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 TEAP Replenishment Task Force Report Assessment of the Funding Requirement

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

TEAP Replenishment Task Force Report

Assessment of the Funding Requirement for the Assessment of the Funding Requirement for the Replenishment of the Multilateral Fund Replenishment of the Multilateral Fund

for the Period 2012-14for the Period 2012-14


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.


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


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


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


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;


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


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 9

Commitment MLF 2009-2011

Activity (US $ million) 2008 RTF 2009-11estimate actuals &

BP

Non-HCFC ODS consumption 64.6 52.0Non-HCFC ODS production 19.1 18.1HPMP preparation 7.7 11.5HCFC consumption 131.0-428.0 277.0HCFC production 0 0.1Destruction 27.0 11.2Supporting activities andIS, ExCom, MLFS, Core 92.0 90.8TOTAL 342.8-639.8 460.6


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


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%


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 ?)


HCFC-142b


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)


HCFC-22


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


HCFCs in Article 5 Parties

Group Size Parties Consumption

1 Very large 1 >25,000 t2 Large 33 1,000-25,000 t 3 Medium 25 360-1,000 t 4 Small 86 <360 tThe 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 2009Total Article 5 HCFC consumption was larger than 500,000 metric tonnes in 2009


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


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


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 principleCE of US$ 4.5/kg used for servicing operationsPercentage use for servicing 70%; it varies between 60 and 80-85% for specific countriesA certain distribution over the consumption sectors foam, refrigeration and AC and servicing


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


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


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


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


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 24

Funding 2011-2014

US$ 195.2 M without new HPMPs and closure costs:ODS phase-out plans 2.36MB consumption and production 10.74Destruction 9.00Technical assistance 0.50HCFC preparation stage II activities 4.80HCFC, existing HPMP commitments 40.80Institutional Strengthening 32.70CAP 41.92Core Unit and Operating Costs, Treasurer 52.46


Totals for six scenarios (US$ million)

Funding scenario HPMPs Prod Sector Est. costs 2011 Total 2012-2014

(% reduction frombaseline consumption

funded in HPMP) Reduction package 75-15-10%

10 240.7 112.6 (195.2) 252.2 306.115 354.6 181.2 (195.2) 252.1 481.320 471.3 239.7 (195.2) 252.1 653.5 Reduction package 90- 0-10%

10 190.3 112.4 (195.2) 252.1 245.215 277.9 165.7 (195.2) 252.1 386.120 367.6 219.2 (195.2) 252.1 529.3Note: a substantial amount of the total goes to production closure (37-

46%)


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


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 2018-2020IS 32.700 25.757 23.300CAP, Core, Sect. 95.275 77.571 83.951


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 45.2TOTAL 686.6 572.9Average 629.8


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 49.7TOTAL 776.1 611.4Average 693.7


Funding overview for three triennia

Best estimate for 2009-2011US $461 million (2008 RTF: US $342.8-639.8 M)

Estimated funding requirement for 2012-2014: US $390-477 million

Indicative funding requirementsfor 2015-2017: US $573-687 millionfor 2018-2020: US $611-776 million


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


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

Documents

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 TEAP Replenishment Task Force Report Assessment of the Funding Requirement