Transport and Carbon Finance Part I Dr. Jürg M. Grütter matching transport with carbon finance

Feb 11grütter consulting2 Company Background Methodology development CDM: AM0031, ACM0016 (both NMs), AMS IIIT, AMS IIIU Methodology development non-CDM: VCS bike, VCS freight, BC freight, various Switzerland Under preparation: Rail passenger, Eco-Drive Projects CDM 4 registered (2 BRTs, cable car, plant-oil) 2 in registration (BRT, Metro) 14 in validation (4 electric vehicles, 1 metro, 9 BRTs) 4 enter validation next 1-2 months (3 metros/LRT, freight) Projects non CDM: 1 registered VCS (gaseous HDVs) 2 VCS in validation (1 BRT, 1 metro) 1 BC validation (freight) >80 registered in Switzerland

Feb 11grütter consulting3 Current Carbon Finance Transport Projects of grütter consulting

Feb 11grütter consulting4 Problem Areas Methodologies Validators Additionality procedure

Feb 11grütter consulting5 Methodologies See discussion per methodology In general very high complexity In general far more is demanded in the transport sector than in other sectors

Feb 11grütter consulting6 Validation Problems: Most accredited DOEs for sectoral scope 7 lack competence and experience DOEs use staff which compare transport projects to hydro dams DOEs are afraid of UNFCCC DOEs charge for transport project 2-3x more than for other projects DOEs take 1-3 years for validation Proposed Solutions: Suspend incompetent DOEs Automatically suspend DOEs which take more than 1 year for validation

Feb 11grütter consulting7 Additionality I Overarching Problem: Additionality has been reduced by the EB to IRR assessment The reduction of project additionallity to one financial parameter is not only questionable per se but reduces effectively the participation of project types where the barriers are far more complex Food for thought: Using a marginal cost approach like GEF not one HFC and most N 2 O projects after 6 months are no longer additional i.e. > 50% of CERs issued by EB are NON-additional using a slightly different concept Conclusion: There is no single and objective criteria for additionality. Therefore keep in mind CO2 plus sustainable development is important and environmental additionality should get back its role

Feb 11grütter consulting8 Additionality II If the UNFCCC wants transport to play a role additionality rules for transport must be adapted UNFCCC has shown it is flexible with small scale projects or LLDCs The sustainable development benefits of transport should be recognized. This justifies simplified additionality procedures Simplified additionality proof is suggested for urban public transit and GHG efficient vehicles e.g.: Based on common practice Based on benchmark

Feb 11grütter consulting9 AM0031: BRTs in CDM

Feb 11grütter consulting10 Problem Areas: Summary Leakage calculations: Costly and not necessary Monitoring survey: Costly and could be made less frequent

Feb 11grütter consulting11 Leakage Load Factor Situation today: every 3 years occupation rate measurements Problem: Cost for surveys around 30,000 USD every 3 years Analysis: Theoretically impact on load factor highly improbable due to market forces Empirically no impact on load factor has been registered Solution: Eliminate this leakage from methodology

Feb 11grütter consulting12 Leakage Load Factor Empirical CityOccupation rate taxis prior project Occupation rate taxis after project Occupation rate buses prior project Occupation rate buses after project Bogota0.7 to % to 66%61% Seoul passengers13.5 passengers

Feb 11grütter consulting13 Leakage Congestion Situation today: leakage determined ex-ante Problem: Cost for surveys around 20,000 USD Data analysis is complex and involves another cost Analysis: Speed and congestion impact cancel each other out Methodologies from other sectors do NOT include rebound effect Total impact marginal Empirically clear that overall impact negative leakage i.e. elimination is conservative Solution: Eliminate this leakage from methodology

Feb 11grütter consulting14 Congestion Impact Empirically ProjectMethRebound tCO2/a Speed tCO2/a Total congestion impact tCO2/a ER per annum BogotaAM00319,000-15,000-6,000247,000 CaliAM003111,000-23,000-12,000258,000 PereiraAM00312,000-1,0001,00035,000 BarranquillaAM00311,000-2,000-1,00055,000 MedellinAM ,000-3,000194,000 GuatemalaAM0031-3,000-95,000-97,000534,000 GuadalajaraAM00311, ,000 QuitoAM00311,000-19, ,000 ChongqingAM0031-2, ,000 ZhengzhouAM0031-8, ,000 JoburgAM0031-1, ,000 SeoulACM >200,000

Feb 11grütter consulting15 Monitoring Survey Situation today: 6 surveys per annum Problem: Cost for surveys around 60,000 USD per annum Analysis: Trip behaviour does not change dramatically in the short period Over time more people have access to private cars and use these thus conservative to take past surveys Empirically results show little short term change Solution: Conduct surveys only every 3 years

Feb 11grütter consulting16 Monitoring Survey Empirical ItemBaselineYear 1Year 2Year 3Year 4Year 5 Bogota trip distance car Bogota trip distance taxis Chongqing trip distance car NA Chongqing trip distance taxi NA ItemYear 1Year 2Year 3Year 4Year 5 Bogota mode share buses89%90%91%92% Bogota mode share taxis + cars10%8% 7%8% Chongqing mode share buses61%57%NA Chongqing mode share taxis + cars37%35%NA

Feb 11grütter consulting17 ACM0016: MRTS

Feb 11grütter consulting18 Problem Areas: Summary Leakage load factor and congestion: Costly and not necessary: idem to AM0031 Monitoring survey: Costly and could be made less frequent Additionallity: Common practice is a killer

Feb 11grütter consulting19 Monitoring Survey Situation today: 1 large and 1 re-test survey per annum Problem: Cost for surveys around 150,000 USD per annum Analysis: Trip behaviour does not change dramatically in the short period Over time more people have access to private cars and use these thus conservative to take past surveys Empirically results show little short term change Solution: Conduct surveys only every 3 years or once per crediting period

Feb 11grütter consulting20 Common Practice I Situation today: less than 50% of cities > 1 million (or mio) LUZ definition Problem: Most countries in the world only have 1 city of this size. If this 1 city established 50 years ago a tram line covering 1% of transit trips in the city no MRTS project is additional due to common practice Common practice procedure is ONLY adequate for countries like China and India This sole factor has excluded dozens of projects in many Latin American, Asian and African countries LUZ is unclear and a concept not used outside selected EU countries Comparison criteria is number of cities instead of asking how are urban trips made

Feb 11grütter consulting21 Common Practice II Solution: Common practice should indicate if something is widely and commonly used. Not the amount of cities is relevant but the share of MRTS in trips in the project city. Comparison criteria: How are trips commonly made in the project city over time and what are the dynamics Criteria Proposal: Share of public transit in motorized trips Justification: if public transit looses ground then private transit is increasingly getting common practice Share of MRTS in motorized trips Justification: The role of MRTS in the respective city in motorized trips is considered A project is common practice: If the share of public transit trips over total motorized trips shows an increasing trend over the last 10 years and If MRTS in the city have more than 50% of motorized transit trips in the project city

Feb 11grütter consulting22 Further Information CEO grütter consulting: Dr. Jürg M. Grütter