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How the Kyoto Protocol Promotes Renewable Energy


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									How the Kyoto Protocol Promotes Renewable Energy: a Perspective from the Private Sector

Jürgen Wahl
February 19, 2004 Global Forum on Sustainable Energy – Fourth Meeting
A Verbund company

Kyoto Protocol
 1997: Industrialized nations agree to limit greenhouse gas emissions  Total target is -5.2% (relative to 1990 levels)  Greenhouse gases: CO2, CH4, N2O, HFCs, PFCs, SF6  Kyoto Protocol enters into force and becomes legally binding after:  Ratification by more than 55 countries  Ratification by the countries which account for at least 55% of the total CO2 emissions Will Russia or USA ratify the Protocol?
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Kyoto Emission Reduction Targets

 Industrialized Nations
 EU  Austria  Sectors (up to)  Individual Businesses (up to)

-8% -13% -20% -25%

February 19, 2004


Ways of Reaching the Kyoto Emission Reduction Targets
Reaching Emission Targets

National Reduction Measures

Flexible Mechanisms

Minimum 50 %

JI: Joint Implementation CDM: Clean Development Mechanism

IET: International Emissions Trading

February 19, 2004

Kyoto Protocol and the Flexible Mechanisms
1. Joint Implementation (JI): emission reducing projects between two Annex I countries resulting in the generation of emission certificates (2008 – 2012 + options out of the “EU Linking Directive)
2. Clean Development Mechanism (CDM): emission reducing projects between an Annex I country and a developing country resulting in the generation of emission certificates (from 2000 – 2012) 3. International Emissions Trading (IET): Annex I countries can trade emission certificates with each other (from 2005 (EU only !) – 2012)
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Share of Total CO2 Emissions – Energy and Manufacturing Industries in the EU15

February 19, 2004


CO2-Demand in Europe supports Business Opportunities:

Europe JI Projects
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CDM Projects

Estimates of International CO2 Potentials:
EU 15 New Member States and Applicant Countries
Baltic Countries


Czech Republic

Slovakia Hungary Romania


*CO2 Reduction • 40% Steel • 40 % Energy 3.000 mt CO2* no demand


Supply Demand

50 mt CO2 1255 mt CO2
February 19, 2004

1836 mt CO2 7 mt CO2

Source: Wuppertal Institute, Policy Brief for the EP Environment Committee EP/IV/A/2003/09/01

Monetary funds made available for technology investments

Host Country
Sale of emission certificates help reach Kyoto targets Benefits: Social and environmental standards Institutional strengthening Establishment of international project pipelines

Donor Country


Benefits: Increased added value and profitability

Benefits: Sustainable technology transfer Capacity building Increased profitability (IRR, NPV)

February 19, 2004


Benefits of JI & CDM for Verbundplan and its partners:
 “First Mover” in using the chances of the Kyoto Protocol in Austria, but also taking the risks;  International Marketing/Image factor “Austrian Sustainable Solutions”;  Strengthening the Core Business of every Team Member;

 Strengthening the international Marketing and Sales activities for our Products and Services;
 New Innovations made for financing projects;  Improved profitability of projects because “avoided environmental costs” have been considered;
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Hydropower Plant Vacha Cascade/Tsankov Kamak, Bulgaria:
Total project value: 200 m EUR (Planning, Engineering, Construction, E&M) including a road construction (30 m EUR)
80 MW

Installed capacity:

Construction period: 2004 - 2007
Long-term Sustainability:  Refurbishment of existing plants in the cascade  200.000 t C02 per year from 2008 – 2012 => => 1 Million tons of CO2  Additional environmental benefits  500 new jobs during construction, 50 new jobs for Operation and Maintenance February 19, 2004


Success Factors for project development (1):
 We convinced our customer at the very beginning of the benefits of Joint Implementation (additional cash flows at least for 5 years)
 Early involvement of the official responsible institutions (treated them as “partners”) in Austria and abroad to finalize an MoU, which lowers political and economic risks  Clear Cost-Benefit Analysis of the project necessary (developing and transaction costs of certificates => clear additionality !

 Definition as a pilot project in 2001 => „Learning by Doing“
 High Flexibility for Project Development and Know how of the Kyoto Protocol and its related rules and regulations was necessary (Austria, EU, International) but changed during the process
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Success Factors for project development (2):
 Integrated 3-Pillars Approach: Parallel development of technical planning, JI-procedure, development of financing structure  Despite missing legal framework we convinced the financial institutions of our ideas and the recent developments of the Kyoto Protocol  The setup of the financing scheme has at least been as important as the technical feasibility !!  Professional Project Management: Strategy, Tasks, Time Schedule, Next steps, etc.  Forward Contract opens benefits (risks) for both sides
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Hydropower Project in Bhutan:
 Renewable energy: two hydropower plants in Basochhu, Bhutan

 Upper Stage: 22 MW  Lower Stage: 42 MW  Project implemented by an Austrian consortium and a local engineering partner  Bhutanese involved during all project phases  Total cost of project: € 31,250,000
 Co-financing through emission certificates could cover approx.10-15% of project costs
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JI Project for an International Paper Company in CEE (1):
Current Situation:
 Paper production process is energy intensive (Electricity, Steam)  Paper companies in industrialized countries are required to reduce their GHG emissions (EU-ET-Directive !)

 Emission reduction by increasing energy efficiency
 Emission reduction generated in Eastern European subsidiaries through JI helps to meet the emission targets !
February 19, 2004

Total Energy Demand Electrical: 500 GWh/a Total Energy Demand Thermal: 5300 TJ/a Self-supply Electrical: Self supply Thermal: 30% 85%

CO2 Emissions:

380.000 t/a

JI Project for an International Paper Company in CEE (2):
JI Project: Fuel switch from oil to biomass and waste at a subsidiary paper production site in Hungary
Benefits for the Paper Company
 Transfer of Emission Certificates to one of the other 6 production sites in EU countries  Less energy costs  Modernization of energy production and supply

Benefits for the Environment
 Reduction of GHG emissions
 Better utilization of resources through increased efficiency  Reduction of other emissions (NOx)  Reduction of landfill waste

February 19, 2004

Conclusions from Private Sector´s point of view:
The Kyoto Protocol supports the development of sustainable energy

solutions in developing countries:
 Creates new financing options (“green certificates”)  Guarantees certain social and environmental standards and thus encourages sustainability  Supports innovation and technological development  Creates new business opportunities and project pipelines

=> Promotes the “Cycle of Sustainable Development”
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Thank you for your attention!
Jürgen Wahl email: Tel:++43-1-53605-54813 Fax:++431-53605-154813

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