1. A domestic offset system for Ireland
Alyssa Gilbert
Siobhan OKeeffe
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2. Ireland has a challenge ahead
Current situation:
Effort Sharing Directive: reduce non-ETS emissions by
20% by 2020
Ireland’s emissions are projected to be approximately
7.6m tonnes of CO2e higher in 2020 than the ESD
target for that year
Agriculture is the largest source of emissions,
representing 29.1% of total national emissions in
2009, and approximately 40% of non-ETS emissions
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3. A domestic offset system for Ireland
Overall objectives:
Assess the transformative potential of Domestic
Offsetting projects in the Irish economy:
Could domestic offsetting encourage best practice?
Could domestic offsetting assist in the long term
transformation to a low carbon society?
Could domestic offsetting promote the development of
enterprises involved in generation and trading offsets?
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4. The potential for DO in Ireland
Potential would depend on scheme design
Market-based approach provides flexibility
Cost-effective
Can drive innovation
External factors (EU schemes) must be considered
Will it drive deep, infrastructural change?
Conflict with other domestic policies?
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5. What is Domestic Offsetting?
Offset projects where project host and credit buyer
(investor) are in the same country
Scheme to develop offset projects in sectors that are
not included in the EU ETS cap-and-trade scheme in
order to promote the achievement of emission
reductions in these sectors.
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6. Country B (with Kyoto reduction target
Country A (with Kyoto reduction target) (JI) or without (CDM))
National UNCCC
Emissions Mechanisms
CDM. Projects
Sector A hosted in
(project developing
investor) countries.
JI. Projects hosted
in other countries
Sector B that also have a
(project Kyoto target
host).
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7. Conclusions
Encouraging best practice
Provides value to previously unrecognised savings
No limit on uptake
Increase GHG literacy
Must balance against other objectives
Food Harvest 2020
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8. Conclusions
Moving to a low GHG society
Incentivises activity in untapped sectors
Capacity building: R&D and ‘green collar’ jobs
Can complement existing initiatives
SEAI grants
Risk of low-GHG ‘bubbles’
Recommend a phased approach to community schemes
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9. Conclusions
Development of offsetting enterprises
Encourage developers/traders to Ireland
Create a need for validators/verifiers
R&D creates exportable IP
Ireland as innovation test-bed
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10. Barriers & Benefits
Barriers Benefits
Other schemes more Creation of a price signal
suitable – building sector Additional/more efficient
Not suitable for very small incentive for abatement
players Benefit to early movers
‘Difficult’ sectors Innovation
Non-additionality may
worsen emissions balance
Interaction of other policy
measures – needs to be
further explored
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11. Abatement potentials and costs
€/t
Name Description Mt CO2
CO2
Built Abatement relative to FTRL in
820 <0
Environment 2020
Abatement relative to FTRL in
Industry 700 <0
2020
Abatement relative to FTRL in
Transport 270 < 100
2020
Abatement relative to baseline in
Agriculture 160 190
2020
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12. Identifying potential schemes
Existing schemes have different styles, e.g.
NSW GGAS
New Zealand
France
All about balancing priorities:
Where does demand come from?
What’s the abatement potential?
What are the costs?
Scope of the scheme?
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13. Designing a DO scheme
Drivers:
Targeted emissions reductions
Creation of export opportunities
Whole economy GHG reductions at least cost
Design elements:
Scope
Sectoral or project-based?
Administration
Funding
Fungibility
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14. 3 DO structures for Ireland
1.Government buyer
2.Domestic ETS
3.JI Framework
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15. Sector focus:
Transport Waste Agriculture Buildings (Commercial and residential) Non-ETS industries
Scheme costs are more a structural issue.
Admin costs should not be overly high - Potentially higher administration costs in terms
Scheme costs more a structural issue participants more straightforward to identify than of establishing project boundaries and
Scheme costs are more a structural issue (see Table 1).
(see Table 1) for some other sectors; MRV and project monitoring reductions (need to address
Scale of costs in setting up boundaries should be reasonably permanence).
scheme straightforward
Emissions reductions achieved will
count towards Ireland's target under the
Effort Sharing Directive (and
consequently Kyoto target). Biofuels No sector-specific issues: emissions reductions achieved will count towards Ireland's target under the Effort Sharing Directive (and consequently Kyoto target). Renewable energy projects can also
Potential to contribute to projects can count towards EU Fuel count towards EU Renewable Energy Directive
EU and Int'l legally binding Quality Directive and Renewable
targets (and threat of Energy Directive
double counting)
Vehicle Registration tax exemption for
Participants under the REP scheme would likely
electric vehicles, Biofuels Obligation
be excluded from hosting offsetting activities, as DO can act as a complement to the Energy
(2010), Mineral Oils Tax Relief Scheme
it would not be in line with their agri- DO can act as a complement to the Energy Map MAP for SMEs. Interaction with the Energy
for non-fossil fuels and carbon tax of 15
Carbon tax of 15 Euros/tCO2. Effect of the environmental plan. BioEnergy Scheme and for SMEs service. Carbon tax and domestic and Agreements Programme should be minimal
Euros/tCO2 for non-EU ETS sectors
landfill levy must be included in assessment of national carbon tax should be taken into account commercial grants (Greener Homes Scheme etc) due to the size of the different entities. The
can affect offset additionality. In Option
IRR of relevant entities. during additionality tests. DO scheme can also need to be factored in to tests for additionality. national carbon tax must be taken into account
Interaction with other A a purchase price fixed higher than
contribute to national target of 17% forest land when assessing additionality
potential climate policy other instruments could negate their
cover by 2030.
instruments (risk of value.
perverse incentives)
Some non-ETS industries could see
No specific sectoral issues. Project There are no plans for commercial or residential themselves brought into the EU ETS in later
Widely acceptable offsetting methodologies for
additionality may be threatened by the buildings or projects to be included in EU ETS. A phases, as the scheme expands. They would
forestry and land use could be introduced,
development and increased uptake of No specific sectoral issues. small number of buildings may be included due to then no longer be eligible for inclusion in a
leading to greater certainty and confidence in
new cleaner vehicle technologies (e.g. combustion. Permanence could be an issue if domestic scheme. Permanence could be an
LULUCF offsets.
electric cars/hydrogen vehicles). behavioural change is included in the measures issue if behavioural change is included in the
Future scenarios measures
Potential overlap of abatement opportunities
Abatement opportunities could be Sector holds a large number of potential
Limited as small number of potential participants International flexibility limited as LULUCF credits with the buildings sector, however this could be
reduced as clean fuel alternatives abatement opportunities (due to large number of
with financially feasible abatement opportunities not eligible in EU ETS overcome through careful sector definitions in
become more commercial properties).
Market Flexibility the final scheme
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16. The pros and cons of different
structures
Additionality
Interaction with other policies
Carbon Leakage
Who pays?
Double counting
Market Flexibility
Future scenarios
Dependent on structure AND on sector
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17. Conclusions
Which design option best fits the objectives?
2.Domestic ETS
Mandatory cap drives demand
Allows for large scope
Flexibility for sectoral or project-based approach
Avoids transfer of credit outside Ireland
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18. Option A Option B Option C
Government Buyer 'Classic' DETS JI/EU ETS linkage
Largest overall cost to the government as commits to
Largest administrative costs although costs can
Financing? Self financing and how? Raises funding all offsetting activity. However could hand day be passed on to participants via auctioning and Administration costs to Ireland are low as largely are
govt revenues? Scale of costs in setting up to day oversight (and costs) to external 3rd party, or covered by UNFCCC.
surrendering of DETS allowances.
scheme could charge a registration fee for participation.
Threat of double counting exists if equivalent AAUs are
not cancelled when credits are sold or submitted for
compliance externally.
No real risk of double counting.
Potential to contribute to EU and Int'l legally Also, if majority of credits are kept for internal
binding targets (and threat of double reductions then becomes very similar to Option A as
counting) government would be key purchaser
See sector table. More limited in relation to other
Options as not all non-ETS sectors can host
See sector table. No structural issues See sector table. No structural issues
offsetting activity. Internal abatement in capped
Potential costs and abatement sectors still possible however.
Ease of participation similar across all 3 options.
Ease of participation similar across all 3 options.
Incentive for project developers in that there is an
Incentive provided in Option A via guaranteed point of Ease of participation similar across all 3 options.
established platform for sales, and large potential
sale for project developers. If purchase price is fixed Strong incentive as allows for obligated sectors to
demand via EU ETS (if Irish government doesn't
then there is no incentive for opportunities with an mitigate costs of DETS participation.
arrange for credits to count towards IE Kyoto
abatement cost higher than this price
Incentive for/ease of participation compliance).
DETS participation could serve as opt-out
Possible overlap in some sectors with other measure to national carbon tax, although host Possible overlap in some sectors with other
Interaction with other potential climate policy measures/incentives, but this can be addressed by sectors would remain obligated. Other policy measures/incentives, but this can be addressed by
instruments (e.g. risk of perverse incorporating into final scheme design conflicts may exist at a specific sector level but incorporating into final scheme design
incentives) can be addressed in planning
Scheme could continue indefinitely until
Scheme sustainability strongly linked to future of JI,
Sustainability of scheme linked to purchase- abatement opportunities exhausted/no longer
although potential under Linking Directive for inclusion
commitment threshold. At this point could segue into economically feasible. Possible later direct or
of domestic offsets could create a driver separate from
Option C. indirect linkage to EU ETS or other international
UNFCCC mechanisms
Future scenarios ETS.
Strong flexibility as level of abatement determined
Established platform for sales, abatement incentives
No market flexibility as only one buyer and fixed by stringency of DETS cap.Fewer eligible 'host'
fluctuate with ERU price. Activities can take place in all
purchase price sectors although capped sectors can still choose
non-ETS sectors
Market Flexibility to abate internally.
Additionality more a sectoral concern. No inherent structural features in any Option that would cause significant concerns over additionality
Additionality/Env Integrity
JI MRV standards already in existence and would be
Sectoral approaches still relatively untested in Project-based approach could allow to later easily applicable, although for some sectors
comparison to project-based mechanisms, causing linkage of DETS to EU ETS. Well-established programmatic approaches would be advisable. MRV
greater risk and uncertainty. Greater scientific MRV standards that could be adapted to Irish activities will need to be carried out by approved JI
uncertainty could allow for free riders. context verifying entities (AIEs).
Applicability of international MRV standards
Voluntary participation should mitigate risk of Voluntary participation should mitigate risk of
Risk of international leakage as production could
17 international carbon leakage but accidental intra- international carbon leakage but accidental intra-
move to non-capped sectors in other EU countries
Carbon Leakage issues sectoral leakage could be a risk in some cases sectoral leakage could be a risk in some cases

19. Transport Waste Agriculture Buildings (Commercial and residential) Non-ETS industries
Environmental integrity could be threatened Standard additionality tests are advised.
around issues to do with permanence and Additionality can still be achieved in presence of
Environmental integrity: As a sectoral
leakage. The sequestration potential of some other incentives/policies if clear rules of
approach is strongly recommended for
Standard additionality tests are advised. land use projects remain unclear and will need exemption from other benefits are established. Standard additionality tests are advised.
domestic offsets in the transport sector,
Additionality can still be achieved in presence of to be assessed in the long term before they can One concern over environmental integrity can be Additionality can still be achieved in presence
concerns over the greater inaccuracies
other incentives/policies if clear rules of be incorporated into a DO scheme. drawn from lesson learned in the UK energy of other incentives/policies if clear rules of
inherent in sectoral monitoring and
exemption from other benefits are established. Existing reforestation and sustainable land use efficiency CERT scheme. Credits for measures exemption from other benefits are established.
baseline-setting must be
policies such as the afforestation grant and such as insulation and CFLs could be discounted
acknowledged.
premium scheme must be taken into account to account for units that are not taken up by
when establishing additionality requirements. residents.
Additionality/Env Integrity
Existing international LULUCF methodologies
Several widely accepted methodologies detailing not universally accepted, due to worries over
Relatively simple CO2 baselines can be Since non-ETS industries are diverse, not
MRV procedures for waste offsetting projects permanence, monitoring and baseline
established for buildings projects. However, always energy-intensive and can be a 'hard to
Monitoring of transport activities within a are in existence. These include IPCC National determination. A sectoral approach may be
projects often have a small-scale, so a reach' sector for policymakers, however offset
non-ETS offset project can be GHG Inventory Guidelines for waste, as well as advisable, although greater scientific uncertainty
programmatic approach may be necessary activities are likely to relate to the built
burdensome and often only sample CDM/JI and VER offset methodologies. Larger must be accepted. Project-based
Again, WRI GHG Protocol, IPCC GHG guidelines environment and energy efficiency, for which
based monitoring is feasible waste facilities may also be captured in EU ETS methodologies for other types of agricultural
and existing offset methodologies provide useful existing robust MRV guidelines can be
and their reporting practices could also serve as project (mainly anaerobic digestion of livestock
Applicability of robust templates for MRV. implemented.
a template. waste) are well established.
international MRV
standards
Large agricultural projects may shift activities in
Carbon leakage could be an issue for
ways that were not intended, e.g. a land use
some subsectors of transport, Carbon leakage would be expected to be less of
change project in one location may displace
particularly those that compete an issue for this sector. Commercial inhabitants
another project in another area,or lead to
internationally (eg some freight of buildings would not be expected to move
clearing of land to replace lost land used for For larger, multi-national non-energy intensive
companies); however for those Low threat of leakage since sector tends to be countries on account of climate policies,
food cultivation. Market-based leakage can organisations (e.g. in pharmaceutical or IT
subsectors which may be more nationally not internationally focussed particularly since energy would not be expected to
occur where a project may alter the supply and sectors) a threat of international leakage exists
nationally focussed (bus and train be a significant cost for these companies
demand forces of agricultural product markets,
transport, car hire companies, vehicle (compared to other sectors). The same would be
e.g. where large forestry projects might reduce
retailers), carbon leakage would be expected for residents
the supply of timber. Interaction with food
expected to be less of an issue.
imports should also be considered.
Carbon Leakage issues
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20. Thank you
Siobhan O'Keeffe
Ecofys UK
+44 (0)207 423 0993 (direct dial)
+44 (0)7766 227 139 (mobile)
Email: S.OKeeffe@ecofys.com
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