Climate change caused by greenhouse gas (GHG) emissions is one of the most serious threats facing the world today. Achieving substantial reductions in global GHG emissions will require a concerted international effort involving governments and corporations acting under international treaties as well as independent action by businesses and individuals prepared to take responsibility for their own GHG footprint. In addition to reducing GHG emissions at the source, a supplementary option is to contribute to activities that reduce GHGs elsewhere by acquiring carbon credits from certified emission reduction projects.
The international political response to climate change
began with the United Nations Framework Convention on
Climate Change (UNFCCC) adopted in 1992. Designed to
raise awareness and build knowledge about the challenges
and barriers faced by climate change mitigation, the
UNFCCC set out a framework for action aimed at
stabilising atmospheric concentrations of GHGs to
prevent dangerous human interference with the climate
system.
The Kyoto Protocol to the Convention, which was adopted
in 1997 by more than 170 countries, significantly
strengthened the UNFCCC by committing many
industrialised countries and economies in transition,
the so-called ‘Annex 1 countries ’, to individual,
legally-binding targets to limit or reduce their overall
emissions of greenhouse gases by at least 5% below the
1990 levels of emission during the period 2008-2012.
In addition to setting the first ever international
target for reducing GHG emissions, the Kyoto Protocol
established, for the first time, a means for developing
countries to get involved in climate change mitigation,
enabling a market-based solution to an environmental
problem and bringing the issue of GHGs to the mainstream
of clean energy planning.
The Kyoto Protocol approved the use of 3 “flexible
mechanisms” for facilitating the achievement of its GHG
emission reduction targets. These are:
1)
Emissions
Trading:
Allowing the international transfer of national
allocations of emission rights, between different Annex
1 countries;
2)
The Clean
Development Mechanism (CDM): A mechanism which allows
for the creation of Certified Emission Reduction (CER)
credits through emission reduction projects in
developing countries, regulated by the CDM Executive
Board;
3)
Joint
Implementation:
The creation of emissions reduction credits undertaken
through transnational investment between countries
and/or companies of the Annex 1 (industrialised
countries).
The rationale behind these three mechanisms is that
climate change is a global problem and that the location
of the greenhouse gas emission reductions is irrelevant
in scientific terms, and can thus be in any country.
While emission reductions generated by these three
flexible mechanisms have different technical names
dependant on which mechanism they arise from, they are
collectively referred to as ‘carbon credits’. Carbon
credits are measured in tonnes of carbon dioxide
equivalent (tCO2e) . One carbon credit represents one
tonne of CO2e non-emitted or reduced. These three
flexible mechanisms, along with the European Union
Trading Scheme (EU ETS) put in place by the European
Union in order to meet its Kyoto target, created the
largest environmental market in the world for the
trading of these carbon credits.
Phase I of the European Emissions Trading Scheme (EU
ETS) began trading on the first of January 2005. The EU
ETS covers the CO2 emissions from circa 11,000
installations in energy intensive sectors of the EU
accounting for approximately 46%, over 2 billion tonnes
of CO2 emissions per year. The five main sectors that
the EU ETS covers are power and heat generation, iron
and steel, mineral oil refineries, mineral industry
(cement, glass, ceramics), and the pulp and paper
sectors.
Under the EU ETS, installations are given an allocation
of EUAs, each worth 1 metric tonne of CO2. In April of
each year installations must hand over an amount of EUAs
equivalent to their emissions in the previous year.
Trading of EUAs and hence the incentive to reduce
emissions is stimulated by too few allowances being
distributed to the installations under the EU ETS,
producing a shortage.
Installations have the option of either abating their
emissions in house or buying allowances from other
installations, on exchanges, or through brokers. The
ability to trade allowances adds a degree of flexibility
missing from a straightforward emissions cap. Under the
EU ETS an installation has the incentive to abate its
emissions when the EUA price rises above its abatement
cost. Furthermore, it has the incentive to reduce its
emissions beyond it own needs and bring the excess
reductions to market. Overall the net reduction in
emissions is the same as it would be under a
straightforward cap, but it is done at least economic
cost.
The voluntary markets:
In voluntary carbon markets, activities that reduce GHGs
produce verified emission reductions (VERs) that can be
sold to companies or individuals wishing to voluntarily
reduce their carbon footprints. Voluntary reductions are
similar to regulated credits, however, they are
different in some important ways.
VERs can be generated from projects which:
- are either based in a country that has not ratified the Kyoto Protocol or does not have the infrastructure to support CDM project development
- have not yet been registered under the CDM
- fall outside of the scope of the CDM
- are too small to warrant the costs of CDM approval
- are specifically developed for the voluntary market
Several voluntary markets are in development around the world. However, there is no single regulating body currently enforcing quality standards in relation to the development and trading of VERs. For this reason it is important to partner with a company which has extensive experience developing high quality emission reduction projects which deliver real and measurable emission reductions.
What We Do:
Sourcing carbon credits:
With significant uncertainty around a successor to the Kyoto Protocol and a rapidly closing window of opportunity under the CDM, Eurogaz can help project developers assess project viability and, where appropriate, guide them through the CDM system or offer advice on alternative credit approaches to help clients maximise financial returns.
Developing CDM emission reduction projects:
We can work in partnership with our clients through the whole carbon credit creating process.
Selling carbon credits:
We can provide our clients with access to the scope of services in particular trading, risk management, sales, marketing and commercialisation strategies.
Carbon offsets and the voluntary market:
We are able to supply robust, transparent and high quality carbon offsets to fit any buyer’s needs, taking into consideration credit types, geographies, risk appetite, volumes, terms, and technologies.
Consulting Services:
We can add value, offer expert advice and create environmental finance solutions in a number fields including renewable energy and energy efficiency, sustainable land-use and forestry, organic agriculture, environmental sciences, finance, policy analysis and emissions trading.
Forest Carbon Projects:
Forest Carbon projects aim to remove a certain amount of CO2 from the air, locking it into the leaves, wood and roots of the trees. Forests literally hold our world together so creating carbon woodlands to compensate for your unavoidable emissions is good - not just for things that breathe the air, or for future generations - but for business too. Eurogaz will assure potential tree-planting sponsors that their schemes meet best standards for biodiversity, ecological impact, 'additionality' and carbon capture measurement, and it is also expected to stimulate much-needed woodland creation across Turkey.
Service Offering:
Developing the Project Design Document and following through the UNFCCC or under a Voluntary Standard
Registration process.
The process of project registration involves the steps briefly set out below:
1) Realization of a pre-feasibility study:
a. Review information on the projects (financial and technical) and check for methodology applicability across the most appropriate standard (CDM, VCS, Gold Standard).
b. Provide high-level financial analysis on the projects across the different carbon standards.
c. Review of Pre-feasibility report
d. Development of baseline scenarios.
e. Development of additionality argument.
f. Development of financial model.
g. Validation by experts.
2) Development of Project Design Documents (PDD):
a. Development of detailed Baseline and Monitoring Methodologies.
b. Development of validated additionality argument.
c. Facilitating stakeholder assessment.
d. Identifying appropriate Project Participants and developing agreement with them to strengthen additionality argument.
3) Host Country Approval:
a. Only if the project is developed under the CDM. Preparing necessary documentation and submission.
b. Facilitating presentation of the case to the authorities..
c. Following up to get Host Country Approval (s) in Place.
4) Validation of PDD by DOE (Designation Operating Entity): This includes open review by stakeholders and experts. Eurogaz shall assist the Project Owner in this process by presenting data/PDD, answering queries etc on behalf of the Project Owner, to the extent possible.
5) Approval by the CDM Executive Board, or the Voluntary Standard: Eurogaz shall respond to queries, and follow up with the CDM Executive Board or the Voluntary Standard.
6) Post Registration-Verification: Eurogaz shall provide Project Owner with necessary support, if and when required.
Sale of Carbon Credits and Maximizing Financial Returns
Eurogaz can facilitate Carbon credits sales in respect of Carbon Credits Issued from the Project during the
entire Credit Period of the Project and manage carbon assets for the Project Owner. Our role shall include the following activities:
(a) Tracking the overall market dynamics for carbon credits (drivers such as demand supply balance across the globe, regulatory issues, country specific trading guidelines etc.) to understand the right timing of a sale, as well as the most beneficial deal structure.
(b) Identification of high quality buyers and markets for price optimization and getting offers from them.
(c) Analyzing the offers received by the Project Owner and helping the Project Owner achieve the following:
(i) The appropriate deal structure, acceptable pricing etc.
(ii) Appropriate terms of sale including assurances/guarantees given, assurances received, contingent risks etc, to get appropriate risk-reward equation.
(d) Facilitation in development of the Emission Reduction Purchase Agreements (ERPAs) or Verified Emission Reduction Purchase Agreements (VERPAs).
(e) Developing structured transactions for carbon credit derivatives.