Transport and Carbon Finance Part I Dr. Jürg M. Grütter jgruetter@gmail.com www.transport-ghg.com matching transport with carbon finance 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) 1 registered VCS (gaseous HDVs) 2 VCS in validation (1 BRT, 1 metro) 1 BC validation (freight) >80 registered in Switzerland Projects non CDM: Feb 11 grütter consulting 2 Current Carbon Finance Transport Projects of grütter consulting Feb 11 grütter consulting 3 Problem Areas Methodologies Validators Additionality procedure Feb 11 grütter consulting 4 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 11 grütter consulting 5 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: Feb 11 Suspend incompetent DOEs Automatically suspend DOEs which take more than 1 year for validation grütter consulting 6 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 N2O 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 11 grütter consulting 7 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 11 grütter consulting 8 AM0031: BRTs in CDM Feb 11 grütter consulting 9 Problem Areas: Summary Leakage calculations: Costly and not necessary Monitoring survey: Costly and could be made less frequent Feb 11 grütter consulting 10 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 11 grütter consulting 11 Leakage Load Factor Empirical City Bogota Seoul Feb 11 Occupation rate Occupation Occupation rate Occupation rate taxis prior rate taxis after buses prior buses after project project project project 0.7 to 0.8 0.9 1.3-1.5 1.4 56% to 66% 61% 12.1 passengers 13.5 passengers grütter consulting 12 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 11 grütter consulting 13 Congestion Impact Empirically Project Meth Rebound tCO2/a Speed tCO2/a Total congestion impact tCO2/a ER per annum Bogota AM0031 9,000 -15,000 -6,000 247,000 Cali AM0031 11,000 -23,000 -12,000 258,000 Pereira AM0031 2,000 -1,000 1,000 35,000 Barranquilla AM0031 1,000 -2,000 -1,000 55,000 Medellin AM0031 0 -4,000 -3,000 194,000 Guatemala AM0031 -3,000 -95,000 -97,000 534,000 Guadalajara AM0031 1,000 0 1,000 51,000 Quito AM0031 1,000 -19,000 -19,000 155,000 Chongqing AM0031 -2,000 0 -2,000 218,000 Zhengzhou AM0031 -8,000 0 -8,000 205,000 Joburg AM0031 -1,000 0 -1,000 35,000 Seoul ACM0016 0 0 0 >200,000 Feb 11 grütter consulting 14 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 11 grütter consulting 15 Monitoring Survey Empirical Item Baseline Year 1 Year 2 Year 3 Bogota trip distance car 9.0 10.7 11.5 11.9 14.2 12.3 Bogota trip distance taxis 7.0 9.7 9.3 11.1 11.8 10.8 Chongqing trip distance car 8.8 9.0 10.5 NA NA NA Chongqing trip distance taxi 7.3 7.5 9.4 NA NA NA Item Year 4 Year 5 Year 1 Year 2 Year 3 Year 4 Year 5 Bogota mode share buses 89% 90% 91% 92% 92% Bogota mode share taxis + cars 10% 8% 8% 7% 8% Chongqing mode share buses 61% 57% NA NA NA Chongqing mode share taxis + cars 37% 35% NA NA NA Feb 11 grütter consulting 16 ACM0016: MRTS Feb 11 grütter consulting 17 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 11 grütter consulting 18 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 11 grütter consulting 19 Common Practice I Situation today: less than 50% of cities > 1 million (or 0.5-1 mio) LUZ definition 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 Problem: Feb 11 grütter consulting 20 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 Share of MRTS in motorized trips Justification: if public transit looses ground then private transit is increasingly getting common practice 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 11 grütter consulting 21 Further Information CEO grütter consulting: Dr. Jürg M. Grütter jgruetter@gmail.com www.transport-ghg.com Feb 11 grütter consulting 22