Opportunities for Carbon Credits in Jatropha Biofuel Projects

Transcription

1 Opportunities for Carbon Credits in Jatropha Biofuel Projects

2 Contents Fundamental notions Future of the Carbon Market Opportunities in the Jatropha Sector 2

3 Underlying Concept CERs AFRICA EUROPE Company in Africa (Annex II) willing to undertake a project to reduce emissions (e.g. Renewable energy project) African company certifies its emission reductions and sells the certified emission reductions (CERs) in order to generate an additional income stream for the project $$$ Company in Europe with obligation to reduce emissions Cost of reducing emissions in Europe is high (e.g. >30 EUR / tco2) European company purchases the rights from the emission reduction project in Africa and uses these rights to meets its obligation 3

4 Carbon credits are issued for reductions in greenhouse gas emissions CO 2 eq Business as usual: The baseline scenario 30,000 Baseline emissions 20,000 Carbon Credits Crediting time Open lagoons emitting methane The CDM project 10'000 Project emissions Anaerobic digesters that Produce electricity/heat Year 4

5 Conditions for a project to qualify under the current carbon market Factors 1 Additionality Description Additional effort Not financially interesting Early consideration Difficulty 2 Methodology Approved methodology Possibility to develop a new methodology 3 Critical size 4 Sustainable development High transaction costs Bigger than tco2e/y Project needs to contribute to sustainable development in host country Each country is free to define its own rules 5

6 Carbon credits and markets - an overview Compliance markets Examples EU Emission Trading Scheme Kyoto Protocol market New Zealand Emission Trading Scheme Key features Kyoto credits (CDM and JI) can be sold to Kyoto and EU markets High liquidity Unit price varies little across projects, but premium for Gold Standard certified projects Voluntary markets GS VERs VCUs VERs for Chicago Climate Exchange,... Carbon credits generated on the basis of voluntary standards Not suitable for compliance purposes Prices vary with quality of projects with Gold Standard projects fetching the highest price 6

7 South Pole can assist you in all the steps necessary to realize a carbon credit project South Pole carbon asset development services Project development Concept Feasibility analysis Financial closure Construction Operation Project registration CER issuance CDM development Initial scope (PIN) Project documentation (PDD) Host country approval (DNA) Validation (DOE) UNFCCC registration Monitoring and verification Issuance of CERs 7

8 Fundamental notions Future of the Carbon Market Opportunities in the Jatropha Sector 8

9 Total size of global carbon market has doubled to 120 billion USD from 2007 to 2008 Billion USD Source: State of the Voluntary Carbon Markets 2009 by Ecosystem Marketplace and New Carbon Finance 9

10 Large growth expected in voluntary carbon market supplier-projected growth in the voluntary carbon markets* * Base on 136 survey respondents Source: State of the Voluntary Carbon Markets 2009 by Ecosystem Marketplace and New Carbon Finance 10

11 Global GHG abatement cost curve beyond businessas-usual 2030 Source: McKinsey Global GHG Abatement Cost Curve v2.0, Jan

12 Post 2012 outlook Three reasons to be cheerful: Discussed national 2020 and 2050 goals for developed countries mostly aggressive (incl. USA!) Too much political capital invested to fail China and India are softening their stance Three reasons to be fearful: The weight of expectation may be too much Tragedy of the commons Private sector could be crowded out 12

13 Contents Fundamental notions Future of the Carbon Market Opportunities in the Jatropha Sector 13

14 Possibilities to gain carbon credits with Jatropha plantations and related biodiesel production Credit origin Reforestation Degraded land to Reforested land Biodiesel Biomass Fossil fuel to Biofuel Fossil fuel based power plant to Biomass power plant Biogas Fossil fuel based power plant to Biogas based power plant 14

15 Reforestation (1/3) What Reforestation is claimed (1/2) Carbon accumulated in the Jatropha trees CDM Meth. AR-AM0001 (main methodology) Standard VER with CCBS add-on recommended Volume credits HIgh Value per credit Highly variable, Euro Demand buyer No demand in the compliance market Higher demand in voluntary market, depending on project 15

16 Reforestation (2/3) KEY APPLICABILITY CONDITIONS AND MAIN HURDLES TO OVERCOME IN ORDER TO IMPLEMENT A REFORESTATION CARBON PROJECT (AR-AM0001) No grazing No shift of pre-project activities Lands severely degraded and still degrading Jatropha tree above thresholds for defining forest as communicated by the DNA (and carbon standards) No deforested land (1990 onwards) Long-term monitoring: min. 20 y up to 100 y Extensive monitoring needed 16

17 Reforestation (3/3) Expected carbon credits Reforestation on a ha plantation Assumptions: Expected credits: Maturity: 5 years Carbon / ha: 9.26 t Linear growing All seedlings set in the first year VER: 1.5 Euro Credits [t CO2e] 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 ER Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Yearly: t CO 2 eq. until maturity reached Total: t CO 2 eq. Expected cash-in: Total: Euro 17

18 Biofuel (1/4) What Reforestation is claimed (1/2) CDM Meth. Life-cycle assessment (LCA) Fossil fuel vs. biofuel AMS III.T -> Applicability conditions AM 47vs3: Revised and proposed for approval next EB Standard Only CDM maybe GS CDM; Volume credits High Value per credit High, 5-7 Euro Demand buyer Moderate (compliance market) No demand in the voluntary market due to reputation issues of biofuels 18

19 Biofuel (2/4) KEY APPLICABILITY CONDITIONS USING AMS III.T: Only transportation use Only plant oil use as a blend up to 10% or pure, NO esterification No shift of pre-project activities No forest on plantation area in the past 10 years Captive fleet AM0047vs.3 (newly revised and waiting for approval by EB): Can be used for transportation use OR stationary equipment No modification in end user facilities/engines using the biodiesel No shift of pre-project activities Cultivation on severely degraded land Captive fleet Project activity includes a biodiesel plant for (trans-) esterification No methane emissions through seed cake Biodiesel used in the host country 19

20 Biofuels (3/4) MAIN CONSTRAINTS RAISED BY THE EXECUTIVE BOARD OF THE UNFCCC IN THE PAST Double counting Land use change Food-fuel conflicts Calculations of upstream emissions of biofuel and petrodiesel production Issues solved by the Meth Panel and waiting for approval by the Executive board of the UNFCCC in the next meeting Need for credible standards and certification schemes for acceptance of biofuel carbon credits under voluntary standards 20

21 Biofuel (4/4) Expected carbon credits Reforestation on a ha plantation using AMS III.T Assumptions: trees/ha 1.5 liter oil/tree and year after gaining maturity 5 years until maturity reached Yearly linear yield increase CER: 7 Euro Expected credits: Credits [t CO2e] ER Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Year 1: t CO 2 eq., Year 5: t CO 2 eq. Total: t CO 2 eq. Expected cash-in: Yearly: Euro Total: Euro 21

22 Biomass (1/4) Reforestation (1/2) What is claimed CDM Meth. Standard Volume credits Value per credit Electricity production burning fruit shells Possibly, avoidance of methane emissions through avoidance of anaerobic degradation of biomass on a dump-site AMS I.D (Electricity) AMS I.C (Thermal) AMS III.E (Methane avoidance) All possible. Depends on set-up of the project Medium - High High, depending on standard implemented 5-7 Euro Demand buyer Comparatively high for all standards especially Gold Standard 22

23 Biomass (2/4) KEY APPLICABILITY CONDITIONS TO CLAIM RENEWABLE ENERGY: High emission factor of the grid (if grid connected) KEY APPLICABILITY CONDITIONS TO CLAIM ADDITIONAL METHANE AVOIDANCE: No demand/use for fruit shells Shells would have been dumped into a dump-site or landfill 23

24 Biomass (3/4) Expected carbon credits Reforestation on a ha plantation Assumptions: trees/ha 3.2 kg shell/tree and year after gaining maturity Energy content GJ/t 5 years until maturity reached Yearly linear yield increase EF 0.5 t CO 2 /MWh Efficiency of electricity generator 35% CER: 7 Euro Renewable energy production: Credits [t CO2e] Additional Methane avoidance: Credits [t CO2e] ER Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 ER Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Electricity Methane 24

25 Biomass (4/4) Expected carbon credits Reforestation on a ha plantation Credits NO CH 4 avoidance: Credits through CH 4 avoidance: Year 1: t CO 2 eq., Year 5: t CO 2 eq. Total: t CO 2 eq. Year 1: 403 t CO 2 eq., Year 10: t CO 2 eq. Total: t CO 2 eq. Expected cash-in: Yearly: Euro Total: Euro Expected additional cash-in: Yearly: Euro Total: Euro 25

26 Biogas (1/4) What Reforestation is claimed (1/2) CDM Meth. Standard Volume credits Value per credit Low carbon electricity/heat production using biogas form anaerobic digestion of seedcake (potentially fruit husk as well) Avoidance of methane emissions AMS I.D (Electricity) AMS I.C (Thermal) AMS III.F (Methane avoidance) All possible. Depends on set up of the project Medium - high High, 5-7 Euros Demand buyer Comparatively high for all standards especially Gold Standard 26

27 Biogas (2/4) KEY APPLICABILITY CONDITIONS TO CLAIM RENEWABLE ENERGY: High emission factor of the grid KEY APPLICABILITY CONDITIONS TO CLAIM ADDITIONAL METHANE AVOIDANCE: No demand/use for seedcake Seedcake would have been dumped into a dump-site or landfill Rather difficult to claim methane avoidance due to valuable seedcake 27

28 Biogas (3/4) Expected carbon credits Reforestation on a ha plantation Assumptions: trees/ha 3.8 kg seedcake/tree and year after gaining maturity Biogas production 287 Nm 3 /t 5 years until maturity reached Yearly linear yield increase EF 0.5 t CO 2 /MWh Efficiency of electricity generator 30% No husk used Renewable energy production: Credits [t CO2e] ER Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Additional Methane avoidance: Credits [t CO2e] ER Yr 1 Yr 2 Yr 3 Yr 4 Yr 5 Yr 6 Yr 7 Yr 8 Yr 9 Yr 10 Electricity Methane 28

29 Biogas (4/4) Expected carbon credits Reforestation on a ha plantation Credits NO CH 4 avoidance: Credits through CH 4 avoidance: Year 1: t CO 2 eq., Year 5: t CO 2 eq. Total: t CO 2 eq. Year 1: 484 t CO 2 eq., Year 10: t CO 2 eq. Total: t CO 2 eq. Expected cash-in: Yearly: Euro Total: Euro Expected additional cash-in: Yearly: Euro Total: Euro 29

30 Total expected income ( ha) Carbon Revenues Revenue [Euro] 800, , , , , , , , Biomass carbon credit value (methane avoidance) 4.1 Biomass carbon credit value (electricity prod.) 3.2 Biogas carbon credit value (methane avoicance) 3.1 Biogas carbon credit value (electricity prod.) 2. Afforestation / reforestation carbon credit value 1.Biofuel carbon credit value 30

31 Conclusion Individual assessment needed for each project High carbon credit potential Every carbon project type can bring high revenues Carbon consultant should be approached as early as possible in the project development to maximize quality and quantity of credits Sustainable plantation on degraded land preferable Several carbon projects on one plantation possible Biomass, Biogas and Reforestation or Biofuel and Reforestation Project registration failure risk Biomass < Biogas << Reforestation << Biofuel 31

32 South Pole Contact Thank you for your attention South Pole Zurich South Pole offices South Pole representatives Patrick Horka, International Support and Control Team Technoparkstrasse Zurich Switzerland T