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Adequacy of PAT and RPO/REC mechanisms to cover potential GHG Emission Reductions in India and room

What could be the contribution of PAT and RPO/REC in affecting emission reductions till 2020? Is there need for other initiatives to affect additional emission reductions?

Emission Reductions in India till 2020

As per the interim report “ Low Carbon Strategies for Inclusive Growth, Planning Commission of India, 2011”, in the  annually 8% GDP growth scenario, the targeted Emission Reductions to reduce Emission Intensity by 20-25% by 2020 is 733 million tonnes of CO2e .

In the report, various carbon emission reduction options are identified and the resulting quantum of annual emission reductions in a scenario wherein we make “determined effort” is 376.5 million tonnes of CO2e….while in the “aggressive effort” scenario (mentioned in the report) these may increase.

Hence to achieve 20-25% emission intensity decrement (from 2005 levels) by 2020 requires aggressive effort and new GHG ER options need to be identified and deployed.

Effort-wise allocation of annual emission reduction is:Estimated emission reduction from sectors in 2020 million tons %1CO2 savings from Energy Efficiency from Demand side9625%2Savings from Supply side change in generation efficiency and mix8523%3Savings from freight modal shift144%4Passenger transport modal shift175%5Vehicle fuel efficiency norms113%6Commercial bldg sector (compliance to ECBC, ratings)6016%7Steel Sector3610%8Cement sector57.515%9Oil & gas0%10Forestry under national mission4311%Total376.5100%

Contribution of PAT and RPO/REC to Emission Reduction Effort

The Perform Achieve and Trade scheme, a part of Energy Conservation effort, being administered by BEE is one of the salient efforts covered in the interim report  “Low Carbon Strategies for Inclusive Growth, Planning Commission of India, 2011”. The generation mix shift to renewable was also considered in line with emerging renewable power purchase obligations enacted/communicated by various states. The Demand Side EE measures, Supply Side measures (EE, Generation Mix shift), measures in Steel and Cement cover about 66% of emission reductions.

The PAT scheme covers only seven industrial sectors and in that about 600 designated consumers contributing to emission reductions to the extent of 100 million tCO2e.   PAT’s contribution to emission reduction is 26% when calculated against the total of 376.5 million tonnes of emission reduction which the identified options in the report will deliver. PAT’s contribution to emission reduction works out to be 14% when calculated against the required annual emission reduction target of 733million tonnes of emission reduction (on 2007 baseline basis).

Similarly, in the case of RPO/REC, if the targets communicated by all the states are met, then RPO/REC can contribute to 15% of the annual emission reductions (slated to be produced by the low carbon choices identified in the interim report) and 6 % of the required emission reductions required to meet the goal of 24% Emission Intensity reduction (from 2005 levels) by 2020.

Hence PAT and RPO/REC are covering only about 20% of the required emission reductions to meet the goal of 24% Emission Intensity reduction (from 2005 levels) by 2020. At present RPO/REC and PAT are the only rigorous tractable mechanisms to achieve and track emission reduction. The majority of emission reductions (the balance 80%) are therefore in effect left to arise from initiatives which are not subject to well defined reporting and monitoring requirements.

Need for New Options for GHG ER market mechanisms

The advantage of PAT, RPO/REC kind of market mechanisms in comparison to pure command & control and tax measures are that

  1. the  emission reduction initiatives are led by private sector with little but important role of the government and

  2. the results are continuously monitored and progress is tracked and amenable to mid course corrections

It is not desirable for India to set about 80% of targeted emission reductions outside market mechanism which are not tracked and do not involve private initiative.  So new initiatives are required to cover a few more sectors and GHG Emission Reduction options thereby bringing at least additional 40% of Emission reductions under market mechanisms or a reporting mechanism so that emissions and the progress in reducing emissions can be tracked.

Some Ideas for New Market Mechanisms

These mechanisms can be directed at a few sectors and activities with large GHG emission reduction potential, which are not covered by the REC/RPO and PAT. The mechanisms can be entity based with an appropriate combination of use of project based offsets.  Some of these can be part of unsupported NAMA and some can be part of supported NAMA or part of bilateral mechanisms with EU, Japan or others. We just mention a few such options which can be detailed if required.

Simple adjustment to PAT and Linkage to EUETS beyond 2012

  1. The entities covered under the PAT may be covered by this new mechanism too.

  2. PAT reporting requirements may be altered to include reporting of the GHG emissions. Main modification that may be required is  to address the GHG coefficients of energy sources and the accounting rules compatibility with  the good practices of GHG accounting at the entity level(EUETS or GRI GHG Protocol or ISO 14064)

  3. The targets for the entities may be drawn from average of GHG intensity data available from EUETS. Or else, new targets could be determined based on the country requirements and sector realities. The entities will be required to meet the targets…..with excess of emission reductions over target, giving rise to credits which can be used by those who fall short of target  on a three year block basis.

  4. Additionally, the excess credits or credits generated after exceeding 1.x of target can find their way into EUETS through provisions made available with a special bilateral arrangement with EUETS. EU has articulated willingness to such schemes from Non Annex I countries.

  5. Such a scheme can also build in an option for generating offsets from project based mechanisms in the supply chain of the concerned industrial outfit.

Salient points: Simple adjustment to PAT and Linkage to EUETS beyond 2012

The mechanism should target doubling the emission reductions what otherwise would have been if the PAT without this extension (increase the entities and target GHG intensity) is implemented

The mechanism should not aim trading alone..but trading may be an instrument for attracting private participation and investment.

It should be  a mechanism  with domestic targets of  GHG intensity (GHG per value addition or unit product as in PAT) and not on absolute emissions

It is a simple addition to in–progress PAT mechanism and can extend it to other entities in the same sectors…such a move can increase the potential GHG ERs by at least 40%

It can enhance the effectivity of  PAT efforts to reduce GHGs- PAT does not incentivize all possible GHG Emission Reductions e.g shift from coal to gas is of no consequence in PAT, having a renewable captive power plant though reduces GHGs, PAT does not incentivize. This  simple new addition to PAT mechanism  can increase the possible GHG ERs by 50% than what otherwise would have occurred by simple application of PAT

It can also open the possibility of extending the obligation to value cahins…these are mostly SMEs……For example an Obligated Entity in Steel Sector (to reduce GHGs) may like to work with an SME who is its supplier, to improve his operations, reduce GHGs; or work with its community to provide water purifiers and generate GHG ERs  and  use such GHG ERs to meet his obligation.

It can also have a provision to generate internationally tradable offsets (in EUETS or any other markets) if the GHG intensity is above an international average…above domestic target set for the entity.

GHG reporting Requirement and demonstration of alignment with National Ambition

  1. A government notification in South Africa requires that the identified entities report GHG inventory annually and disclose their plans to meet national ambition. In our case, such a national ambition can be 25% reduction in GHG intensity from 2005 levels by 2020.

  2. The emission reduction plans can also be that of procuring offsets from project based mechanisms located in the supply chains. By this, the identified entities (large industry) will work with SMEs (and benefit SME by tech/expertise transfer) to shore up their long term sustenance.

  3. Offsets generated from the agriculture and community based projects may be also allowed in this mechanism.

This second proposition

  1. Covers all major industrial entities

  2. Can be covered under a voluntary mechanism like operation by MoEF

  3. Obligates all of them align with Nation’s Copenhaegen communication

  4. Allows for large and medium industry to work with small and tiny and also agriculture/rural sectors to generate offsets offsets and meet their voluntary commitments

Emission Reductions through Modal shift and Linkage to EUETS

  1. As per the report “ Low Carbon Strategies for Inclusive Growth, Planning Commission of India , 2011”, the opportunity of emission reduction from modal shift in goods transportation is 3% and this can be substantially enhanced if role of shipping as a means of domestic goods movement is enhanced.

  2. The funds from Government of India’s Clean Technology Fund can be utilized to build the infrastructure (ports, jettys, berths, conveyors etc) to enhance domestic goods movement by ships.

  3. The industry (imines and metals, cement etc. identified in the interim report) may be incentivized by granting credits if they achieve reduction of GHG intensity goods (raw material and products) movement beyond a reduction target.

  4. The GHG ERs generated by such modal shift can be part of a bilateral agreement with EU or Japan

  5. The methodology available within CDM can be deployed and shipping initiatives can be structured as a Program of activities

  6. Such a possibility was well received by Indian Ship Owners Association and DG Shipping.

Waste Management at Local Governments and GHG emission reductions

  1. Inadequate domestic waste management continues to be a problem in many cities and problems. This is a major source Methane emission which can be reduced by cost effective interventions.

  2. Local bodies can be made responsible for GHG reporting and achievement of GHG targets of the local body per capita of serviced population.

  3. A provision be made that performing better than the target be rewarded   with GHG credits which can be used by others falling short to meet target.

  4. The project based emission reductions undertaken by such local bodies can be made eligible to generate credits that are admissible in a domestic GHG mechanism of an Annex I country (EU/Japan/Canada)

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