Joint Implementation

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Joint Implementation Gas Flaring Reduction
Projects

• Alexandrina Platonova-Oquab
• Carbon Finance Unit, World Bank

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Presentation outline

• JI fundamentals
• Project cycle and methodologies
• Baselines Monitoring
• Flaring reduction under JI
• Opportunities Barriers in Russia
• Uncertainty on post-2012 period

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Joint Implementation fundamentals (1)

• Joint Implementation
• Generate emission reductions (ERUs) from
  investments in developed (Annex B) countries
• Two Tracks for JI
• JI Track 1
• Simplified procedure for fully eligible
  countries
• JI Track 2
• International verification of projects

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Joint Implementation fundamentals
(2)Participants

• Governments of investing and host countries
• Eligibility national rules
• Project approval by the Designated Focal Point
• Private Public companies
• Must be authorized by the government
• and for JI Track 2
• JI Supervisory Committee (JISC)
• International rules / verification
• Independent validators
• Determine conformity of projects with JI
  requirements

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Joint Implementation fundamentals (3)Status
Rules

• JI Track 2
• Launched in October 2006
• JISC Track 2 guidelines available
• Baseline setting monitoring rules (incl.
  guidance on additionality)
• JI Project Design Document (PDD) forms approved
  by COP/MOP2
• JISC administrative fees approved by COP/MOP2
• JI Track 1
• No rules available yet from Host Parties
• More relaxed rules ? / Adoption of Track 2
  guidelines?

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JI Track 2 Project cycle
Preparation and review of the project
Project completion
Transfer of ERUs
Carbon asset due diligence
Eligibility requirements
Negotiation of project agreements
Possible review by JISC

• Determination by AIE
• PDD forms established by JISC
• Letter of Approval
• Baseline setting
• Publication of PDD

15 days
30 days
45 days
Periodic verification by AIE
Determination report by AIE
Possible review by JISC
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JI Track 2 Methodologies Baseline setting
monitoring (1)

• Key objective of JI (CDM) methodologies
• determine GHG emission reductions from a project
  activity over time
• Key elements of JI (CDM) methodologies
• determination of emissions in the relevant
  reference scenario (baseline) and in the project
  scenario
• procedures to collect and use the relevant data
  to calculate emission reductions (monitoring)
• demonstration that the project reduces emissions
  and is not the most likely scenario
  (additionality)
• JI projects may use approved CDM methodologies or
  a new appropriated approach

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JI Track 2 Methodologies Baseline setting
monitoring (2)
Baseline (gas flaring)

• Main challenges
• Baselines are counterfactual/ hypothetical
• Additionality / environmental integrity
• Reasonable conservativeness
• Monitoring methodology
• Procedures to measure or to estimate project
  emissions (incl. leakage)
• Procedures to determine baseline emissions
  (context data)
• Data sources, quality control

Emission reductions
GHG emissions
Project emissions
Time
In addition to CO2 price, baseline is key for
determining financial impact of JI
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Examples of baseline methodologies for gas
flaring reduction projects

• Economic or financial analysis
• Baseline is the (time dependent) investment
  alternative (incl. no investment) with the
  highest IRR or the highest NPV or the lowest
  costs (all risk adjusted)
• Example Rang Dong project (Vietnam) - CDM
  methodology AM0009
• Scenario or barrier analysis
• Baseline is the option facing the least amount of
  barriers
• Example Gas-to-Market project facing low prices
  limited access to the transmission system
• Control groups
• Baseline is common practice
• Example No incentive to reduce gas flaring leads
  to the continuation of the current situation in
  the country/region
• Technology benchmark
• Baselines for specific circumstances
• Example Widespread non-compliance with legal or
  regulatory requirements

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Flaring Reduction ProjectsRussias JI market
segment (1)

• Large opportunities in Russia
• 15 bcm of associated gas flared per year,
  officially
• Projects do not overcome the hurdle rate of
  return
• Regulatory institutional barriers for better
  utilization of associated gas
• Carbon finance could bring additional revenues
• Achievable annual reductions up to 2 MtCO2e per
  project
• Priced at 7/tCO2 the ERUs bring up to 70 M for
  a project in 5 years for GHG-friendly projects

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Flaring Reduction ProjectsRussias JI market
segment (2)

• Barriers for JI projects in Russia
• Currently JI Track 2 procedure expected to be
  used
• National rules approval procedure for JI Track
  2 not available yet
• However, 3 from 9 submitted JI Track 2 projects
  are in Russia
• Uncertainty on forthcoming JI rules in Russia
• Any limitations on possible activities /sectors?
• Clear procedures for approval?

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Post-2012 uncertainties Timing for current JI
opportunities

• Carbon finance flow is now limited by 2008-2012
  period
• Progress of the international negotiations is key
• Opportunity window is narrowing
• Particularly, in the absence of national
  procedures
• Possible uncertainty mitigation
• Faster move on setting national JI rules in
  Russia
• Possible use of Green Investment Schemes
• On the project level
• Develop projects start operations in 2007-2008

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Useful References

• Websites on JI and CDM
• Website of the UNFCCC
• JI Track 2 Modalities Guidelines
  http//ji.unfccc.int
• CDM Gas Flaring Reduction Projects
  http//cdm.unfccc.int/Projects (search by AM0009
  AM0037)
• Websites on oil and gas climate activities
• Methane emissions from oil and gas industry (US
  EPA Natural Gas STAR) http//www.epa.gov/gasstar/
  index.htm
• GHG Protocol Initiative www.ghgprotocol.org
• GGFR Report 6 on gas flaring reductions under
  the CDM www.worldbank.org/ggfr
• API Compendium on GHG emissions
  http//www.api.org/ehs/climate/

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• Thank you!

www.carbonfinance.org aplatonova_at_worldbank.org