Green Deal Pilot National Carbon Markt Jan van

Green Deal Pilot National Carbon Markt Jan van den Berg (Carbon Matters) Jos Cozijnsen (Emissierechten. nl) Wytze van der Gaast (JIN Climate and Sustainability)

Why a Green Deal? • Public-Private collaboration for identifying emission reduction opportunities in areas not covered by EU Emissions Trading Scheme • Voluntary market for CO 2 certificates already existed, but: • Procedures not always transparant • Cases of double counting • Not clear how emission reductions related to Dutch national GHG inventory

What the Green Deal does • Compiles Rulebook for GHG accounting for different project types • Baselines • Additionality • Double counting • Transparent and robust accounting procedures for emission reductions – trust! • Supports adding monetary value to emission reduction projects through tradeable carbon certificates • Supports national GHG accounting of emission reductions in non-ETS sectors

Possible project areas Project supply, e. g. • Fuel switch in transport and shipping • Land use and forestry • Geothermal and/or residual heat • Rooftop Solar PV Demand for carbon certificates, e. g. • Companies who’d like to reduce carbon footprint • Governments • Citizens

Example - shipping • 8000 inland vessels in the Netherlands; 3/4 privately owned by families • Investment in new vessel expensive (4 -5 million Euro) with long payback time • most owners are in the age of 40 -55 • This complicates shift to more sustainable engines • Dutch agreement on 20% emission reduction by 2030 • Possible supporting role Green Deal National Carbon Market: • Selling CO 2 certificates to support pilot projects • Create space within 20% reduction goal to be achieved via carbon certificates

Today’s programme 13. 00 -13. 15 Opening by Jos Cozijnsen and Wytze van der Gaast 13. 15 -13. 45 Dutch Green Deal for National Carbon Markets (Jan van den Berg | Carbon Matters) 13. 45 -14. 15 Carbon markets in the EU policy context (Jos Cozijnsen) 14. 15 -14. 45 Carbon Market development in Austria (Dorian Frieden | Joanneum) 14. 45 -15. 15 Carbon market opportunities in transport and cities in France (Fanny Guezennec | Eco-Act) 15. 15 -15. 30 Coffee break 15. 30 -16. 00 The Swiss domestic credit system (Jeff Swartz | South Pole) 16. 00 -16. 30 Concluding session: Opportunities for carbon certificates in transportation

Green Deal National Carbon Credits Objectives of Dutch Government and Private Partners - Lower the cost of GHG reduction - Target large part of Dutch GHG emissions outside EU ETS system - Create access to benefits of certification for broad range and smaller scale of projects - Create options for visible local compensation Total NL GHG emissions 2015: 195 Mt. CO 2 eq/yr Source: ECN-PBL Energieverkenningen 2017 Total NL - ETS Total NL – non-ETS

Green Deal structure • Public – Private partnership between 16 private parties and national government

Green Deal structure Four working groups: 1. Methodologies 2. Project portfolio’s 3. Registration of certificates 4. Communication

Issues • Carbon credit or emission reduction certificate? • Double counting / claiming • Avoid that one emission reduction is claimed / booked multiple times • Avoid / correct negative emission impacts on ETS market • Additionality of emission reduction • To what extent is a project activity already required by policy? • How strictly can this test be applied? • Baseline determination • Scenario showing what would have happened in absence of the project • Who owns a certificate? • Risk definition and mitigation

Green Deal Options Agriculture Residential Projects/Methods underway: Transport Industry Power Fuels Heat - Peat land conservation Transportation Fuels (Hydrogen, Power) - Sustainable heat sources (Mijnwater, Waste heat, Geothermal Heat) - Solar (PV/T) - Forestry - CO 2 storage (Olivine)

Green Deal Examples A Dutch example: Peat land management Agriculture: ground water level reduction Effect: Peat oxydation and CO 2 emission Impact: 30% of regional CO 2 emissions Friesland 35% of country wide peat land equivalent to 150 5 MW windmills Method: Baseline definition Project timeline Ex-Post vs Ex-Ante Risks: Change of agricultural demands Change of area destination

Green Deal Examples Geothermal energy for green houses Horticulture: sustainable heat source Effect: Replacement of NG consumption Impact: in NL 5 -6 Mt. CO 2 eq for greenhouses (=50% of total agiculture emission) Method: Baseline definition Project lifetime When is new technology common practice Additionality: Horticulture not under ETS Governmental sectoral agreements (MJA) Follow-up to MJA limited New projects additional to actual practice versus New projects covered under MJA

Green Deal next steps • Green Deal is pilot for period 2017 – 2020 • How long will Green Deal remain relevant in light of current EU and Netherlands policy developments? • Will it be overtaken by policy, or • Will it actually support, compliment EU and NL climate policies? • Green Deal partners want to act on: • Growing demand to support climate investments for ‘Paris’ as element of socially responsible entrepreneurship. • Substantial opportunities for projects that are not (yet) covered by policy and that can benefit from selling climate certificates. • EU-level co-operation for harmonised methods in non-ETS sectors?

Domestic carbon markets in EU context Start of CO 2 Trading concept: Kyoto Protocol 1997 Jos Cozijnsen, Emissierechten. nl

Loosing Time / Winning Momentum • It took 7 years (1997 -2004) to start testing the EU Emissions Trading Scheme • It took 12. 5 years (2005 -2017) to start a Dutch Pilot National CO 2 Market • It is like love: it takes time • Global Carbon Budget ends in 2100 zero EU non-ETS Emissions by 2050

Non-ETS CO 2 -target for 2030 What do we have? • So flexible: perverse incentive NOT to reduce • After 2026 -2030: use part of extra forest/land stored CO 2 for non-ETS target • Trade, bank, borrow CO 2 -budget • Cut some CO 2? Domestic credits via 24 A ETS Directive

Non-ETS Shortage & Surplus: Trade It Study Sandbag, March 2018

Potential Non-ETS Trade/Cuts • Trade among MS could range between 75 Mt and 644 Mt AEAs. Demand would mainly come from smaller, higher income MS • Without additional reductions, potential supply in 2021 -2030 would only be 96 Mt AEAs. • By unlocking further reductions through reduction projects, a supply of up to 614 Mt AEAs could be generated, primarily in lower-income countries. • Bridge ETS-Non ETS with Art 24 A

How to spur Non-ETS Market? • Take non-ETS reductions seriously for 2030 -target • Make explicit room for market instrument (select sectors, projects), otherwise additionality issue (credits against baseline) policy mindset • Give it a market value: aiming for € 20 -25 (buyer/seller) • Same issues in other EU MS: interested market • Learn from Domestic Offsets: California, Canada • Ask EU co-ordination: EC mentions Art 24 A ETS • Is global isssue under Paris Agreement: how to treat non-capped sectors in NDCs; difficult sources

Workshop Berlin 2015 • Many similar outstanding issues in all nations • Scale of problem not so big; just need to get it started • Available pragmatic solutions to avoid double claims • Discount % for uncertainty/ leakage risk • Cancel 1 extra EU allowances per credits for safe side • Credits remain in host country; no double counting! • Need to harmonise, cooperate, learn, coordinate • NL reasons for domestic offsets: support local initiatives, raise awareness, consistent communication (what is climate neutral? ), certify reductions, market interest • Only problem for NL solved: finance gets started…. .

Take-aways • Projects generate real CO 2 reductions • They identify Non-ETS potential and techniques • Do it ‘Smart’: good business en added values • Do it Holistic & Inclusive: Carbon pays, SDGs sell • Use Existing Standards: CDM, ISO, Carbon. Fix • Do it Lean & Mean: limit costs, avoid VAT, existing registry (Mark. IT/APX), accredited ETS verifiers en exchanges (EEE) • No MIFID-2 consequences yet (Finance oversight)

• Strong connection needed between projects and funders • Role of government: central, public-private partnership, as long as good for atmosphere • What is scope: • Support non-ETS carbon goals • Grey area between hard policy and no policy • price?