AMERICAN ELECTRIC POWER
American Electric Power (AEP) is a founding member, and the only utility among the original participants, of the Chicago Climate Exchange (CCX), the world’s first – and North America’s only – voluntary market for trading greenhouse gas (GHG) emission reductions. CCX members have agreed to begin at the end of 2003 to reduce their GHG emissions by 4% below the average of their 1998-2001 baseline by 2006 (Phase I) and by 6% by 2010 (Phase 2). For AEP, this means reducing a baseline of 165 MMT of CO2-equivalent GHG emissions by 1% annually between 2003 and 2006, an additional 0.25% in 2007 and 2008, 0.5% in 2009, and an additional 1% in 2010.
CCX Membership
CCX members collectively account for 275 million tons of GHG emissions annually (~5% of U.S. carbon dioxide emissions in 2000) and represent a cross-section of over 80 public and private sector North American entities, including Ford Motor, International Paper, IBM, American Electric Power, Manitoba Hydro, Amtrak, the City of Chicago, Boulder, Oakland, universities such as University of Minnesota and Oklahoma, as well as other environmental innovators, such as World Resources Institute, Pax World and the Rocky Mountain Institute. Since AEP’s demonstration of leadership in helping to found the CCX, three additional electric power generators have joined. In September 2005, AEP announced its commitment to extend its CCX membership through 2010 and to further reduce its GHG emissions to six percent below the baseline
AEP Approach
Anticipating the need for market-based systems to enhance the economic efficiency of multilateral approaches toward addressing global climate change, the CCX is a pioneering effort to establish multi-sectoral, multi-national systems for trading credible GHG reductions on a voluntary basis. By enabling flexibility in the methods (across a range of six different GHGs), location (across four countries), and timing (across multiple years, with credits for early action and limited banking of excess reductions) of these reductions, the CCX facilitates price discovery and rewards innovations in technology and management. Such reductions are to be achieved through self-regulated, rules-based, and legally-binding exchanges of quantifiable, verifiable GHG emission reductions and offsets that result from projects in the United States, Canada, and Mexico, as well as from offset projects in Brazil. GHG emissions reduction commitments can be met through any combination of direct reductions, emissions offset projects such as methane capture or forest sequestration, early action credits for forestry projects undertaken between 1995-1998, and CCX purchases. AEP has undertaken projects including plant efficiency improvements, unit retirements/mothballing, nuclear availability improvements, forestry projects, SF6 programs, wind power purchases, and new plant proposals.
AEP Perspective
With risk, comes opportunity. As the largest generator of electric power in the United States, AEP also ranks among the leading emitters of GHGs in the United States. Recognising the responsibility that comes with its position in industry, the company has also identified unique advantages that could be realised through joining the ranks of the founding members of the CCX. The chance to help shape the rules of the pioneering GHG market in North America brings with it the opportunity to help establish important precedents that will shape future approaches to market-based GHG reductions. Furthermore, participation as a CCX founder also has stimulated early innovation in management and technology that could provide competitive advantages for AEP in a carbon-constrained environment. The fruits of AEP’s participation in the CCX’s Phase I pilot programme have been convincing enough to lead the company to extend its participation through 2010, with the expectation that our leadership and commitment will result in additional opportunities and credibility.
ENEL
Initiatives on CDM and JI
In addition to reducing the emissions of the generation plants operated by Enel, a substantial element of the company’s GHG strategy is an aggressive use of the opportunities offered by project-based mechanisms to obtain carbon credits: Certified Emission Reductions (CERs) under CDM and Emission Reduction Units (ERUs) under JI. Enel plans to capture these opportunities in different ways, including:
Enel is undertaking a number of actions, whose main results are expected in the 2008-2012 commitment period. These actions are sometimes undertaken in cooperation with the Italian government.
Investments in Carbon Funds
In Enel’s view, dividends from carbon funds should cover approximately 20% of the emissions reductions needs of the company in 2012. Enel is finalising its participation in two funds. One of these is a private fund, whose target portfolio amounts to several tens of million tons. This fund is characterised by a high degree of diversification in terms of number of projects, technologies and geographical areas. It has signed with sellers a number of letter of intents, which already cover some tens of million tons.
The second one is the Italian Carbon Fund (ICF), set up by the Italian Ministry of Environment with an initial funding of US$ 15 million. The target is to collect US$ 80 million. ICF is maintained as Trustee by the World Bank – International Bank for Reconstruction and Development (IBRD) and follows precise rules for diversifying investments in terms of both projects and host countries.
Direct Purchase of Credits
This component of Enel’s GHG strategy consists of taking on the risk of registering a potential CDM or JI project. Through long-term contracts, the project developer is guaranteed an additional flow of revenues, while Enel acquires all the credits generated by the project. Under this scheme Enel is not involved in project development activities in areas and/or countries which are not included in its business.
A year ago, Enel began activities in China within the framework of a memorandum of understanding (MOU) with the Italian Ministry of Environment, which is carrying out a comprehensive cooperation programme with the Chinese government.
Enel is making available its expertise in the energy sector to identify opportunities and is playing an intermediary role between the public and the private sectors. At the same time Enel is taking advantage of the network already established by the Ministry to seize opportunities as a CERs buyer and obtain full control of the procedures related to the validation and certification of emissions reductions.
China’s potential is estimated at over 100 million tons/year. The database so far developed within the framework of the MOU includes over 130 projects: 19 wind energy, 62 hydro, 10 energy efficiency, 14 coal mining, 15 landfill, 11 HFC-23 and 2 N2O projects, plus a number of efficient household stoves, coal-fired heating boilers and swine manure projects.
Enel is presently preparing to extend to Russia and India activities aimed at purchasing credits from project developers.
Development of own Projects
Enel has power generation activities not only in Italy, but also in Spain, Bulgaria, Romania, Russia, North America and Central America and has recently signed a contract for the acquisition of assets in Slovakia. Enel is a worldwide leader in renewable energy generation and is very active in further developing its capacity in Latin America. Some of these projects (in particular geothermal and hydro) are presently being developed as CDM. Total yearly potential of this pipeline could reach approximately 1 million tons towards the end of the Kyoto commitment period.
ONTARIO POWER GENERATION
** Contribution to be determined **
RAO UESR
** Contribution to be determined **
e7 GROUP
The e7’s first registered Clean Development Mechanism project
The e7 Bhutan Micro Hydro Power Project has been officially registered as a Clean Development Mechanism (CDM) project under the terms of the Kyoto Protocol. Not only is this the first CDM registered project for the e7, an international group composed of ten leading electricity companies from G8 countries; it is also the first project to be registered in the Himalayan Kingdom of Bhutan.
The CDM Executive Board of the United Nations Framework Convention on Climate Change (UNFCCC) made the announcement on May 23, 2005.
The project, led by Kansai Electric Power Co. (Japan) with the participation of Electricité de France (France), Hydro-Québec (Canada) and American Electric Power (USA), was carried out in close collaboration with the Bhutan Department of Energy/Ministry of Trade and Industry, the Ministry of Finance and the National Environment Commission, as well as ministries of Communications, Health and Education.
The small-scale hydro power station is located on the Lamchela Chu river, at 2 500 metres above sea level in an area of steep mountains approximately 150 km from the country’s capital, Thimphu. The run-of-the-river type facility, which will generate an output of 70 kW, will supply electricity to approximately 50 households, a dispensary and a school in the village of Chendebji. The project aims to promote rural electrification in the Kingdom of Bhutan, where the electrification rate remains as low as 20%.
The e7 conducted a full environmental impact assessment and drafted the design and construction works. A Bhutanese contractor won the international call for tender in the spring of 2004 and began construction in August 2004. Consisting of an intake, settling basin, 800-metre penstock, powerhouse and distribution lines, the project is expected to be completed in July 2005.
During public consultations held in Chendebji in 2003 and 2004, the villagers expressed their desire to have access to electricity and explained that they had witnessed the economic development brought about by electrification in other villages in Bhutan. Access to electricity will bring major improvements to the lives of the villagers, including:
To further reduce the use of wood for cooking and heating, the e7 will facilitate the purchase of rice cookers and water boilers for each household in the village and look at installing improved cooking and heating stoves, and better ventilation at the village school. Not only will these actions have a positive impact on the health of particularly women and children, who spend many hours a day in poorly ventilated houses with open fires; it will also free up time currently spent in gathering wood. This is of particular importance as the village is located on the edge of one of the largest and richest natural conservation areas in Bhutan.
In undertaking the Bhutan project as a CDM, e7 hopes to demonstrate the viability of small-scale projects, identify any obstacles to the CDM process and share its findings with the CDM Executive Board in an effort to streamline and improve the procedure.
The e8, comprising ten leading electricity companies from the G8 countries, was formed in 1992 following the Rio Summit to examine and co-operate on major global electricity-related issues, with an emphasis on the global environment and sustainable energy development.