A C ASE S TUDY: A SJAS B ELO H ORIZONTE C DM P ROJECT BRAZIL / KYOTO - - PowerPoint PPT Presentation

A CASE STUDY: ASJA’S BELO HORIZONTE CDM PROJECT

BRAZIL / KYOTO PROTOCOL

Agostino Re Rebaudengo President arr@asja.biz

February 22nd, 2010 Fordham University School of Law

 KYOTO PROTOCOL AND EMISSION TRADING  ASJA’S PROJECTS AND ACTIVITIES  CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)  KYOTO PROTOCOL WEAKNESSES  IMPROVEMENTS FOR THE “ NEW KYOTO PROTOCOL”

 INDEX

 KYOTO PROTOCOL

INTERNATIONAL CARBON EMISSION CERTIFICATES

Belo Horizonte

Annex I

Rivoli headquarters CERs: Certified Emission Reductions VERs: Verified Emission Reductions

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Carbon Emissions Reductions: CERs, VERs     Technology, know-how, capitals

 EMISSION TRADING - BASIC CONCEPT

 Emission reductions should be achieved where they

are the cheapest.

 Set a target and the market will work out the most

cost-effective way to meet it.

 Price of the carbon credit will determine whether a

participant will trade or reduce.

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 KYOTO MECHANISM

KEY POINTS TO CONSIDER

Baseline Emissions The baseline for a CDM project activity is the scenario that reasonably represents the anthropogenic emissions by sources of greenhouse gases (GHG) that would occur in the absence of the proposed project activity. Additionality A CDM project activity is additional if GHG emissions are reduced below those that would have occurred in the absence of the registered CDM project activity.

CDM: Clean Development Mechanism GHG: Greenhouse Gases

Additionality= Emissions Reductions

Brazil (CDM projects under registration) Belo Horizonte China (CDM projects already registered) Kunming Shenyang Taiyuan Shanzhuangtou Taiyuan Xingou

 CDM - ASJA’S PROJECTS

Asja works in foreign countries where it implements GHG emissions reduction projects in the framework of the Kyoto Protocol Flexible Mechanisms. It is the first Italian company to have one of its biogas-to-energy plants registered as a CDM project. Currently, 6 Asja projects are registered to the UNFCCC, with a further 15 ERPAs already signed for projects under validation.

UNFCCC: United Nations Framework Convention on Climate Change ERPA: Emissions Reduction Purchase Agreement

Argentina (CDM projects already registered) Norte III (Buenos Aires) Puente Gallego (Rosario) China (CDM projects under registration) Handan

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3 STEPS:

• 1. Technical Involvement:

 Design and Feasibility Analysis  Local Operation and Maintenance (O&M) Staff  Direct Transfer of Technology

• 2. CDM Procedure Consultancy:

 Legal Analysis  Local Specialized Staff  Direct

Contact with Certification (DOE), Host Country (DNA) and International (UNFCCC

• Executive Board) Entities
• 3. CERs’ Trading:

 Internal Primary Trading Structure

 CDM - ASJA’S ACTIVITIES

DOE: Designated Operational Entity DNA: Designated National Authority Asja CDM project / high-temperature flares

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In May 2008 Asja Brasil bid successfully for a biogas exploitation contract concerning a landfill in the Belo Horizonte Municipality (Minas Gerais, Brazil) to seek for CERs – Certified Emission Reduction. In August 2008, a concession contract was signed by the Municipality of Belo Horizonte and Asja Brasil for the right to exploit the landfill gas. The Project consists of a landfill gas collection, transport and treatment system with electricity production and sale to the national grid. Asja will take care of all the design, construction,

• peration and maintenance processes until 2024.

 CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

GENERAL INTRODUCTION TO THE PROJECT

Asja CDM project / general manifold

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Project Aim: the Project reduces GHG emissions into the atmosphere using biogas as fuel for power generation, thus displacing energy produced from fossil fuel sources. Legal framework to set the baseline: Brazil has no policy imposing mandatory landfill gas capture or destruction requirements.

 LANDFILL GAS PROJECT

CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

Asja CDM project / engine

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 ENERGY MIX OF BRAZILIAN NATIONAL GRID

CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

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Landfill site total area:

284 ac (114.9 ha)

Area for municipal waste treatment and disposal:

160 ac (65 ha)

Solid urban waste landfilled:

more than 14,000,000 tons

Landfill lifetime:

32 years - Sept. 1975/Dec. 2007

Crediting Period (CP):

10 years

Total CERs claimed in CP (Est.):

2.885.165 tCO2eq

Total electricity produced in CP (Est.):

416.500 MWh (which will power 65.200 people/year)

 LANDFILL KEY-DATA

CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

Asja CDM project / high-temperature flares

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 LANDFILL GAS PLANT LAYOUT

CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

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DRIVERS Costs:

 Belo

Horizonte Municipality royalty: USD 8.000.000 already payed and USD 2.400.000 will be paid during the next ten years + annual

• perating costs

CAPEX:

 USD 12.000.000

Revenues:

 CERs trading: USD 49.000.000  Electricity sale: USD 39.000.000  Pay back period: 5 years

 CDM ECONOMICS

CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

Book Cover / The End of Oil / Paul Roberts

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 CDM PROJECT CYCLE

CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

Project Development Validation Approval Registration Project Construction Monitoring Verification & Certification Issuance 1

Project development 1

2

Validation

By Designated Operational Entity

2

3

Approval

By Designated National Authorities

3

4

Registration

By CDM Executive Board

4

5

Project Construction 5

6

Monitoring

By project participants

6

7

Verification and Certification

By Designated Operational Entity

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8

CERs Issuance

By CDM Executive Board

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 VERY LONG CDM TIME-TABLE

CASE STUDY – CDM PROJECT IN BELO HORIZONTE (BRAZIL)

CDM Planning

Contract with Municipality of B.H. Aug 2008

Design, Local Approval

Environmental Permit Nov - Dec 2008

PDD Preparation

PDD Preparation Nov 2008

DOE Validation

International stakeholders consultation period 06 Dec 08 - 04 Jan 09 Validation Report Apr 2009

Stakeholders Approval

Submission to DNA for Letter of Approval May 2009 Local Stakeholders’ Comments Oct 2008 – Registration Date

Plant Construction Start

Dec 2008

Project Operation Start

Oct 2009

EB Registration

Registration to UNFCCC and Beginning of CERs Production Apr 2010

CERs Verification and Issuance

First CERs Issuance - Est. and CERs Cashing-in Dec 2010

28 MONTHS FROM SIGNATURE TO THE FIRST CERS CASHING-IN!

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Though the free-market based emission quotas exchange system (cap-and-trade) is a smart mechanism which works fine in theory, a number of factors have drastically reduced its efficacy, namely:

• 1. red tape affecting the project validation, registration

and verification processes, leading to “stiff” schedules and modalities;

• 2. the predominance of

purely financial operators in primary purchasing and trading, which altered (doped!) prices and expectations;

• 3. as a further consequence, an extremely limited use of

technology transfer, reserved for the few operators that had both the specialized know- how and capitals needed to invest abroad;

4.

a lack of guarantees for the post-Kyoto period.

 KYOTO PROTOCOL WEAKNESSES

REASONS FOR A (PARTIAL) FAILURE

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Advisably, new negotiations should take into account :

 streamlined, faster procedures (e.g. ex-ante evaluation of

additionality by macro-sectors instead of a case-by-case approach);

 a wider involvement of insitutional players, especially for

initiatives taken in slow-developing countries where food, health, and social sustainability also require urgent actions;

 gradual transition from the old to the new “Protocol” (for

example, companies investing in China with a 10 year crediting period cannot have their projects stopped early at the end of 2012);

 massive incentives to real technology transfer: better

integration

• f

pollution reduction projects with fast technology development.

 IMPROVEMENTS FOR THE “NEW KYOTO PROTOCOL”

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LOOKING FORWARD TO MEXICO CITY… …FOR A BETTER CO2 REDUCTION SCHEME!

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