RENEWABLE ENERGY
CLIMATE CHANGE AND CARBON FUNDING
An important aspect of renewable energy development is the displacement of polluting energy source. With the rising in governments', aid agencies' and other funders' awareness of the climate change problem, carbon off-setting and low-carbon funds have been set up to promote technologies which contribute to a reduction in greenhouse gas emissions. In addition, in recent years there has been an increase in private sector off-setting carbon emissions by investing in low-carbon technologies. A diverse range of mature renewable energy technologies is now available, including small hydro power, wind power, solar photovoltaic, biofuels and geothermal. These use local natural resources to meet energy needs. As a result of the concern about global warming, a whole new area of investment opportunities has been opened up for the development of these technologies.
Climate change
The Intergovernmental Panel on Climate Change – the most authoritative international body on this subject – has clearly demonstrated that climate change is already happening, that it is due to human activity, and that temperatures could rise on average between 2oC and 4oC over the coming century. The impacts of climate change range form flood to drought and from freshwater scarcity to hunger, with these impacts greatest in developing countries as they often lie in vulnerable climactic zones, and have limited capacity and resources to adapt. From the pie charts it is clear that CO2 emission from the energy sector are the major cause of climate change.
CO2 from energy sources
A move from using fossil fuels to using renewable energy is one way of mitigating climate change by significantly reducing emissions of CO2. In order to calculate the CO2 saving from using renewable, it is important to compare the carbon emissions from the different technologies. This is shown in the table as tonnes of CO2 emissions per unit of energy produced.
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Renewable energy, climate change and carbon funding
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Example: A typical 200 kW mini hydro electric scheme would produce 28 GWh over its 25 year lifetime and approximately 140 tonnes of CO2 . For the same amount of energy an oil fired power station would produce 20,500 tonnes of CO2 .
Renewable energy at the forefront of climate change mitigation
The table above demonstrates that there is a significant benefit from renewable energy in terms of reducing greenhouse gas (GHG) emissions from energy production. Emissions from renewable energy can be several orders of magnitude lower that the emissions from conventional fossil fuel power. In addition, there is significant climate change benefit for energy efficiency project, such as improved cook stoves or higher efficiency industrial processes. In many cases renewable energy and energy efficiency projects have a double benefit of addressing both a development benefit (such as electrifying an isolated community) and climate change benefit.
Electricity Production Sources Coal Oil Gas Geothermal Wind Turbines Photovoltaic Small Hydro Large Hydro Biomass fuel
Tonnes CO2 / GWh 1 2 851 to 1362 733 367 to 561 57.0 9.0 59-71 5 32.0 14.0
Note: the CO2 emissions for the renewable energy technologies are calculated by dividing the carbon emissions over the project life cycle (raw materials inputs, construction and running) by the energy produced over the lifetime of the technology. The emissions shown for the fossil fuels are from the power station only.
Because of the climate change benefits of renewable energy, many national governments provide grants or preferential condition for development of some renewable technologies. The Carbon Market The Kyoto Protocol of the UNFCCC has set binding targets for signatory industrialised countries to reduce their carbon emissions by 2012. A post 2012 climate change agreement is currently under negotiation. These targets have ensured that many industrialised countries have made significant reductions in the emissions from their own energy sectors. However, it is often less costly for a developed country to pay for emissions reduction in a less developed country, rather than reduce emission at home. This has led to the development of a global ‘carbon market’. Similarly, many private sector companies have been forced by consumer pressure to assess the carbon emissions from their own corporate activities. Increasingly companies are reporting their carbon emissions along side financial information, and in a number of cases they are offsetting their carbon by paying for renewable energy and energy efficiency projects. This has created a private offset carbon market. There is some controversy that the offset market means that industrialised countries or high emitting private sector companies can ‘pay’ for carbon emission reduction, rather than taking action at home to avoid GHG emissions. However, the market system does provide funds for developing countries to move towards lower carbon technologies. There is a move towards setting a quality standard for carbon offset projects, which would ensure that the carbon market supports long-term moves towards a lower carbon energy sector, and that offset projects also offer a sustainable development benefit. The ‘Gold Standard Foundation’ is at the forefront of setting quality standard. The cost of saving carbon emissions Both the carbon market of the Kyoto protocol and voluntary off-setting (see next page for details), have given a price for a tonne of carbon.
1 Fossil fuel emissions from: World Bank source 2 Renewable emissions from: Estimates from ETSU, 1 Fossil fuel emissions from: World Bank source 2 Renewable emissions from: Estimates from ETSU,
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An industrialised country, can purchase a ‘certified emission reductions’ or CER for around $25 per tonne of CO2. That is the industrialised country can pay US$25 to be allowed to emit CO2 by paying towards a low-carbon project in a developing country. Similarly, a private sector company may decide, for corporate social responsibility reasons, to offset the cost of its carbon emissions (say energy used in its buildings or the emissions form air travel). Offsets can be purchased for around US$10 to US$20 per tonne CO2 of emitted. This money can then be invested in a range of renewable energy or energy efficiency projects which can verify that one tonne of CO2 has been avoided for every carbon offset purchased. Details of carbon funding mechanisms are given on the next page.
Carbon funds
Global Environment Facility The Global Environment facility (GEF) is a co-operative venture between over 30 National Governments and the World Bank, United Nations Development Programme (UNDP) and the United Nations Environment Programme (UNEP). An independent financial organization, the GEF provides grants to developing countries for projects that benefit the global environment and promote sustainable livelihoods in local communities. Since 1991, the Global Environment Facility has provided $6.8 billion in grants to support over 1,900 projects that produce global environmental benefits in more than 160 developing countries and countries with economies in transition. About one quarter of this fund has been spent on climate change and renewable energy projects. GEF funds are contributed by donor countries. In 2006, 32 donor countries pledged $3.13 billion to fund operations for four years. GEF Small Grants Programme (SGP) was launched in 1992 to provide support for communitylevel initiatives. Medium size projects are limited to a maximum of $1 million in GEF funds. Full size project (larger than $1million) go through a rigorous application and monitoring process. Further Information from: http://www.gefweb.org Clean Development Mechanism The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialised countries with a greenhouse gas reduction commitment to invest in projects that reduce emissions in developing countries, as an alternative to more expensive emission reductions in their own countries. The presence of a market for carbon reduction credits (known as ‘certified emission reductions’ or CER)) creates a value for emissions reductions which stimulates investment (known as carbon financing) for low-carbon projects in developing countries. The most important factor of a carbon finance project is that it can demonstrate that it would not have occurred without the additional incentive provided by emission reductions credits. Projects acceptable for carbon financing under the CDM must demonstrate that they: • Deliver real emissions savings that go beyond what would happen in a "business-asusual" scenario • Are independently verified (note: the verification process to demonstrate that CO2 emissions reduction has taken place does incur some additional cost to the project) Further information from: http://cdm.unfccc.int Community Development Carbon Fund: http://carbonfinance.org
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Voluntary Carbon offsetting
Voluntary carbon offsetting involves companies or individuals paying to offset the emissions associated with a specific action through the purchase of verified units of GHG emissions savings (known as "offsets"). For example, you can offset a flight or a car journey with the emissions saved in a renewable energy project.By buying offsets, the purchaser provides finance for green projects, such as renewable energy or energy efficiency. Voluntary offsetting often will prioritise small scale community based projects which have greater sustainable development benefit. See examples on next page. Companies who manage voluntary offsetting funds include 3 : The Climate Trust: http://www.climatetrust.org Carbonaided: http://www.carbonaided.com atmosfair: http://www.atmosfair.de CarbonNeutral: http://www.carbonneutral.com co2balance: http://www.co2balance.com Climate Care: http://www.climatecare.org
Carbon off-setting examples
Peru Micro Hydro - Annual Saving in GHG Emissions - 5,000 TCO2e 4 Micro hydro projects provide rural communities with access to a clean and reliable energy source. Emission savings are created as hydro power displaces other more carbon intensive fuels that would otherwise be used to generate electricity in the area.
Sri Lankan Biogas Projects – Annual Savings in GHG Emissions – 3,132 TCO2e4 The project has involved the introduction of over 60 new biogas schemes, meeting 75 per cent of household cooking needs. GHG emission savings are created as the biogas displaces other more carbon intensive fuels.
Bangladesh Cook Stoves - Annual Saving in GHG Emissions 5,000 TCO2e 4 The project has resulted in the installation of an additional 7,500 cook stoves installed and working. GHG emissions savings are derived from more efficient use of biomass to supply energy needs than traditional cooking methods.
3 The offsetting companies listed here have been recommended on reputable sources. However, Practical Action recommend that renewable energy developers make a thorough check of offsetting companies for reputation and quality standards of the offsetting arrangements. 4 Carbonaided
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Renewable energy, climate change and carbon funding
Practical Action
Tamil Nadu Wind Power Project, India – Annual savings in GHG emissions - estimated 50,0000 tCO2e 5 This project sees the construction of 28 new wind turbines in India. The turbines have a total capacity of 21.93 MW and will contribute towards greening Tamil Nadu’s electricity supply. By providing renewable energy, the project helps to reduce India's reliance on fossil fuels for electricity generation. Solar Home Lighting, India Annual Savings in GHG emissions - 12,500tCO2e between 20042008 The project supports a company which sells solar lighting systems, replacing kerosene lamps, in rural India. The solar systems include a small solar photovoltaic panel, a battery and energy efficient lights,
(Note: TCO”e = tonnes CO2 equivalent)
Sources of Information
The Renewable Energy and Energy Efficiency Partnership (REEEP) is an active, global public-private partnership that structures policy and regulatory initiatives for clean energy, and facilitates financing for energy projects.
REEEP International Secretariat, Vienna International Centre, Room D1732, Wagramerstrasse 5, A – 1400 Vienna, Austria
email: info@reeep.org Phone: +43 1 26026-3425 http://www.reeep.org
The Gold Standard Foundation offers a quality label to CDM/JI and voluntary offset projects, fetching premium prices. Renewable energy and energy efficiency projects with sustainable development benefits are eligible. The Gold Standard is endorsed by over 44 non-governmental organizations worldwide. Gold Standard projects are preferred by a range of government and private actors. The Gold Standard c/o BASE 22 Bäumleingasse, CH-4051 Basel, Switzerland Phone: +41 (0)61 283-0916 Fax: +41 (0)61 271-1010 http://www.cdmgoldstandard.org
Most countries have joined the international treaty -- the United Nations Framework Convention on Climate Change (UNFCCC) -- to begin to consider what can be done to reduce global warming. Recently, a number of nations have approved the Kyoto Protocol, which has more powerful (and legally binding) measures. The UNFCCC secretariat supports all institutions involved in the climat change process, and oversees the CDM. UNFCCC P.O. Box 260124 D-53153 Bonn Germany Phone: (49-228) 815-1000 Fax: (49-228) 815-1999 http://unfccc.int
5 CarbonNeutral
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