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Public Meeting Public Meeting Reviewing and Approving Offset Reviewing and Approving Offset Projects and Protocols Projects and Protocols May 21, 2009 May 21, 2009 California Air Resources Board California Air Resources Board California

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Reviewing and Approving Offset Projects and Protocols

May 21, 2009 California Air Resources Board

Reviewing and Approving Offset Projects and Protocols

May 21, 2009 California Air Resources Board

Public Meeting Public Meeting

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California Cap-and-Trade Rulemaking Timeline California Cap-and-Trade Rulemaking Timeline

  • Focus in 2009: work through implications of

different issues and policy decisions

  • Focus in 2010: finalize program design and

develop regulatory language

  • End of 2010: Board action on cap-and-trade

regulation

  • Extensive public process throughout
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Purpose of Meeting Purpose of Meeting

  • Discuss preliminary staff thinking on:

– Reviewing and adopting offset protocols – Project types – Reviewing and approving offset projects

  • Stakeholders are asked to provide written

comments on this topic to ARB by June 19th (to ccworkshops@arb.ca.gov)

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ARB Compliance Offset Development Process ARB Compliance Offset Development Process

April 28th

  • Criteria for compliance offsets

– Requirements for offset projects

Today

  • Protocol review and adoption process
  • Approval process for offset projects

– Verification of offset projects – Issuance of offset credits

Future Topics

  • International offsets and linkage
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Meeting Agenda Meeting Agenda

  • Opening Remarks (15 minutes)
  • Staff Presentation (30 minutes)
  • Round-Table Discussion (2 hours)
  • Other Issues (15 minutes)
  • Adjourn
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Outline for Today’s Presentation Outline for Today’s Presentation

  • Offsets in the Scoping Plan
  • Reviewing and adopting compliance
  • ffset protocols
  • Project types
  • Reviewing and approving compliance
  • ffset projects
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Scoping Plan: Compliance Offsets Scoping Plan: Compliance Offsets

  • All offsets must meet high quality

standards (AB 32 requirements)

  • The majority of emission reductions

must be met through action at capped sources

– No more than 49% of reductions can come from offsets

  • No geographic limits
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Compliance Offset System Potential Elements Compliance Offset System Potential Elements

–Protocol Adoption –Validation –Registration –Monitoring and Reporting –Verification –Certification –Issuance –Enforcement –Others?

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What Are Project Protocols? What Are Project Protocols?

  • Provide project eligibility requirements
  • Methods to calculate, monitor and

report emission reductions or removals accurately and consistently

  • ARB adopted protocols must generate
  • ffsets that meet all AB 32 criteria (i.e.

real, additional, quantifiable, permanent, verifiable and enforceable)

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Existing Project Protocols Existing Project Protocols

  • Protocols for some project types have

already been developed as part of existing offset programs (e.g. CCAR, RGGI, CDM, etc…)

  • ARB Board has adopted voluntary offset

protocols developed by CCAR:

– Forests, manure digesters, urban forestry

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Protocol Approval Process Protocol Approval Process

  • Project-by-project

– Individual project assessments submitted by project developers and reviewed on a case-by-case basis by ARB and verifiers

  • Standards-based

– General criteria and quantification methods pre-established in protocols and approved by ARB for use by project developers

  • Hybrid

– Combines elements of these two

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Protocol Approval Process: WCI Coordination Protocol Approval Process: WCI Coordination

  • ARB is coordinating its efforts for

protocol review and approval with the Western Climate Initiative effort

  • ARB is working with WCI to approve

protocols for the regional program that will ensure that California meets AB 32 requirements

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ARB Preliminary Staff Thinking: Protocol Approval Process ARB Preliminary Staff Thinking: Protocol Approval Process

  • ARB would follow the hybrid approach

– Use standardized methodologies to the extent possible – Develop a process for reviewing and approving future methodologies, including those submitted by individual project developers

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ARB Preliminary Staff Thinking: Project Types ARB Preliminary Staff Thinking: Project Types

  • Prioritize an initial list of project types

– Analyze potential of those project types to achieve reductions – Evaluate whether protocols exist for priority project types

  • If so, determine whether they need to be

modified to meet ARB requirements

– In the case that protocols do not exist for priority project types establish protocol development process

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ARB Preliminary Staff Thinking: Prioritization of Project Types ARB Preliminary Staff Thinking: Prioritization of Project Types

  • Prioritization based on the following criteria:

– Is the project type applicable in California? – Is the project type able to achieve real tons that avoid double counting in the short term? In the long term? – How widely applicable is the project type? – Is the project type generally cost effective? – Does a quantification method already exist for the project type? – Does the project type help ARB achieve policy goals in the Scoping Plan?

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ARB Preliminary Staff Thinking: List of Eligible Project Types ARB Preliminary Staff Thinking: List of Eligible Project Types

  • 1st Priority: Board approved protocols
  • Forests, manure digesters, urban

forestry

  • ARB staff starting to develop list
  • Request stakeholder input on project

types that may meet prioritization criteria

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ARB Preliminary Staff Thinking: Board Approved Voluntary Protocols ARB Preliminary Staff Thinking: Board Approved Voluntary Protocols

  • Cap-and-trade regulation could increase

stringency and/or expand the offset system beyond the current board- approved protocols

  • Starting in 2012 all compliance offsets

would be subject to offset system regulatory requirements

– ARB regulatory verification and enforceability requirements

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ARB Preliminary Staff Thinking: Existing Offset Protocols ARB Preliminary Staff Thinking: Existing Offset Protocols

  • Review and potential revision process

could be very resource intensive

  • This process may require additional

expertise and resources beyond those available to ARB

  • ARB could utilize outside expertise and

capacity to review and modify existing protocols to meet ARB criteria

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–Protocol Adoption –Validation –Registration –Monitoring and Reporting

Compliance Offset System Potential Elements Compliance Offset System Potential Elements

–Verification –Certification –Issuance –Enforcement –Others?

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Validation Validation

  • Assessment of a project’s likelihood that

implementation will result in the GHG emission reductions/removals described in the project documentation

  • Pro: upfront confidence of GHG

reductions if project is implemented

  • Con: adds another step and cost
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ARB Preliminary Staff Thinking: Validation ARB Preliminary Staff Thinking: Validation

  • Validation on a voluntary basis

– Third-party validation in this case

  • Due to the use of standardized

methodologies to quantify emission reductions validation should not be required

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Registration Registration

  • Point at which there is formal

acceptance of the project into the system and project is allowed to generate compliance offsets

  • Registration is prerequisite for

verification, certification and issuance

  • Standards contained in protocols

relevant to registration of offset projects

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ARB Preliminary Staff Thinking: Registration ARB Preliminary Staff Thinking: Registration

  • Project developer submits request for

registration

– Need to determine what documentation is required in request

  • ARB conducts assessment of request

– What should the timeframe for review be?

  • Criteria for approval of request

– Need to be developed – Processing fee?

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Monitoring and Reporting Monitoring and Reporting

  • Collection and archiving of all relevant

data that determines baselines and emission reductions from projects

  • Project protocols may have project

specific requirements for the types of monitoring and reporting required

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ARB Preliminary Staff Thinking: Monitoring and Reporting ARB Preliminary Staff Thinking: Monitoring and Reporting

  • Monitoring is required for verification,

certification and issuance of compliance

  • ffsets
  • All collected data must ensure

verifiability of project’s stated emission reductions

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Verification Verification

  • Process in which verifier assesses

against program criteria the assertion that GHG reductions have occurred

  • Verification process

– Mirror the requirements for mandatory reporting?

  • How much flexibility is needed to

address different project types?

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ARB Preliminary Staff Thinking: Verification ARB Preliminary Staff Thinking: Verification

  • AB 32 requires a regulation for the

verification of compliance offsets

  • The offset system must include:

– Clear and transparent quantification methods – Monitoring requirements – Reporting and documentation requirements

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ARB Preliminary Staff Thinking: Verification (cont’d.) ARB Preliminary Staff Thinking: Verification (cont’d.)

  • Require third-party verification
  • Include project specific verification

requirements

  • Materiality threshold
  • Reasonable level of assurance
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Certification Certification

  • Formal written assurance that the GHG

reductions in the verification report actually took place

  • Could be considered a request for

issuance of compliance offsets

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ARB Preliminary Staff Thinking: Certification ARB Preliminary Staff Thinking: Certification

  • Require certification of emission

reductions after the verification process

– Written statement

  • Once the emission reductions are

certified ARB could issue offset credits for those reductions

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Issuance Issuance

  • Creation and transfer of compliance
  • ffsets equal to the number of verified

and certified emission reductions from a registered offset project

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ARB Preliminary Staff Thinking: Issuance ARB Preliminary Staff Thinking: Issuance

  • Project developer submits proposal for

issuance of offset credits

– Need to determine what is required in proposal (i.e. verification report, certification)

  • ARB conducts assessment of request

– What should the timeframe for review be?

  • Approval or rejection of request

– Need to determine what the criteria are for approval – Issuance fee?

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Enforcement Enforcement

  • Ability to investigate and take action for

violations or non-compliance

  • Provides accountability
  • Provides confidence that compliance
  • ffsets meet AB 32 requirements and

achieve reductions

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ARB Preliminary Staff Thinking: Enforcement ARB Preliminary Staff Thinking: Enforcement

  • Offsets must be backed by regulations and

tracking systems in order to:

– Establish and track ownership – Ensure against double-counting of emission reductions and – Provide transparency

  • ARB is responsible for enforcement of its

regulations

– Projects located outside CA: Need a mechanism (e.g. MOU) to ensure enforceability

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ARB Preliminary Staff Thinking: Enforcement ARB Preliminary Staff Thinking: Enforcement

  • Regulation could give ARB authority to

investigate and take action for violations by:

– Potential third-party verifiers – Project developers that register reductions – Use of offsets for compliance purposes

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Comments Comments

  • Questions during the workshop can be

sent to: ccworkshops@arb.ca.gov

  • Written comments on preliminary staff

thinking are requested by June 19th; please submit comments to: ccworkshops@arb.ca.gov

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Team Leads for Cap & Trade Rulemaking Team Leads for Cap & Trade Rulemaking

Offsets Stephen Shelby Impact analyses (environmental, economic, localized, small business, public health) David Kennedy, Stephen Shelby, Barbara Bamberger, Mihoyo Fuji, Jeannie Blakeslee, Judy Nottoli, Jerry Hart Marginal abatement costs and leakage related issues Mihoyo Fuji Natural gas for residential and commercial Karin Donhowe Industrial sectors Bruce Tuter, Mihoyo Fuji Reporting and energy efficiency Manpreet Mattu Transportation Joshua Cunningham Electricity Claudia Orlando Offsets and cap-and-trade project manager Brieanne Aguila Market operations and oversight Ray Olsson Cap setting and allowance distribution Sam Wade, Mary Jane Coombs

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For More Information… For More Information…

  • ARB’s Cap-and-Trade Web Site

– http://www.arb.ca.gov/cc/capandtrade/capandtrade. htm

  • To stay informed, sign up for the Cap-and-Trade

listserv: – http://www.arb.ca.gov/listserv/listserv_ind.php?listna me=capandtrade

  • Western Climate Initiative

– http://www.westernclimateinitiative.org