Generating Carbon Credits in China

Generating Carbon Credits in China

Protecting Climate and Health in the Chinese Rural Energy Sector Professor Kirk R. Smith University of California, Berkeley In collaboration with the Center for Entrepreneurship in International Health and Development (CEIHD) Presentation at UNDP/MOST MDG-Carbon Facility Beijing, May 21, 2007 MDG Carbon Facility Is it possible to achieve both measurable and verifiable carbon credits?

as well as measurable and verifiable progress toward Chinas Millennium Development Goals? And, How does one handle trade-offs between the two, that is, Make a decision to go with a project that achieves more progress toward MDGs, but costs more per ton of carbon? Premises The energy sector is where carbon emissions and MDGs are most closely

linked Rural energy is the energy sector where these links are strongest in China MDG 4. Reduce child mortality. Official Indicators 13. Under-five mortality rate 14. Infant mortality rate 15. Proportion of 1 year-old children immunized against measles Rural Energy Mortality/morbidity from pneumonia Incidence of low birth weight

MDG 5. Improve maternal health. . Official Indicators 16. Maternal mortality ratio 17. Proportion of births attended by skilled health personnel Rural Energy Mortality/morbidity from chronic obstructive pulmonary disease (COPD) Mortality/morbidity from lung cancer MDG 1. Eradicate extreme poverty

and hunger. Official Indicators 1. Proportion of population below $1 (PPP) per day 2. Poverty gap ratio [incidence x depth of poverty] 3. Share of poorest quintile in national consumption 4. Prevalence of underweight children under-five years of age 5. Proportion of population below minimum level of dietary energy consumption

Rural Energy Fuel costs per person-meal. Time spent cooking. Time spent obtaining and preparing fuel Economic modeling of the effects of expanding rural energy activities Total Rural Energy in China: 2005

Electricity 7% Kerosene 2% LPG 1% Crop wastes 33% Coal 35%

Biogas 1% Wood 21% Ministry of Agriculture Village Biomass Storage Mixed Fuels Portable coal briquette stove, Shaanxi

Coal heating and cooking stove with chimney installed for winter, Shaanxi Cooking and heating stove without chimney, Shaanxi Also used for kang (heated platform bed) Improved Biomass Stoves in China

More than 180 million introduced since 1983 Health Impact in China Indoor air pollution from household solid fuel use 2002 (WHO) Children: 21,000 premature deaths from pneumonia Women: 342,000 from COPD 18,000 from lung cancer Burden = 3.2 million DALYs Disability-adjusted life years lost standard international metric for combining mortality and morbidity

1.6% of national burden of disease in China Cumulative distribution of PM10 estimates in cites Selected World Regions North America 1.00 0.80 Western Europe 0.60 India

AmrA EurA SearD 0.40 WprB China 0.20 0.00 0

50 100 150 PM10 From the Outdoor Air CRA: WHR-2002 200 250

Chinese Burden of Disease from Top 10 Risk Factors Plus Selected Other Risk Factors Alcohol Blood pressure Tobacco Underweight Occupational hazards (5 kinds) Indoor smoke from solid fuels Overweight Road traffic accidents* Direct Energy Impacts

Low fruit & vegetables Cholesterol Unsafe water/sanitation Urban outdoor air pollution Lead (Pb) pollution Physical inactivity Unsafe sex Climate change 0% 1%

2% 3% 4% 5% Percent of All DALYs in 2000 6% 7%

Carbon from Rural Coal Ministry of Agriculture: 167 million tons coal used in 2005 About 450 million tons CO2 About 10% of Chinese emissions Triple Carbon Balance: Energy (Smith, 1994) Triple Carbon Balance: Health (concentrations

of pollutants) Triple Carbon Balance: Global Warming Potential How to quantify, verify, and value? Carbon Savings Fuel savings (CO2) plus improvements of combustion efficiency (CH4) Probabilistically weighted sample surveys with a subset of measurements: techniques originally developed in China and now being field tested in Mexico Can measure methane and other GHGs

as well Use global carbon market prices University of California (Berkeley and Irvine) Has developed standard methods for evaluating fuel use, indoor air pollution, and GHG emissions from household combustion devices Work started in India and China in early 1990s Now being used worldwide for fuel use and air pollution First field tests of GHG methods ongoing

in Mexico and Uganda. Summary of Slides Removed (unpublished data) Laboratory results do not match field results: Need to measure in real use in real households A few relatively simple measurements do well in predicting total GHG emissions Portable instruments do almost as well as lab instruments in monitoring emissions Probe does almost as well as the more difficultto-employ hood in determining emissions How to quantify, verify, and value? Mothers and Childrens Health

Apply peer-reviewed results of meta-analyses of health benefits from household energy improvements using standard epidemiologic risk techniques to estimate DALYs for each population group Probabilistically weighted sample surveys and subset of pollution measurements: techniques developed in China and now applied many places How to determine economic value? WHO/IBRD has developed methods and recommendations Commission on Macro-economics and Health, 2001

Recommended methods and criteria for setting priorities among health interventions based on DALYs: saved healthy life years Cost: in terms of local income levels Adopted by World Health Organization and World Bank Recommendations Very Cost-Effective: Less than the local $GDP/capita per DALY should be considered part of primary health promotion and be undertaken as quickly and widely as possible.

Cost-Effective : Between one and three times the local $GDP/capita-DALY, interventions should be seriously considered and with appropriate attention to the needs of special populations, regions, etc; the cheaper ones should generally be undertaken first. Not Cost-Effective : More than three times the local $GDP/capita-DALY, interventions should be left to private markets and not be part of government or donor activities. Cost-Effectiveness Analyses Need to apply consistent criteria Need to stick to UNFCCC rules for CDM No need to depart from recommendations by

WHO/IBRD for health analyses Need to reflect standard financial analysis methods Is need to adjust discount rates and other protocols to bring the three types of analysis together DALYs - health Global Warming Commitments climate change including use of GWPs for combining GHGs Costs financial analysis Summary metrics for use in co-benefits scoping. Health

Climate Change Money Metric DALYs (Disability-Adjusted Life Years) GWC (Global Warming Commitment) International Dollars

Unit Years Tons CO2 equivalent US Dollars Formulation Years lost from premature death plus weighted years lost to disability

Tons CO2 plus tons other GHGs multiplied by their global warming potentials (GWPs) Local currency adjusted by its capability to buy standard market basket of purchases Kyoto Case

1% 100-year ~ 0.7% 3% Base Case 3% 20-year ~ 4.3% 3%

Financial Case 3% 20-year ~ 4.3% 6% Discount Rates Health Impact in China Indoor air pollution from household solid fuel use 2002 (WHO)

Children: 21,000 deaths from pneumonia Women: 342,000 from COPD 18,000 from lung cancer Burden = 3.2 million DALYs If half reduced, at $4500/DALY (3x GDP/cap) = $7.2 billion/yr Without credit for poisonous coal Carbon from Rural Coal Ministry of Agriculture: 167 million tons coal used in 2005 If half could be saved: 260 million tCO2 at $15 = $3.9 billion/yr

If combustion efficiency could be increased so that the methane emissions are reduced from the remainder, depending on GWP, perhaps an additional $2 billion/yr could be had What Rural makes is Linked to sense Three to

Sectors do first? HowEnergy Much to Spend to Major Support RED? MDG Health Goals Global Climate

$ per ton-carbon (world carbon market) Rural Energy Development 1-3x $GDP/capita per DALY saved (WHO/IBRD, etc. recommendation) First projects: Substitute fuels and stoves for

Local Market poisonous coal in China: >50 million people. Relatively easy and noncontroversial carbon Economic and health calculations. Development Good start to establishing methods. Area denotes the total Social Benefit in International Dollars from the combined value of carbon offsets (valued at 10$/tCO2e) and averted DALYs ($4500/DALY, which is three times the Chinese GDP/capita. Blue represents the proportion of the total social benefit from averted DALYs

Yellow represents the proportion from carbon offsets. Source: Smith & Haigler, in prep Initial Pilot Project A near-term pilot project can be designed immediately to demonstrate the feasibility of combining MDG indicators and carbon finance. As an example, indoor air pollution monitoring and fuel savings data can be collected as MDG indicators in a program to generate carbon credits from the replacement of inefficient household coal stoves with high-efficiency gasifier stoves that use processed crop residues as fuel.

Such a model project would provide relatively quick proof of method. MDG Carbon Toolkit Develop an MDG Carbon Toolkit that can be used by rural energy project developers for a wide range of project activities. To create this handbook, invite a select group of experts to prepare and present analyses on modeling benefits of investments in rural household energy, including experts from UC Berkeley as well as academics in Norway, the Netherlands, and several Chinese universities. This conference will assist provincial officials and others to think about how to score poverty alleviation along with

carbon credits, health improvements, and other indicators of progress on MDGs. Economic modeling tools will be included Provincial-level pilot Pilot and validate the MDG Carbon Toolkit in a province, likely the same location where the conference was held. This might further involve the organization of an institution to oversee the implementation of projects with funds from the carbon offset facility. What we are already doing

CAREI: Promoting renewable and efficient energy in rural areas of China UC Researchers Pioneered methodologies for measuring GHG emissions and indoor air pollution, many initiated in China Conducting health effects studies of household fuel interventions Conducting method development for co-benefits calculations Modeling economic benefits in developing countries CEIHD: Disseminating tools for M&E, e.g. protocol for fuel use assessment Venture Strategies: Acting as project developer for improved stove project in Uganda. Writing PDD and

developing M&E for carbon offset funding Kirk R. Smith Professor University of California Berkeley Thank you

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