is currently implementing three AIJ pilot projects: the Mexico High Efficiency Lighting Pilot Project, the Poland Coal-to-Gas Conversion Project and the Burkina Faso Sustainable Energy Project. An additional project, recently approved, is the Integrated Agricultural Demand-side Management Project with the Andhra Pradesh Electricity Board in India.

Title: Fossil of the Day presentation
Sponsors: Climate Action Network, Friends of the Earth, Greenpeace, National Environmental Trust, WWF
Internet: http://www.fossil-of-the-day.org

Canada, the US and Chile featured in the Fossil of the Day awards organized by NGOs to highlight contentious negotiation positions. The daily award ceremony is staged with the assistance of the popular Lyon-based puppeteers, Guignol. The puppet shows summarize and parody the on-going negotiations at SB-13.

Related links:
Climate Action Network: http://www.climatenetwork.org
Friends of the Earth: http://www.foei.org
Greenpeace: http://www.greenpeace.org
WWF: http://www.panda.org

Title: From obstacle to opportunity: lessons from the acid rain emissions trading programme for the Kyoto Protocol
Sponsor: Environmental Defense (ED)
Contact: Annie Petsonk <annie@edf.org>
Internet: http://www.environmentaldefense.org

Outlining the United States' experience with the acid rain (A/R) reduction initiative, Joe Goffman, ED, (photo right) suggested that it holds important lessons for international negotiators working on the rules for the Kyoto Protocol. He explained that polluters have been "over complying" with the US Clean Air Act because a market for excess emissions reduction had been created by legislation. In addition, the programme has induced technological innovation that otherwise would not have happened, while keeping transaction costs low.

Turning to lessons for the Protocol process, Goffman argued that 'banking' of allowable emissions should be permitted, to foster early reductions during the first compliance period, and that a 'no exit' policy has promoted cost effectiveness. He added that in the international context of the KP, 'buyer liability' would ensure compliance. While the A/R programme is national, market mechanisms such as emissions trading have been applied regionally in the US to address the NOx issue, concluded Goffman.

Ben Feldman, Environmental Resources Trust (ERT), outlined the work of the GHG Registry, which is modeled on the US EPA's Allowance Tracking System (ATS). The Registry catalyzes markets to bring about environmental benefits in the absence of an established regulatory system by building the infrastructure for a GHG emissions trading programme.

Discussion: Participants raised questions about exporting the A/R programme, the importance of the Second Budget Period of the Kyoto Protocol, and on the modalities of the A/R programme.

Related Link:
Environmental Resources Trust: http://www.ert.net

Title: Setting standardized baselines for project-based activities: Case studies in cement and steel, electricity generation and energy efficiency
Sponsor: Organisation for Economic Co-operation and Development (OECD)
Contact: Jan-Corfee Morlot <jan.corfee-morlot@oecd.org>
Internet: http://www.oecd.org/env/cc/
http://www.iea.org

At the request of the FCCC Annex I Expert Group, the Organisation for Economic Co-operation and Development (OECD), together with the International Energy Agency (IEA), provided overview papers on potentials for standardizing emissions baselines methodologies for JI and CDM projects. Jan Corfee-Morlot, OECD, provided a brief overview of the different studies, including the cement, electricity, iron and steel sectors and noted that a forestry sector study is underway. Presenting results from "An Initial View on Methodologies for Emissions Baselines: Cement Case Study", Jane Ellis, OECD, illustrated the complexities of baselines for the industry sector, such as, defining boundaries, establishing baseline units, data issues, additionality and baseline lifetimes. Concluding, she highlighted that standardization is possible at different levels of aggregation and stressed that additionality requires baseline "tests" as well as qualitative additionality checks. On "An Initial View on Methodologies for Emissions Baselines: Case Study on Energy Efficiency", Jonathan Pershing, IEA, illustrated multi-project baselines (M-P) using recent capacity additions, comparing t /GWh values for wind and natural gas or wind and oil. Insights into the electricity sector, indicated, for example, that M-Ps based on recent capacity are a better reflection of the business-as-usual (BaU) scenario. Jane Ellis, OECD, elaborated on a possible framework for baseline standardization. She queried whether simple, generic guidance on baseline methodologies could be defined and suggested the minimum guidance required. She outlined elements for guidance, including: project aggregation; project boundaries; project crediting lifetimes; methods and assumptions; and data sources. Summarizing, she offered options for generic guidance to address definitions and elements, and to elaborate further methodological development with sufficient flexibility to allow a-learning-by-doing approach.

Discussion: Discussion themes included uncertainties regarding future predictions of energy supply and demand, and how to maintain confidence about the standardization of different parameters, methods, and baseline values. The panel highlighted that a generic standardization sets out values for transparency, whereas baselines at project-specific level could lead to administrative burdens.

More information:
For copies of the OECD/IEA reports see http://www.oecd.org/env/cc/

Title: Capacity building for industry in six African countries
Sponsor: United Nations Industrial Development Organization (UNIDO)
Contact: Peter Pembleton <ppembleton@unido.org>
Internet: http://www.unido.org

Peter Pembleton, UNIDO, (photo right, seated left) introduced background studies prepared for Phase I of a programme designed to build capacity in developing countries for participation in the CDM. Presenters from Ghana, Kenya, Nigeria, Senegal, Zambia and Zimbabwe described initial research to establish capacity building needs, to identify barriers and review potential industrial projects for the CDM. Additional phases will focus on programme development and implementation of pilot projects.

Presenters of the case studies identified a range of potential CDM candidate industry sectors, including: power plants, iron and steel scrap and aluminum smelting, cement and brick manufacturing, pulp and paper production, vegetable oil production including energy recovery from ground nut shells, copper production, and the sugar industry. A number of presenters described how sustainable industrial development could complement their national development plans, and each outlined the potential for reduced and/or avoided emissions should the proposed projects proceed.

Discussion: Participants raised questions about: the compatibility of a project to substitute hydro-power with new thermal power capacity with the CDM's objectives; the need to develop detailed calculations of the costs attached to potential reductions with a view to estimating the competitiveness of projects within the context of the CDM; the probable focus on large scale investments under the CDM and desirability of bundling African projects; the need to consider the wider benefits of the UNIDO projects; the absence of Least Developed Countries from the line up of participants in UNIDO's Africa and CDM programme; and the low potential for emissions reduction projects in Africa.

More information:
UNIDO project website: http://www.unido.org

Title: Results of the international emissions trading simulation of the IEA
Sponsor: International Energy Agency (IEA)
Contact: Richard Baron <richard.baron@iea.org>
Internet: http://www.iea.org

Richard Baron, IEA, (photo right) presented the results of an international emissions trading simulation designed to deliver hands-on experience in an international emissions trading scheme. Approximately 24 countries participated in this effort, representing both Annex I countries and EITs. Participants had to make decisions on whether to buy allowances in the international market or achieve domestic emissions reductions, given their countries' emissions trajectories and compliance options. The simulation showed that the overall cost saving potential of a trading scheme was approximately 60%, but that results varied dramatically across countries. In addition, some EITs reduced their emissions beyond compliance levels to sell excess allowances on the international market. The outcome indicates the need for government monitoring of assigned amounts and inventories, and the importance of market transparency. Several participants in the trading simulation spoke of their experiences, stressing that it had been a useful learning experience. The participant who adopted the role of the EU explained that he aimed to reflect the EU's position on domestic action, and thus avoided trading. Other participants aimed to find the least-cost options for compliance. The participant who adopted the role of the US remarked that no information on other countries' abatement costs was available to the market.

Discussion: Participants posed questions about the marginal abatement curve, on which sectors and gases were covered, and the importance of the second Budget Period for decision-making.

Title: Positive list for the CDM
Sponsor: World Wildlife Fund (WWF) and Climate Network Europe (CNE)
Contact: Liam Salter <lsalter@wwf.int.org>
Internet: http://www.panda.org

Chair Dave Hawkins, Natural Resources Defence Council, introduced the panel discussion on a positive list for the CDM. Dr Stephen Bernow, Tellus Institute, presented the findings of the report, "Cleaner Generation, Free-Riders and Environmental Integrity: CDM and the Power Sector". The report consists of an analysis undertaken for the World Wildlife Fund by the Tellus Institute in collaboration with the Stockholm Environment Institute. The analysis provides an estimate of the potential carbon emission impacts of the CDM, focusing on new power plants in the power sectors of non Annex I countries. In conclusion, Bernow noted that while the CDM could induce some legitimate reduction in emissions from electricity generation in host countries, it could also give rise to a prominent amount of "spurious" emissions allowances by crediting "free-rider" activities. Dr Sujata Gupta, TERI, India, made a presentation on Initiating CDM Environmental and Developmental Concerns. She stated that before a positive CDM list is agreed, there is a strong need to address additionality, baselines and sustainable development, in the process of establishing guidelines. Douglas Korsah-Brown, FoEI, highlighted the importance of considering sustainable development to maintain the integrity of the KP. Liam Salter, WWF International, stressed that under the CDM, 94% of the business-as-usual scenario for the power sector remains unchanged. He suggested keeping "free riders" out by restricting the eligibility of technologies and maintaining a focus, in principle, on inherently low risk technologies.

Discussion: Discussion revolved around the European Union, US and Peruvian positions on a positive list for the CDM and the eligibility thresholds for power plants. On a positive list, participants discussed how to achieve principles that address equity with regard to technology transfer. Issues were raised concerning developing country participation and how they could benefit, particularly with regard to the CDM and renewable energy projects that could risk excluding certain geographical regions. On "free riding" the Environmental Integrity Group pointed out that the CDM is another example of the need for good management and strict adherence to principles.

Related links:
http://www.teriin.org
http://www.tellus.org