turkey: proposed carbon registry 3

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Amit Bando Ankara, TurkeyMarch 23, 2010

[email protected]

National Carbon Registry

A Proposal for Turkey

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Agenda

The Current Situation in TurkeyThe Current Situation in Turkey

Essential Features of a Carbon Registry

The Proposed Turkish Carbon Registry

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The Current Situation in Turkey

The Turkish private sector is an active participant in Voluntary Carbon Markets (VCMs)

100% of Turkey’s carbon projects are designed for VCMs VCMs account for less than 1% of Global Carbon Markets 63% of all VCM wind projects are of Turkish origin Strong renewable energy potential - currently, out of 64 projects, there are 34

wind, 22 hydro, 2 geothermal and 2 landfill gas projects Estimated emissions reductions of 22.6 MtCO2e by 2012 Projects worth US$ 220 million by 2012 (Ecosystem Market Place, 2008)

VCMs are defined by a lack of regulatory drivers Operate alongside their regulated market cousins

Heavily influenced by them

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The Current Situation in Turkey (continued)

Most Turkish VCM projects have used the Gold Standard High level of market credibility ensures high value for the verifiable emissions

reductions (VER) certificates Very similar to the Clean Development Mechanism (CDM) standards

Turkey is an Annex-1 (non Annex-B) country under the UNFCCC Faces no legally binding emissions reduction targets Cannot participate in the largest global compliance carbon markets Cannot use the Kyoto “Flexibility Mechanisms” that include:

Emissions trading, Joint Implementation (JI), and the Clean Development Mechanism (CDM)

Turkey is negotiating for EU accession Not ready to curb economic targets to voluntarily cut GHG emissions

Likely starting point for all negotiations with the EU Will shape Turkey’s general strategy in her accession negotiations and in

negotiations for post-2012 climate regime

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Turkey’s private sector has evolved in the VCMs through” learning by doing”

Lack of government rules and regulations Lack of institutional support mechanisms Lack of information on carbon markets at the government level

Ministry of Environment and Forestry (MoEF) is key agency involved in carbon markets

Also the focal point for the European Environmental Agency Responsible for harmonizing national environmental laws with EU norms Several departments in charge of sectoral emissions control, EIAs, etc.

National Coordination Board on Climate Change (NCBCC) is responsible

for overall climate change policies Established in 2001 and revamped in 2004 (through Prime Minister’s Circular

Number 25377)

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Some key concerns exist

The average reported value of US$ 9.4/tCO2e for Turkey’s VCM credits is about one quarter to one half of the potential value in compliance market

Turkey is an Annex 1 country poised for EU accession – both paths potentially lead towards a future emissions commitment

Undervaluation of carbon assets places nation at a long-term disadvantage because it is selling off its carbon assets at low prices

Especially true for projects that could have strategically delayed carbon reductions to maximize life cycle value (e.g., efficiency enhancement projects with a time frame of 30-50 years)

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The Current Situation, Though in a Flux, Provides Immense Opportunities

As part of a National Carbon Management Authority, a Carbon Registry can help

Build on momentum provided by private sector participation in the VCMs

Increase the value of Turkey’s carbon assets

Provide an institutional base on which to build a compliance based carbon regime in the future

Turkey is poised to “seize the day”

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Agenda


Essential Features of a Carbon Registry Essential Features of a Carbon Registry

The Proposed Turkish Carbon Registry

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Carbon Project Registries: Tracking the Trades

Registries provide a host of market services Tracking credit sales and ownership Increasing market efficiency through information sharing Protecting against “double counting.”

Registries are typically classified into two categories Emissions tracking registries

Track buyer entities’ emissions and reductions Establish baselines and account for emission reductions Critical tool for cap-and-trade systems

Carbon credit accounting registries Report on transactions of credits, allowances, and offsets Create a “substantial new commoditized, fungible asset class”

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Carbon Project Registries: The Architecture

Most registries Are public or semi-public databases and transparent Depend on third party standards to screen and classify credits Impose some level of legal liability on registrants

Third party verification is not required - but 87% of all credits in the voluntary OTC market are third party verified

Several standards are popular VCS -- used by 24% of organizations Gold Standard -- used by 18% VER+ -- used by 10% CCSB -- Used by 10%

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Carbon Project Registries: The Cost

The cost of listing credits on an OTC registry varies widely Difficult to pin down - registries bundle their services differently.

Environmental Resources Trust (ERT)’s GHG Registry charges $2,000 - $6,000 for opening an account annual renewal fee of $1,500 to $5,000 $.035/ tCO2e administrative transaction and software system fee.

New Zealand-based Registry Company (known as “Regi”) account registration for buyers/sellers is free per-project verification costs are $149 transaction fees around $0.23 per credit transferred $0.04 for each credit retired (fixed cost of $1.12 for each transfer)

ERT services can include third party verification, whereas Regi only accepts

credits that have already passed inspection by a certification service.

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Carbon Project Registries: Usage Data

Several registries are being used CCX -- 12% Blue Registry -- 13% CDM/JI -- 18% Gold Standard Registry -- 4% Environmental Resources Trust (ERT) -- 5% US Department of Energy -- 4% California Climate Accounting Registry (CCAR) -- 2% New South Wales -- 2% Bank of NY -- 0.08% Other --14% Retailers’ own specific registry -- 26%

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Exchange, Standard, Verifier and Supplier Registries: Examples

The Chicago Climate Exchange (CCX) Registry An accounting system for the CCX’s cap- and-trade scheme Suppliers seeking to include their credits in the registry must be members Offsets need approval of CCX Committee on Offsets

Assigns serial numbers to ensuing third party-verified credits Registry is both an emissions reductions tracking program and a carbon

credit accounting system Somewhat transparent, providing publicly-available information regarding

the offset provider/aggregator, project type and location, as well as transaction volume.

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Newer Registries: Example

Gold Standard Registry for VERs - 2008 Gold Standard Foundation and APX created registry Creates, tracks, and enables the transfer of Gold Standard certified VERs,

ERUs, and CERs Low-cost and transparent electronic database Registered users can access information on the status of credits (such as

whether they are re-sellable or retired) Serialization of each Gold Standard VER credit Double-entry accounting framework Full ownership and transaction tracking for VERs, ERUs, and CERs

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Agenda


Essential Features of a Carbon Registry

The Proposed Turkish Carbon RegistryThe Proposed Turkish Carbon Registry

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Investments through VERs are viable options for Turkey under the UNFCC

To promote economic development goals, the nation needs to attract additional foreign direct investment (FDI)

The VER market is growing rapidly with active VER registries in Europe, Australia and the US -- market expected to grow rapidly

The VER market analysis suggests that Turkey should focus on certain key sectors to develop attractive projects

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Proposed Carbon Market Registry will Enhance Investments through VERs

Initially, Turkey’s Carbon Market Registry should serve as a project registry

The Registry should keep the costs of registration low to encourage universal project registration

The Registry should use internationally accepted standards to screen credits

For example, Turkey has had considerable success using the Gold Standard Allows for compatibility with the CDM and potential fungibility between VERs

and CERs

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Proposed Carbon Market Registry will Enhance Investments through VERs (continued)

The Carbon Market Registry should keep its data partially public This will enhance the credibility of the system at the outset Increase investor confidence in the system Overtime, database could be opened up for public scrutiny and greater

transparency

Eventually, in anticipation of a future compliance regime, the Registry could Develop its own monitoring, reporting, and verification procedures patterned after

EU and other internally acceptable guidelines Be prepared to ensure compliance through the deduction of allowances from

accounts in the registry equal to verified emissions reported for each installation Be prepared to specify compliance penalties

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Proposed Carbon Market Registry - Physical Infrastructure

Initially, the Registry could be a three-person unit within the MoEF

The Head of the Carbon Registry could be “seconded” by the MoEF

A mid-level technical specialist should also be assigned to the Registry

An administrative staff-member should complete the unit

This structure is likely to ensure support for the fledgling Registry

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Proposed Carbon Market Registry - Physical Infrastructure (continued)

MoEF line-item budget allocations should finance the Registry for at least two years

Registry is expected to operate with considerable autonomy with regards to registering carbon projects

Will need to leverage existing government, private sector and academic resources. Should establish a physical and on-line presence with active legal, financial and

institutional support Over time, the Registry will improve its own capacity as well as that of

MoEF, other government agencies and project developers to support the nation’s participation in the VCMs

Many of its services could be rendered on a “fee for service” basis This will ensure that Registry is able to generate revenue streams in

addition to the project-registration fees

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Proposed Carbon Market Registry - Online System Features

At the outset, the Carbon Registry should invite uniform membership for the sole purpose of registering Turkey’s carbon projects

Carbon Registry members should be able to register online via a

secure portal Manage accounts in the secure environment and navigate through the

Registry’s website All applications, reviews and approvals should be handled electronically Approved projects should be listed online

The website should be user-friendly and informative The online services should include information and guidance documents

for potential project developers and the general public

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Proposed Carbon Market Registry - Online System Features (continued)

Eventually, in anticipation of a compliance regime (e.g., as part of EU accession) the Registry should aim for three levels of membership

Full Members who are entities with significant direct greenhouse gas (GHG) emissions who have committed to reducing their emissions a certain percent per year from a baseline determined by their average emissions over a specified period of time

Associate Members who are entities with negligible direct GHG emissions, such as office- based institutions, businesses, and service organizations. Associate Members should commit to report and fully offset 100% of their indirect emissions associated with energy purchases and business travel from year of entry through a certain date in the future

Participant Members who are project developers, offset providers, offset aggregators, and liquidity providers

turkey: proposed carbon registry 3

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