History of Accounting Presentation

							Tools for Greenhouse Gas Analysis:
   Exploring Methodologies for
       Development Finance

              July 14, 2009
    OVERSEAS PRIVATE
INVESTMENT CORPORATION
         (OPIC)
   An Agency of the United States Government
History of Carbon Accounting at OPIC


        Address by President Clinton at the UN Special
        Session on Environment & Development June
        1997.

        • Track and report, on an aggregate basis, the
          annual greenhouse gas emissions from OPIC-
          supported power sector projects.

        • FY1998 and FY1999 aggregate reporting of 100%
          of emissions calculated using mass balance
          methodology which assumed an installed capacity
          factor of 100%.

        • CO2 emissions in (U.S. short) tons.
History of Carbon Accounting at OPIC


      Climate Change: Assessing Our Actions (2000)

      • A review of the cumulative annual greenhouse gas emissions
        and climate implications of all OPIC finance and political risk
        insurance projects supported since 1990.

      • Calculated cumulative emissions for power sector projects as of
        2000 and projected cumulative emissions in 2015.

      • Assumed all power plants operate for 25 years.

      • Assumed that direct emissions from oil, gas and industrial
        projects were de minimis when compared to the power sector
        emissions.

      • In 2000 30% of OPICs portfolio exposure was in the power
        sector.
History of Carbon Accounting at OPIC


      Climate Change: Assessing Our Actions (2000)

      • In 2000 the cumulative emissions from 52 power plants (16,775
        MW) represented 0.24% of global emissions.

      • In 2015 the cumulative emissions were projected to represent
        0.43% of global emissions.

      • Based on 25 year life-of-plant and 85% operating capacity factor
        (hours).

      • Did not disaggregate calculations – just generic mass balance
        algorithm and default values for certain parameters (heat rates
        by generating technology, emission factors by fuel types).

      • Conclusion: “Cumulative annual GHG emissions from OPIC-
        supported projects do not substantially contribute to global GHG
        emissions and associated climate change impacts.”
History of Carbon Accounting at OPIC


      Friends of the Earth, Inc., Greenpeace, Inc. and the
        City of Boulder, Colorado v. Overseas Private
        Investment Corporation and the Export-Import
        Bank of the United States

      • “…providing loans, insurance and other assistance for fossil fuel
        projects including extraction projects (oil and gas fields) and
        transportation projects (pipelines), processing and refining
        facilities and power plants.”

      • “…will result in the annual emissions of billions of tons of
        greenhouse gases (primarily carbon dioxide)– emissions
        equivalent to almost two-thirds of U.S. annual domestic carbon
        dioxide emissions.”
History of Carbon Accounting at OPIC



                                                     OPIC Fuel Mix vs US Domestic Fuel Mix for Electric Generation



                                   60
                                                     52

                                   50
                                                                            48
         Percentage of Portfolio




                                   40


                                   30
                                                                                                          30.2                    1990-2002
                                                                                                21
                                   20                                                                                             US, 2001
                                              16.5                               15

                                    10                                4
                                                                                                                 9
                                                                5.3
                                        0
                                                                                                                       US, 2001
                                            Coal                                           0
                                                          Oil                                                        1990-2002
                                                                          Gas
                                                                                      Nuclear
                                                          Fuel Type                                  Renew able
History of Carbon Accounting at OPIC


           Difference in Accounting Methods…

           •    Comparison of annual U.S. emissions to OPIC’s 25 year
               cumulative emissions.

           • Count the emissions from the combustion of all the
             petroleum, natural gas and coal produced by extractive
             industry projects and fuel transported via pipeline – referred
             to as “indirect emissions”.

           • Count all lifetime emissions for privatizations.

           • Count emissions from committed projects that never move to
             financial close.
History of Carbon Accounting at OPIC


        Lessons Learned…

        • Annual emissions reporting is less problematic than
          cumulative emissions reporting.

        • The term “indirect emissions” can mean different things to
          different people.

        • A clear distinction must be drawn between “committed” and
          “active” projects.

        • Proof-read settlement agreements carefully with respect to
          the use of U.S. short tons and metric tonnes.
OPIC Climate Change Policy

     • Goal: reduce the direct greenhouse gas emissions associated
       with projects in OPIC’s “active portfolio” by 30% over a ten-year
       period (2008 - 2018).

     • Baseline Inventory Operational Boundary is defined as 100% of
       the direct, on-site emissions from all projects in OPIC’s active
       portfolio as of June 30, 2008.

     • Baseline inventory includes all projects in the energy, oil and
       gas, transportation, mining, manufacturing and construction
       sectors that are of sufficient size to potentially emit more than
       100,000 U.S. short tons/year.

     • Projects in the finance/banking, insurance, and service sectors
       were not included in baseline because the majority of emissions
       from these sectors are attributed to electricity use, which was
       defined as outside of the scope of the baseline.
OPIC Climate Change Policy


     • Used independent auditor (Pace Global Energy Services LLC)
       to develop the baseline inventory.
     • Used 2007 operating data to calculate baseline.
     • Power plant accounting estimates based on operating capacity
       of 8000 hours/year, fuel consumption data (if available), facility
       operating capacity and/or more specific data provided by
       investors. Where fuel consumption data was not available used
       IFC’s conversion efficiency factor and other standard
       assumptions sourced from the Climate Registry’s General
       Reporting Protocol.
     • Non-power accounting estimates based on operating capacity of
       8000 hours/year and throughput and fuel consumption data.
       Where estimates from similar facilities were relied on data was
       obtained from credible, public information sources such as API,
       USEPA or the Energy Information Administration. Standard
       assumptions were sourced from the General Reporting Protocol.
OPIC Climate Change Policy


     Final Baseline Number –

     • 50,452,986 US short tons – which equals the 48,050,463 tons
       auditor estimate plus 5% to account for active projects that emit
       less than 100,000 tons/year.

     • Now quantifying emission estimates from all projects with the
       potential to emit greater than 25,000 tons year to be consistent
       with the recent draft GHG reporting rule proposed by USEPA.

     • Baseline and disaggregated accounting calculations published
       in OPIC’s Annual Policy Report to the U.S. Congress (April
       2009).
OPIC Climate Change Policy


     Constraining New Carbon – Annual Cap

     • 3 million tons/year, although OPIC may further reduce this.

     • Allocation based on strategic importance in foreign policy and
       developmental benefit context.

     • Extension of insurance or finance term treated at new
       commitment.

     • Projects involving renewable energy and “clean technology”
       assigned a value of zero.

     • Since July 2007 have added 787,000 tons to the portfolio.

     • 32 projects have not moved forward in part because of the cap
       constraint.
OPIC Climate Change Policy


     Other Elements –

     • Consider only those coal-fired power plants that capture and
       sequester 85 % of greenhouse gas emissions.

     • All projects estimated to emit greater than 100,000 tons/year
       automatically Category A.

     • Decline support for projects that cannot meet energy efficiency
       benchmarks.