3 Replies Latest reply: Jul 12, 2017 8:05 PM by michael.steinhoff@iclei.org RSS

    Market-Based:  All or Nothing?

    michael.steinhoff@iclei.org C4D Enthusiast

      Hi all, here's another issue that continues to vex me and several cities i serve.  There has always been significant interest by cities in incorporating the market based measures that their citizens and businesses participate in, namely various renewable energy attribute transactions.  More recently I've been hearing from some that are concerned about the opposite flow of other types of credits.  A specific example are reductions that come from external finance where the financiers are retaining and presumably selling credits for the projects they facilitate.  The more i think about it, the more i realize how many of these kinds of transactions geographic inventories are blind to, especially B2B transactions.


      Personally, i've always looked at the geographic inventory as a kind of commons. Especially since the data is so highly aggregated, that the emissions are not owned in the sense that they are from a corporate perspective.  What happens when the common benefit to the community is privatized?  I know that's a bit of a normative question, but curious what people think.  More tangibly, does that kind of transaction affect the way we assess whether a city has met a reduction target?  Certainly there are many that are anticipating the use of various kinds of offset and crediting mechanisms to meet their targets.  Should goal achievement in that case require a complete accounting of all the private credit transactions that have moved reductions in or out of the boundary?  If so and a city knows they are going to need external funds to make the projects happen, perhaps they should stay strictly geographic based accounting.


      While there are ways to keep track of these kinds of transactions within private accounting, what seems to be missing are mechanisms for squaring up private and public accounting.  This seems like something the development finance folks in the room have had to confront. Looking forward to hearing what people think.



        • Re: Market-Based:  All or Nothing?
          michael.steinhoff@iclei.org C4D Enthusiast

          Hmmmm,  76 views with no comments.  Does that mean I'm totally off-base or that this is something we really need to be talking about?

            • Re: Market-Based:  All or Nothing?
              rosebailey C4D Connoisseur

              Hi Michael,

              I have only just seen this but would love to comment! I think you raise some really interesting points and I definitely don't have the answers, but I think the concept of credits and accounting will become an increasing issue at city level as the focus on more confidently quantifying city action ramps up. I have always been really sceptical of carbon credits as I think they can often lead to so much confusion and difficulty in terms of transparency of accounting, in particular the more inforamal system. I LOVE data and transparency and talking about 'monitoring, reporting, verification' (MRV) so definitely have a view on this!


              I guess some immediate observations from me are:


              - From a GHG accounting, the GPC 'mentions' credits and says that they should be reported but is a bit vague and doesn't lack much guidance explicitly on how to account for this except that they should not be included in inventory totals. In the new C40 GPC reporting tool 'CIRIS', there is now a space for reporting credits purchased/sold and any 'credits' that might be considered from e.g. purchasing energy on a green tarrif, or investing in wind turbines that feed the grid. These have to be reported separately under 'net emissions' as they are 'counted' in the national grid emission factor, or by the person/company/country who bought the credit.... so the GPC approach at least seems to support the idea that you report emissions occurring in the territory, or as a result of activities, before any buying/selling. And those are your 'true' emissions from the point of view of international reporting standards.


              - 'Official' and 'unofficial' carbon credits operate very differently. Credits purchased through Kyoto mechanisms for example, or as fully financed and tracked NAMAs,  have clear MRV requirements and the impact of these in carbon terms can be tracked between the buyer and seller/location/implementer etc. Unofficial credits - a local business purchasing offsets for their operations via a third party company for example - is very difficult to track and account for. I would not at all encourage any accounting of this kind of activity by cities, at least not officially. The impact of these activities would be included within national emissions reporting as, for exmaple, forest stocks increase or energy consumption declines in the country of implementation. But there is no government to government 'trade' here so it would be wrong to include in 'official' submissions of a city who funded such an activity (that is just my opinion!). If it is within the country then I guess that's a slightly different story...


              - As we look more towards the role of cities in national climate action post-Paris, such as Nationally Determined Contribution (NDC) implementation, things get more complex. If a city is independently buying credits to meet targets, or selling credits off, how does this get reflected up the chain? There needs to be a system for better integating and tracking what is hapenning in cities and better coordination between levels of government, on finance, data, emissions, projects..... Climate finance is one area that very clearly shows the opportunities and potential challenges of not being well integrated, in terms of flowing of finance for project, MRV of finance, ensuring accountability, tracking what's going on....


              All a bit of a minefield. I am no carbon credit expert, I have colleagues who are so this is all from water cooler chats I have had with them. My particular interest currently is about how to better align cities and countries for Paris implementation....

              Would be good to get more thoughts from you on any of this.... interesting topic!



                • Re: Market-Based:  All or Nothing?
                  michael.steinhoff@iclei.org C4D Enthusiast

                  Thanks Rose!  All good points.  What I was getting at is that reported GPC inventories should reflect a purely geographic view of emissions and emissions generating activities.  The limited guidance that GPC has on the subject of market mechanisms assumes that it is the local government who is doing the trading or at least is aware of the trading.  Combine that with something like PACE programs that are financed externally.  In many cases the financiers also reap the benefit of selling a credit of some kind from their project.  When the local government comes to do a re-inventory/inventory update and just add up where they are relative to their goals, they have no way of knowing that the observed reductions that are occurring in their community have been sold off. 


                  Given that as the situation, it would seem that no local government can do a complete accounting of all market mechanisms operating in their boundary and the only ones that are ever quantified are those that make a contribution towards lowering the apparent footprint of the city (RECs).  Is there much point in doing that at all since we are blind to so many other transactions?  If a city really wants to report RECs, should they also have to make a concerted effort to understand other transactions?


                  I know there isn't a straightforward answer there.  Just more grist for the mill...