Offsetting Principles and The CDM, JI Basics

Offsetting Principles and the CDM, JI Basics

Lucas BelenkyACX Executive Climate Change and Carbon Trading Course

November 12th 2012

Gas Factor Example Source

Carbon Dioxide (CO2) 1 Combustion

Methane (CH4) 21-24 Waste

Nitrous Oxide (NO2) 298 Fertilizer

Hydro Fluorocarbons(HFC)

4,000-12,000 Refrigerant Production

Sulfur Hexafluoride (SH6)

16,000 Transmission Lines

What is a Carbon Credit?

• Definition: A carbon credit is a generic term for any tradable certificate or permitrepresenting the right to emit one tonne of carbon dioxide or carbon dioxideequivalent (eCO2).

• Bought, sold, traded, and hedged as other global commodities.

• Currency of the international carbon markets.

• Considered “retired” or “cancelled” if used to cover emissions

$25Billion

Example of an Emission Trading Scheme

800 tonsCapEU-ETS

1,200 tons

400 tons

The Principle of Offsets

800 tonsCapEU-ETS

1,200 tons

400 Credits

Example of an Emission Trading Scheme (Offsets)

• Mechanism under the Kyoto Protocol

• Promotes carbon reduction projects in developed countries

• Project-based Mechanism

• Guidelines for certifying offsets from annex I counties for compliance purposes

The Joint Implementation (JI) Mechanism

• Mechanism under the Kyoto Protocol

• Promotes Low Carbon Development and Technology transfer

• Project-based Mechanism

• Guidelines for certifying offsets from non-annex I counties for compliance purposes in Annex I countries = Certified Emission Reductions (CERs)

The Clean Development Mechanism (CDM)

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

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All CDM Projects in the Pipeline in Brazil + Mexico + India + China

as a fraction of all projects

Mexico

Brazil

China

India

HFCs, PFCs & N2O reduction

68%

Renewables18%

CH4 reduction & Cement &

Coal mine/bed6%

Supply-side EE4%

Fuel switch3%

Demand-side EE0% Afforestation &

Reforestation0.0%

Transport0%

CERs issued in each sector

Status of CDM projects NumberAt validation 3685Request for registration 74Request for review 27Correction requested

3Under review

Total in the process of registration 104Withdrawn 53Rejected by EB 213Validation negative by DOE 198

Validation terminated by DOE 1049Registered, no issuance of CERs

2389Registered. CER issued 1354Total registered 3743Total number of projects (incl. rejected & withdrawn) 9045

The CDM at a Glance

Financial Crisis

Nuclear Disaster in Japan

Double Dip and Over-supply