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Leveraging Domestic Offset Projects for a Climate-Neutral World Regulatory Conditions and Options Editorial Information

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Leveraging domestic offset projects for a climate-neutral world Regulatory conditions and options Editorial information Publisher German Emissions Trading Authority (DEHSt) at the German Environment Agency Bismarckplatz 1 D-14193 Berlin Phone: +49 (0) 30 89 03-50 50 Fax: +49 (0) 30 89 03-50 10 [email protected] Internet: www.dehst.de/EN Status: March 2017 Authors Katharima Nett Stephan Wolters adelphi consult GmbH Alt-Moabit 91 10559 Berlin Responsible editors Section E 1.6: Corinna Gather Emilio Martin-Rodriguez Project number: 60392 Cover image: Tkemot/ Shutterstock.com The authors wish to thank Lucio Brotto, Patrick Bürgi, Marta Hernandez de la Cruz, Julian Ekelhof, Aric Gliesche, Julia Grimault, Simon Henry, Daniel Scholz, Luc Wittebolle, Vicky West and all the participants of the consulta- tion workshop for commenting on this paper and/or sharing their insights and experiences. Needless to say, this does not imply that they necessarily endorse the analysis and recommendations. Thanks also to Tristan Heß, William Hull and Stella Schaller for their research and editorial support. Abstract Voluntary domestic offset schemes offer great potential as instruments for advancing ambitious climate action and supporting the transformation towards low-carbon economies. At the same time, their possible scope of action in countries with reduction targets is limited: Mitigation commitments from the Kyoto Protocol, the EU ETS and national or subnational compliance mechanisms enhance the risk of different forms of double counting and demand guidance on additionality. Adding to these challenges, the regulatory framework will change by 2020. This study carried out by adelphi on behalf of the German Emissions Trading Authority (DEHSt) at the German Environmental Agency (UBA) analyses the characteristics of initiatives in countries that generate carbon credits from domestic projects for being used mainly as voluntary offsets. It identifies respective challenges and oppor- tunities and develops recommendations for improving regulatory conditions in order to advance the develop- ment of a domestic voluntary market and leverage its potential for a climate-neutral world. The recommendations include: ▸ No more niches: Regulative framework needs to proactively safeguard environmental integrity. Where emissions reductions are counted towards national targets, governments could cancel Assigned Amount Units (AAUs) or commit to not selling excess AAUs. Transparent communication can alleviate concerns that double claiming can undermine perceived environmental integrity. ▸ Assess and endorse existing voluntary carbon standards: Official government endorsement (or by another central institution) of voluntary offset mechanisms could offer the opportunity to build on credible standards and use existing infrastructure instead of creating parallel structures that increase the risk of double coun- ting. An endorsement could take the form of a positive list of recognized standards or provide certain benchmarks. ▸ Leverage the potential of the LULUCF / AFOLU sector: As the international community is aiming for a carbon-neutral world by the end of the century, carbon sinks will become more and more important. Most domestic offset initiatives are active in this sector, thereby providing significant experience in developing and implementing emission reduction and removal projects that the compliance market can learn from. ▸ Close the ambition gap with voluntary action: What seems to be a contradiction – using voluntary domestic offsets for compliance – may, in fact, help to get on track with ambitious climate targets. This can, for example, inform discussions on the Paris Agreement, in particular article 6.4. Kurzbeschreibung Der freiwillige inländische Markt für Treibhausgaskompensation bietet ein großes Potenzial als Instrument für ambitionierten Klimaschutz und den Übergang zur kohlenstoffarmen Wirtschaft. Zugleich schränken Minde- rungsverpflichtungen aus dem Kyoto-Protokoll, dem EU-Emissionshandelssystem (EU ETS) und der nationalen oder subnationalen Ebene den Gestaltungsspielraum ein. Hinzu kommt, dass sich der regulative Rahmen ab 2020 ändert. Diese Studie von adelphi im Auftrag der Deutschen Emissionshandelsstelle (DEHSt) im Umweltbundesamt (UBA) analysiert die Eigenschaften und Voraussetzungen von Initiativen in den Ländern, die Kohlenstoffzertifi- kate aus inländischen Projekten für freiwillige Kompensationen generiert haben. Ziel der Studie ist es, die Herausforderungen und Chancen für nationale Klimaschutzprojekte im freiwilligen Kompensationsmarkt zu beleuchten und Vorschläge zur Verbesserung der Rahmenbedingungen für die Entfaltung eines inländischen freiwilligen Kompensationsmarkts zu entwickeln – und damit der Vision einer klimaneutralen Welt näher zu kommen. Es lassen sich einige Empfehlungen ableiten: ▸ Keine Nischen mehr: Der Regulierungsrahmen kann Doppelzählung vermeiden helfen. Wo Emissionsredukti- onen auf nationale Ziele angerechnet werden, können Staaten Assigned Amount Units (AAUs) löschen oder sich verpflichten, frei werdende AAUs nicht zu verkaufen. Eine transparente Kommunikation kann vermeiden, dass double claiming die wahrgenommene Umweltintegrität beeinträchtigt. ▸ Freiwillige Qualitätsstandards bewerten und empfehlen: Der Staat oder eine andere zentrale Stelle könnte freiwillige Qualitätsstandards prüfen und empfehlen. Damit könnte auf etablierten Standards aufgebaut werden und bereits existierende Infrastruktur genutzt werden, statt parallele Strukturen zu schaffen, die das Risiko von Doppelzählungen erhöhen. Dies könnte zum Beispiel durch eine Positivliste anerkannter Stan- dards oder die Festlegung von Mindestanforderungen erfolgen. ▸ Potential des LULUCF- bzw. AFOLU-Sektors ausschöpfen: Da die internationale Gemeinschaft eine klimaneu- trale Welt bis Ende des Jahrhunderts anstrebt, werden Kohlenstoffsenken eine immer größere Rolle spielen. Die meisten inländischen Kompensationsinitiativen sind in diesem Sektor aktiv und haben daher viel Erfahrung mit der Entwicklung und Umsetzung von Projekten zur Emissionsreduktion und in Senkenpro- jekten, von der der Verpflichtungsmarkt lernen könnte. ▸ Ambitionslücke mit freiwilligen Aktivitäten schließen: Was als Widerspruch erscheint – freiwillige inländi- sche Kompensationen für Verpflichtungsziele zu nutzen – kann dazu beitragen, die ambitionierten Klima- ziele zu erreichen. Das kann auch für die weiteren Verhandlungen zur Ausgestaltung des Pariser Abkommens von Interesse sein – insbesondere zu Artikel 6.4. 4 Leveraging domestic offset projects for a climate-neutral world: Regulatory conditions and options Content 1 Introduction ...........................................................................................................................................35 2 Concepts and definitions ........................................................................................................................35 2.1 Domestic offset projects ...........................................................................................................35 2.2 Obstacles for domestic projects.................................................................................................36 2.2.1 Additionality .....................................................................................................................36 2.2.2 Types of double counting ...................................................................................................37 3 Policy background: framework conditions for domestic projects .............................................................45 3.1 International framework: Kyoto Protocol ....................................................................................45 3.1.1 Background: Regulative conditions.....................................................................................45 3.1.2 Implications for domestic offset projects ............................................................................47 3.2 The European framework ...........................................................................................................49 3.2.1 Background: regulative conditions .....................................................................................49 3.2.2 Implications for domestic offset projects ............................................................................51 3.3 National framework: domestic offset projects in Germany ...........................................................53 3.3.1 Regulative framework ........................................................................................................53 3.3.2 Cost effectiveness of domestic projects ..............................................................................54 4 Voluntary offset schemes in Annex I countries ........................................................................................54 4.1 Analytical framework ................................................................................................................55 4.1.1 Overview of the initiative ...................................................................................................55 4.1.2 Integration of the initiative in the pre-2020 framework ........................................................57 4.2 Australia ..................................................................................................................................57 4.2.1 Overview of the initiative ...................................................................................................57
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