Accessing Carbon Finance Workshop on Landfill Gas Development and the CDM Denpasar, Indonesia. September 5-7, Sn. Environmental Specialist. Lasse Ringius. World Bank

Overview of Presentation - Kyoto Protocol/CDM - Baseline and monitoring methodologies - CDM project cycle - Overview of global carbon market

Kyoto Protocol: Industrial countries must reduce GHG emissions by 5.2% compared to 1990 levels in the period

Current Kyoto gaps

Annex B Non-Annex B How to close the gap? Joint Imple- mentation Emissions Allowance Market Clean Development Mechanism

Clean Development Mechanism (CDM) Project-based mechanism Projects in developing countries earn “credits” for reducing additional CO 2, CH 4, N 2 O emissions Verified GHG emission reductions have become an internationally tradable commodity  Seller: Project investor  Buyer: OECD governments and companies facing GHG mitigation targets under the Kyoto Protocol

World Bank Carbon Finance Funds Italian Carbon Fund. $15 million (open to Italian participation). Italian Multi-shareholder. Multipurpose. Netherlands Clean Development Facility. $180 million. Netherlands Ministry of Environment. CDM energy projects. BioCarbon Fund. $46.3 million (open). Multi-shareholder. JI and CDM LULUCF projects. Community Development Carbon Fund. $128.6 million (closed). Multi-shareholder. Small-scale CDM energy projects. Prototype Carbon Fund. $180 million (closed). Multi-shareholder. Multi-purpose. Total funds under management: ~ US$ 875 mill. Netherlands ECF Netherlands European Carbon Facility. $60 million with IFC. Netherlands Ministry of Economic Affairs. JI projects. Spanish CF Spanish Carbon Fund. $200 million (open to Spanish participation). Spanish Multi-shareholder. Multipurpose. Danish CF Danish Carbon Fund. $64 million (open to Danish participation). Danish Multi-shareholder. Multipurpose.

How Indonesia can benefit from the CDM Electricity $$ Power Purchase Agreement Certified Emission Reductions $$ Emission Reduction Purchase Agreement LFG to Energy Project

Organic methane (CH 4 ) Forms when organic material decomposes under anaerobic conditions Avoidance of CH 4 emissions through:  Prevention  Capture & Combustion When CH 4 is avoided, CO 2 is emitted But: CO 2 originating from the decay of organic material is considered neutral to the atmosphere

ER estimation The amount of credits that can be earned from LFG projects is dependant upon several factors:  Amount of waste;  Waste composition (organic fraction);  Waste management practices (e.g landfill covering, compacting of waste, depth of landfill);  Moisture;  Age of the landfill site;  Efficiency of LFG collection system; and  Amount of LFG collection mandated by law

A back-of-the-envelope-calculation* Methane generation potential of 1 ton of waste ranges from less than 100 to more than 200 m 3, depending on the waste composition (IPCC Good practice guidelines 1996) With weight of methane equaling kg/m 3 : 150m 3 of CH 4 = 0.1 tons of CH 4 At a collection efficiency of 70%, 0.07 tons of CH 4 can be recovered Multiplied with the GWP for CH 4 (i.e., 21), one ton of waste yields 1.47 t CO 2 e emission reductions (ERs) * based on gas yield methodology

Example: Carbon revenues from LFG recovery and methane destruction 1 mio. tons of waste 6 mio. m 3 LFG/yr 2,140 ton CH 4 /yr 1,500 ton CH 4 recovered/yr 31,500 tCO 2 eUS$ 140,000/yr * Underlying assumptions: - 1 m 3 LFG contains 357 g methane - 70% collection efficiency - US$ 4.50/t CO2e

Opportunities in the MSW sector CH 4 is 21 times more potent than CO 2. The “methane kick” significantly improves project economics. Projects which reduce CO 2 or CH 4 emissions against the baseline are eligible, e.g.  Landfill gas recovery and utilization  Composting  Biodigestion

LFG methodologies

Approved LFG methodologies ProjectReferencePresented by Salvador da Bahia (VEGA), Brazil AM0002ICF Consulting Durban, Africa del Sur AM0010PCF Nova Gerar (NCDF) AM0003NCDF / Ecosecurities Onyx, BrazilAM0011 CERUPT ABIL, IndiaAM0012PCF / IDFC Biodigester

Elements of consolidated LFG methodology ACM0001 Builds on approved methodologies for landfill projects Does not replace previously approved methodologies Applicable to both flaring-only and gas utilization projects

Elements of ACM Baseline Baseline is release of gas to the atmosphere, considering gas captured for other reasons (safety, regulations, contractual requirements) If no regulations apply, an Adjustment Factor shall be used and justified based on project context Approved additionality tool applies  Step 2: Investment analysis: For flaring projects: a straightforward investment economics test For electricity generation projects: compare levelized electricity costs with least cost option in the system or show that IRR is below standard returns in the market.  Step 4: Common practice test can feed into Adjustment Factor

Elements of ACM Monitoring LFG projects allow for direct monitoring of emission reductions following the simple rationale that all methane captured would have been released in the absence of the project ER = (methane captured – x%) * 21 with x = Regulations or Adjustment Factor Monitoring variables include: LFG recovered / flared through flow meters, methane content of LFG (continuous gas analyzer or periodic samples), flare efficiency, flare availability, electricity generation, etc. Furthermore: monitoring of regulations and adjustment of baseline scenario if regulations tighten

Which methodology to choose? MethodologyElectricity generation? Baseline Salvador da Bahia (VEGA) noMandated collection in concession contract (20% eff) Durban (PCF) yesExisting safety curtain wells (7% eff., declining) + monitoring of regulations Nova Gerar (NCDF) yes, but not credited Collection efficiency in bidding documents + safety margin (20%) Onyx (CERUPT)yes, but on-site use only Coll. mandated by law or economically attractive (0%) Consolidated Methodology yesExisting Regulations or Adjustment Factor + monitoring of regulations

MSW Project Examples in the Bank Durban LFG-to-energy, RSAA. Sanghvi Nova Gerar LFG-to-energy, BrazilW. Kornexl Shanghai LFG-to-energy, ChinaM. Anderson Mexico LFG-to-Energy UmbrellaW. Vergara Teheran LFG-to-Energy, IranA. Rotman Olivarria LFG capture and flaring, Argentina H. Terraza Liepaja Energy Cell, LatviaA. Halldin ABIL Biodigester, IndiaD. Hoornweg