Benchmarking and the Kyoto Protocol

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Benchmarking and theKyoto Protocol

• Daan van Zanten

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Agenda

• Kyoto Protocol History
• Benchmarking Methodology and Process
• Covenant Benchmarking Energy-efficiency
• Kyoto Protocol Current Status and Progress
• EU Emission Trading Scheme
• Future Developments

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History of the Kyoto Protocol

• In 1992 at Rio de Janeiro, the United Nations
  Framework Convention on Climate Change (UNFCC)
  was signed ? developed countries to stabilize
  greenhouse gas (GHG-) emissions at 1990 levels by
  2000. Further meetings ?so-called Conference(s)
  of Parties or COPs.
• At COP-3 in 1997 the Kyoto Protocol was adopted ?
  legally binding limits on GHG-emissions in
  industrial (Annex 1) countries use of
  market-based implementation mechanisms.
• Industrial countries to reduce emissions of GHGs
  (i.e CO2, methane, nitrous oxide,
  hydrofluorocarbons, perfluorocarbons and
  sulphurhexafluoride) on average by 5.2 below
  1990 levels during first commitment period from
  2008 2012.

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The Kyoto Protocol and the EU

• EU (15 pre-accession Member States) committed to
  reducing GHG-emissions by 8 compared to 1990
  levels during theperiod from 2008-2012.
• Individual emissions targets (EU burden
  sharing) for each Member State for Netherlands
  the target is a 6 reduction compared to 1990
  level.
• Use to be made of three market-based flexible
  mechanisms- Emissions trading- Joint
  Implementation (JI)- Clean Develop Mechanism
  (CDM)
• In Netherlands in 1999 the Covenant Benchmarking
  Energy-efficiency was signed as a tool towards
  achieving the Kyoto target by world leader
  operation of the energy-intensive industry.

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Agenda

• Kyoto Protocol History and Implementation
• Benchmarking Methodology/Process
• Covenant Benchmarking Energy-efficiency
• Kyoto Protocol Current Status and Progress
• EU Emission Trading Scheme
• Future Developments

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Benchmarking definition

• There are numerous definitions of benchmarking,
  but essentially it involves learning, sharing
  information and adopting best practices to bring
  about step changes in performance. So, at its
  simplest, benchmarking means Improving
  ourselves by learning from others".
• Benchmarking is a structured, outward looking
  (out-of-the-box), practical and action-oriented
  process.
• Since the 1990s benchmarking is widely used in
  the global manufacturing industry (e.g.
  refineries, petrochemicals, steel).

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Benchmarking in Practice
Performance
Own Performance
Time
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Benchmarking Methodology
Benchmarking process - structured process
Data Collection
Recommen-dations
Monitoring Review
Analysing
Planning
Plan Collect Analyze Adapt Act 30
50 20
depends on scope
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Benchmarking is Not the Sameas Benchmarks

• Benchmarks are performance measures How many?
  How quickly? How high? How low?
• Benchmarking is actiondiscovering the specific
  practices responsible for high performance,
  understanding how these practices work, and
  adapting and applying them to your organization
  or situation.
• Benchmarks are facts benchmarking enables real
  improvement.

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Agenda

• Kyoto Protocol History and Implementation
• Benchmarking Methodology and Process
• Covenant Benchmarking Energy-efficiency
• Kyoto Protocol Current Status and Progress
• EU Emission Trading Scheme
• Future Developments

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Benchmarking CovenantHistory

• 1989-2000 MJA Covenant for energy conservation
• Multi-year agreement between government
  industry
• Target 20 improvement in energy efficiency for
  the sector
• Achieved by Chemical Industry gt25
• Major contributions CHP (Co-generation of Heat
  and Power), good housekeeping, energy management.
• 1997 Kyoto Protocol Under EU burden
  sharing 6 reduction in the Dutch GHG-
  emissions in the period 2008-2012 based on 1990
  level.
• 1999 Energy Efficiency Benchmarking Covenant
  (http//www.benchmarking-energie.nl)

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Benchmarking CovenantWhat are the main elements
of the Covenant ?

• Covenant between the Government, the Competent
  Authorities (Bevoegd Gezag) and the
  energy-intensive (gt 0.5 PJ/a) industry.
• The industry undertakes to achieve world-top
  energy-efficiency performance and the Dutch
  government will not impose supplementary national
  policy governing CO2-emission reduction (i.e
  energy tax, ceiling on CO2-emissions).
• Benchmarking (and best practice studies / energy
  audits) versus the world-top (10 best)
  process-installations in the world.
• Undertaking from the industry to be among the
  world leaders by 2012 with intermediate targets
  for 2005 / 2008.

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Benchmarking CovenantSignatories/participants/par
ties
Confederation Netherlands Industry Employers
SectoralOrgani-sations
Inter-ProvincialConsultative Forum
Ministry ofHousing Environment
Ministry of Economic Affairs
Companies
Signatories to the Covenant
Benchmarking Commission
Verification Bureau VBE (Independent authority)
Competent Authorities(Bevoegd Gezag /
Vergunningverleners)
Consultants(Expert third parties)
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Benchmarking Covenant Benchmarking at large

• Ca. 100 industrial and electricity generation
  companies withsome 230 sites with a total energy
  consumption of about 1100 PJ/a have joined the
  Benchmarking Covenant.
• The Best International Standard (world-top)
  energy-efficiencies for comparable processes to
  those used in the Dutch process installations
  were established in ca. 40 Benchmarking (BM)
  studies as well as in ca.100 Best Practice (BP)
  studies andin ca. 50 Energy Audits
• These studies were carried out by expert third
  parties (consultants, some 50 in total) and were
  verified by theVBE according to the criteria set
  out in the Covenant

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Benchmarking Covenant Process Steps
Prepare andvalidate theEnergy Efficiency Plan
(EEP)
Identify world leader Establish gap toworld
leader
Monitoring andreporting
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2
3

• Preparation by Company
• Validation by Verification Bureau
• Advice Verification Bureau to Competent Authority

• Company
• Verification Bureau
• BenchmarkingCommission(Every year)

• Identification and establishing by Consultant
• Verification by Verification Bureau(Every four
  years)

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Benchmarking Covenant Best International Standard
Establishing the Best International Standard
(world-top) for the energy-efficiency (specific
energy consumption) of a process installation
(current over the coming years up 2012) 1.
Benchmark - Decile method - Region
method 2. Best Practice 3. Energy Audit
Order of application

• For process installations getting heat from a
  CHP-installation account is taken of the
  energy savings associated therewith.

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Benchmarking CovenantBest International Standard
Decile BM
Benchmark according to the decile (best 10)
method
Spec. EnergyCons., GJ/ton
17,2
Number of process installations(outside the
Netherlands)
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Benchmarking CovenantEnergy use of participating
industrial companies by sector

• Petroleum refining

• Chemicals

• 54,8

• 17,1

• Glass, ceramics, cement

• Paper industry

• 3,0

• 4,3

• Iron and steel- non-ferrous metal industry

• Beer

• 0,7

• Otherindustry

• 16,1

• Electronics Components

• FoodIndustry

• 0,4

• 2,5

• 1,2

Interim report 2002
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Benchmarking CovenantResults and follow-up

• Benchmarking of the energy-efficiency of Dutch
  process installations has proceeded successfully
  ? on average the Dutch installations were among
  the world leaders. A contributing factor was
  the high penetration of CHP in Netherlands.
• All companies prepared Energy Efficiency Plans
  (EEPs) describing their gap ( or -) with the
  Best International Standard and indicating the
  measures (as necessary) they would take how and
  when (AFARA) to bridge the gap.
• The energy savings of the announced/under study
  measuresby industry and electricity generating
  installations amount toca. 100 PJ/a ( 6
  million tons/a avoided CO2-emission)in 2012
  compared to 1999.

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Benchmarking Covenant Yearly reporting of the
planned and the achieved energy savings
2003 data
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Agenda

• Kyoto Protocol History and Implementation
• Benchmarking Methodology and Process
• Covenant Benchmarking Energy-efficiency
• Kyoto Protocol Current Status and Progress
• EU Emission Trading Scheme
• Future developments

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Current status of the Kyoto Protocol

• The Kyoto Protocol came into force on 16th
  February 2005 following the accession of Russia
  which brought the GHG-emissions of the industrial
  (Annex I) Parties to the UNFCC which have
  ratified the Protocol, above 55 of the 1990
  emissions.
• Major other industrial countries which have
  ratified are Canada and Japan. The US and
  Australia have not ratified. China, India and
  Brazil are among the other countries which have
  ratified the Protocol but as non-Annex-1
  countries they do not have obligations to reduce
  their GHG-emissions.
• COP-10 has been held in December 2004 in
  Buenos-Aires.
• The EU ETS (European Cap and Trade Emissions
  trading scheme, initially for CO2) started on
  1/1/2005 for the first period 2005 2007.

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Kyoto Protocol targets in EUBurden sharing
GHG-emission targets
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Kyoto Protocol progress in EU - IActual and
projected GHG-emissions
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Kyoto Protocol progressDevelopment
GHG/CO2-emissions worldwide

• of World GHG 1990 -
  2000 emissions in 2000 CO2 Change
• United States 20,5 18China 15,0 3
  9
• European Union (25) 14,0 -3
• Russia 5,5 -22India
  5,5 64Japan 4,0 12Brazil
  2,5 53Canada 2,0 22Australia
  1,5 26

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Kyoto Protocol progress in EU- IIDistance-to-targ
et in 2002
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Agenda

• Kyoto Protocol History and Implementation
• Benchmarking Methodology and Process
• Covenant Benchmarking Energy-efficiency
• Kyoto Protocol Current Status and Progress
• EU Emission Trading Scheme
• Future Developments

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EU Emission Trading SchemeNational Allocation
Plans (NAPs)

• Via National Allocation Plans (NAPs) each of the
  25 Member States have set limits (caps) on the
  CO2-emissions from the energy-intensive
  installations by issuing allowances as to how
  much CO2 these installations are allowed to emit.
  
• The scheme is mandatory for the ca. 12.000 EU ETS
  installations (Energy Activities, Production and
  Processing of Ferrous Materials, Mineral Industry
  and Paper Pulp).
• The NAPs have been assessed by the EU on 11
  criteria which include amongst others level
  playing field, technological potential, clean
  technology, early action and new entrants.
  

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EU Emission Trading Scheme Dutch National
Allocation Plan

• For the allocation of the CO2-emission allowances
  in the Dutch NAP (for the first period, 2005 to
  2007) the energy-efficiency performance of
  installations as established under the Covenant
  Benchmarking (and the MJA2 for smaller
  installations) have been taken into account
  (reward for early action).
• Registration of the CO2-(and NOx)-emissions will
  be done bythe Nederlandse Emissie Autoriteit
  (NEa).
• Large differences between allocations in
  different EU countries.
• Outside Netherlands only limited use of
  benchmarking results.

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EU Emission Trading Scheme Allocation under
Dutch NAP

• Allocation HE x G x E x C
• HE Historic emissions installation
  (20012002)
• G Growth factor within the sector
• E Energy-efficiency ratio
  (World-top energy-efficiency / Own
  energy-efficiency)
• C Factor to remain within the total cap

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EU Emission Trading Scheme Yearly monitoring /
selling buying of allowances

• Yearly monitoring, verification and registration
  of the CO2-emissions on the basis of Monitoring
  Verification Protocols (next to the monitoring of
  NOx-emissions for which a national trading scheme
  is being developed).
• Operators of a EU ETS installation will be
  required to surrender by30th April a number of
  CO2-emission allowances equal to theirverified
  annual emissions for the previous calendar year.
• Emission trading selling of allowances when
  surplus or buying when shortage direct or via
  an exchange set up by a trader/bank.
• Current indicative trading level 14 / t
  CO2.
• Sanctions to apply in case of non-compliance.

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EU Emission Trading Scheme CO2 price development
EU emission market
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EU Emission Trading Scheme Second round ETS

• Second round EU ETS is period 2008 2012.
• NAPs for this round will have to be established
  by mid 2006.
• Definition of (combustion) installations covered
  by ETS.
• Discussion on EU-wide use of CO2-benchmarks.
• Leakage effects - re-allocation of production
  elsewhere.
• World-wide trading of CO2-emission rights

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EU Cap-and-Trade systemSome Government and
Industry Perspectives

• Government - Absolute cap on CO2-emissions (per
  installation) - Ex-ante trading scheme -
  Regulations and enforcement - IPPC and EU
  decision making processes
• Industry - PSRs (Performance Standard Rates)
  for CO2-emissions - Ex-post trading scheme -
  Practicality and flexibility - Administrative
  effort and cost - Unlevel playing field and
  uncertainty - Increase in electricity prices
  - Competitive position vis-à-vis the the
  rest-of-the-world (in particular the US
  and the Far-East)

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Agenda

• Kyoto Protocol History and Implementation
• Benchmarking Methodology and Process
• Covenant Benchmarking Energy-efficiency
• Kyoto Protocol Current Status and Progress
• EU Emission Trading Scheme
• Future Developments

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Future developmentsPost-Kyoto Protocol period

• The Kyoto Protocol runs until 2012, thereafter ?
• No agreement on post-Kyoto architecture at COP-10
  ? Seminar of Governmental Experts to be held in
  May 2005 in Paris.
• Position of countries which have not ratified the
  Kyoto Protocol (in particular the US and AU) or
  which have no obligations yet to reduce their
  GHG-emissions (China, India, Brazil, ).
• Various targets and schemes are being put
  forward e.g. a 15-30 reduction of the EU
  GHG-emissions by 2020 to a Contraction
  Convergence (CC)-scheme by NGOs.
• How to involve all major GHG-emission
  countries.

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Future developments Post-Kyoto treaty
architecture

• Some essential criteria for any post-Kyoto treaty
  architecture - Environmental Effectiveness -
  Cost-effectiveness - Equity - Dynamic
  flexibility
• Benchmarking is a crucial tool to fulfill these
  criteria.
• Other important factors - Technology
  development and transfer - Compatibility with
  Development Goals