Case Study Analysis of the U. S. and EU Proposals (Task Final Report) - National Energy Technology Laboratory - Bog

The issue of greenhouse gas emissions has been at the forefront of environmental concerns for the past decade. A number of treaties, agreements, and voluntary programs have been proposed to reduce emissions - some of which have been the subject of intense debate and disagreement. Most notable among these proposals has been the Kyoto Protocol. Signed in 1997 by the United States and other industrialized countries, the Kyoto Protocol is a major international treaty imposing binding emission reduction targets on the developed world. However, the U.S. Senate never ratified Kyoto, and the Administration recently announced its intention of dropping out of the international negotiations surrounding the Protocol. Nonetheless, the general scientific consensus, that global warming is a real, significant issue, is not in dispute. The Administration is calling into question only the appropriate response to this issue, while explicitly recognizing the need for some response. Regardless of whether this response takes the form of a domestic voluntary program, an international treaty, or something in between these two extremes, it is likely that it will incorporate "market mechanisms" in some form or other. Most of the various emission reduction responses that have been proposed over the past few years include such mechanisms. The development and implementation of these mechanisms, designed to facilitate low-cost solutions to environmental problems, is part of a broader trend away from the command-and-control regulations of the past, and towards increased flexibility in meeting regulatory requirements. This new market-based approach has worked its way into greenhouse gas emission reduction programs and proposals, using the guidelines provided by the United Nations Framework Convention on Climate Change (UNFCCC), and developed into a new concept: credits for emission reduction projects undertaken beyond a country's borders. Perhaps the greatest challenge for this new concept is the development of a protocol, or set of protocols, for estimating the emission reductions associated with projects. There is considerable concern among various groups surrounding the accuracy of the emission reduction estimates upon which credits would be awarded. In addition, others, particularly any potential project developer, want protocols that can be implemented within reasonable costs. Nonetheless, all parties generally recognize the need for accuracy of credits and agree on the need for a standard approach or set of procedures for estimating project-level emission reductions. A number of such approaches have been proposed and the purpose of this report is to evaluate some of the key proposals. Specifically, the report presents a series of hypothetical case study analyses designed to test each proposed approach in the context of potential real world projects. The case studies have been selected to cover a broad range of sectors and project types. The goal is to identify the strengths and weaknesses of each approach, and based on the case study analyses, recommendations for improving and refining the different approaches are developed. Four different approaches are evaluated in this report: The approach officially proposed by the U.S. at the recent (COP-6) negotiations surrounding the Kyoto Protocol; The European Union's "Positive Technology List"; The U.S. National Energy Technology Laboratory's (NETL) technology matrix concept (the "full" technology matrix); A hybrid approach combining elements of the technology matrix with the official U.S. approach (the "hybrid" technology matrix). Each case study project is evaluated using each of the above four approaches. The results for each approach are analyzed, compared and contrasted; these critical analyses in turn reveal the strengths and weaknesses of the different approaches in the context of a variety of different project types.