Transport and Carbon Finance

Dr. Jürg M. Grütter

jgruetter@gmail.com
www.transport-ghg.com

matching transport with carbon finance

Company Background
† Design, planning and implementation of GHG
transport projects worldwide since 1992
† Development, negotiation and monitoring of the first
GHG reduction sales agreement of transport
companies in Europe
† 1st approved CDM transport methodology, 1st
registered CDM transport project, 1st registered VCS
transport project
† 5 out of 8 approved CDM transport methodologies and
80% of all CDM transport projects in validation or
registration
† Offices in Switzerland, China, India, Colombia, Bolivia
and partner offices in Mexico, Brasil, South Corea,
VietNam and Egypt

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Current Carbon Finance
Transport Projects of grütter consulting

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The CDM Process

Project Identification
PIN Technical and financial feasibility

Project Design PDD Approved methodology

DOE
DNA
Validation/Registration
EB

Monitoring PP

CER – Certified Emission Reduction

Verification/Certification
Issuance CERs
DNA – Designated National Authority
DOE DOE – Designated Operational Entity
EB – Executive Board of the CDM
PDD – Project Design Document
PIN – Project Identification Note
EB PP – Project Proponent

CER

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Approved CDM Transport Methodologies
Reference Area Methodology
Developer
Small Scale Methodologies

AMS-III.C Electric and hybrid vehicles UNFCCC

AMS-III.S Low emitting fleets Mitsubishi

AMS-III.T Vegetable oil for vehicles grütter consulting

AMS-III.U Cable car for mass transit grütter consulting

AMS-III.AA Vehicle retrofit CaFIS

Large Scale Methodologies

AM0031 BRT grütter consulting

ACM0016 Mass Rapid Transit Systems grütter consulting

AM0090 Freight mode switch Arcelor Mittal

Marzo 2010 grütter consulting 5

Transport Methodologies Rejected
† Numerous biofuel methodologies: reasons
basically upstream emissions and political
reasons
† Efficiency improvements (bus dispatch, eco-
drive) due to problems cause-effect and
separation of project and external impact
† Fuel switch basically due to baseline
determination; indirectly included in AM0031
and ACM0016
† Mode switch (freight, pipeline, TOD, avoidance
of transit) due to baseline determination,
additionality

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CDM Projects in
Registration/Validation I
Project Country Developer
BRT Transmilenio, Bogotá (registered) Colombia Grütter Consulting
Regenerative brake energy DMRC (registered) India DMRC

Cable car Medellin (registered) Colombia Grütter Consulting

BRT Chongqing (in registration) China Grütter Consulting

Plant oil for transport (in registration) Paraguay Grütter Consulting

BRT Edomex (in registration) Mexico Grütter Consulting

BRT Megabus, Pereira Colombia Grütter Consulting

BRT MIO, Cali Colombia Grütter Consulting

BRT Transmetro, Barranquilla Colombia Grütter Consulting

BRT Cartagena Colombia Optimconsult

BRT Insurgentes Mexico Grütter Consulting

BRT Guadalajara Mexico Grütter Consulting

BRT Quito Ecuador Grütter Consulting

Metro Delhi India Grütter Consulting

Marzo 2010 grütter consulting 7

CDM Projects in
Registration/Validation II
Project Country Developer
Metro Mumbai One India Grütter Consulting
Regenerative brake energy Metro Mumbai One (will be rejected) India Reliance
Regenerative braking suburban trains Mumbai (will be rejected) India IR
Lohia electric vehicles India Grütter Consulting
EKO electric vehicles India Grütter Consulting
Electrotherm electric vehicles India Grütter Consulting
Hero electric vehicles India Grütter Consulting
BRT Indore India ICTSL
Mode shift road to rail corridors (will be rejected) India Competent Consultants
Mode shift road to rail cars (will be rejected) India MSPL
Improved train control metro Santiago (will be rejected) Chile Deuman
BRT Zhengzhou China Grütter Consulting
BRT Medellin (enters validation until 12.2010) Colombia Grütter Consulting
BRT Guatemala (enters validation until 12.2010) Guatemala Grütter Consulting
Bharathi freight road to rail (enters validation until 12.2010) India Grütter Consulting
Metro Mexico Line 12 (enters validation until 12.2010) Mexico Grütter Consulting
LRT Tunis
Marzo 2010(enters validation until 12.2010) grütter consulting Tunisia Grütter Consulting 8
BRTs in CDM

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BRTs in CDM II
† Compares baseline emissions per trip of
passengers using other modes in absence of the
project with BRT emissions
† Emission reductions due to larger buses, higher
occupation rates, new vehicles, fuel-switch and
mode-switch
† Large variations for ERs per passenger between
countries
† Not all BRTs reduce emissions: see BRT Delhi

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Metros, LRTs, Cable-Cars and CDM

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Metros in CDM II
† Compares baseline emissions per PKM of
passengers using other modes in absence of the
project with Metro emissions from origin to
destination
† Emission reductions due to mode switch
† Emission reductions per passenger larger than
for BRT
† Large variations for ERs per passenger between
countries due also to carbon factor electricity
† Proof of additionality can be difficult

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Alternative Fuels

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Alternative Fuels and CDM II
† Projects must group many units e.g. through
producer
† Biofuel projects: very complex, evry limited
applicability
† Electric vehicle projects: not in all countries
emission reductions e.g. China conventional
vehicle has lower emissions than electric one
† Gaseous vehicles: not all technologies used lead
to emission reductions, especially heavy duty
CNG vehicles due to high CH4 emissions

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Rail

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Rail and CDM II
† Only 1 methodology approved
† Passenger rail e.g. fast trains: ERs basically if
mode switch plane to rail
† Freight rail has considerable potential
† Electrification: Does not reduce emissions in all
countries (depends on carbon factor electricity)
† ADB projects rail: some with good potential
† Additionality proof can be difficult if freight or
passenger numbers are not high

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Is Carbon Finance Important?
† CF can help to overcome barriers
† CF can help to make systems financially sustainable
† CF can help to boost a new technology
† Examples:
„ CQ BRT: CF covers >50% of additional investment cost for BRT
„ ZZ BRT: CF covers
operational deficit
„ DMRC: Negative NPV with
scenario based on
previous Indian experience
with metros;
with CDM positive NPV
„ Hero electric vehicles:
income allows for setting
up recharging facilities

Dec 10 grütter consulting 17

Eligible Projects
„ Must have emission reductions
„ Must be additional: basically financial additionality
„ Must be announced within 6 months of signing first
important contract e.g. for construction to UNFCCC
and DNA
„ Basically urban mass transit, inter-urban rail/ship,
mode-switch, alternative vehicles
„ Efficiency projects very difficult due to proof of
baseline /BAU
„ Road infrastructure projects very difficult due to
leakage

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Opportunities
† Eligible projects can attract additional finance
† Makes projects more sustainable
† Basically additional operational income

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Barriers and Risks
† Methodologies not available for all project types
† High complexity to develop methodologies and
PDD
† Additional data collection
† Significant upfront and recurrent costs
† Long, very long time involved:
„ 1-2 years methodology approval
„ 1-2 years from CDM project start to registration
„ 3-5 years from CDM start till receiving first money
† Rules keep changing and decisions of validators
and UNFCCC are inconsistent and unpredictable
† Future of climate markets and prices unsure

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Cost and Benefit
† Upfront costs without methodology
development of around 200,000 USD for
standard mid size project (100,000t/a)
† Annual recurrent costs of around 70,000 USD
† Carbon price CERs currently around 15 USD/t.
Has fluctuated between 3 and 35 USD /t
† Current VCS price around 5 USD/t. Has
fluctuated between 1 and 15 USD/t

Dec 10 grütter consulting 21

Programmatic CDM
† Basically for grouping projects
† Could be interesting for special types such as
EcoDrive, electric vehicles, MRTS in smaller
cities
† Has disadvantages and advantages compared
to normal project types

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NAMAs
† Still unclear if and how
† Similar discussions since years with sectoral
approach, programmtic approach etc….
† Problems of benchmark, geographical scope etc
are significant

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Conclusions
† CDM can be used for certain types of transport
projects
† CDM can make an important financial
contribution
† CDM requires significant upfront money and
involves considerable risks
† The rules governing CDM must be followed e.g.
concerning prior consideration to be eligible for
CDM finance
† Kioto Protocol till 2012 – Carbon finance
through CDM, Voluntary markets, Regional
markets etc. continues

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Further Information

CEO grütter consulting:

Dr. Jürg M. Grütter
jgruetter@gmail.com

www.transport-ghg.com

Dec 10 grütter consulting 25