Global Methane Initiative

International Incentives for CMM Projects

Clark Talkington Advanced Resources International

Global Methane Initiative Coal Mines Subcommittee Meeting

November 7, 2019

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Methane Initiative

Types of CMM Project Incentives

Emission reductions credits Tax credits Renewable energy credits (RECs/AECs) Feed-in or “Green energy” tariffs Subsidies Import waivers Exploration grants Regulatory incentives Research grants Other policy-based initiatives

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Methane Initiative

Emissions Markets: Market Coverage

Allowances - larger sources in covered sectors.

May allow offsets for price containment. – CMM is usually an offset

Specific national/sub-national policies and voluntary carbon markets may be applicable to CMM projects.

Source: ICAP 3

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MECH ANISMIN THE PARIS AG REEM ENT

Global stocktake

Secretary­General 's Climate Summit +,••·•· .:,::::. la • +-T Communicate Communicate

Ado_Ption of the Pans Rulebook

C new or new or

ommunicate updated NDCs updated NDCs

new or updated NDCs

Net-zero emissions & climate resilience

Global Initiative

Current State of Paris Agreement

Adopted 2015 Ratified by 187 of 197

signatories. Relies on NDCs – bottom up

rather than top down. – 175 countries included methane in

scope of their NDCs – Only 2 mentioned CMM specifically

The next round of NDCs will be submitted in 2020.

Major commitments announced at 2019 Climate Action Summit.

Source: UNFCCC, UN, UNECE 4

5

e m ~rdc.nonwmpllmL'Dil«~ e rn~«~IDf ~ (I/ ClrtlonWl~or sttlUllld. rni.ndcrconsloaralon e c.bonw~«:t.:hedulldillw ft rn~or!IEN!dule:lar11C>ncm<nf.-consldorzlon ~ a m ~rdart,onta ~ ~Ol'Sd'll«lia:1,m«armn • morart,onwurclcr consldcr~

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Regional, national and subnational carbon pricing initiatives selected: share of global greenhouse gas emissions covered

57

56

46 48 - -

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2015 2017 2018 2019 2020

Year of implementation

Global Methane Initiative

Emissions Trading Schemes/Carbon Taxes

57 markets 46 countries 20% of global emissions CMM offsets limited to a

small number of markets

Source: World Bank Group, 2019 5

6

~ 2,000 -

'd 1,800 -::e

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2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

■ CER issuance • • Cumulative CER issuance - Annual average secondary CER pric es

■ ERU issuance • • Cumulative ERU issuance

; 150 -o·

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125 -

100 -

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Liechtenstein carbon tax

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Finland carbon tax

F<ance ca<bon.

l':orway carbon tax

Alberta carbon tax. ArbErta CCIR

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Share of GHG emissions covered in lhe jurisdiaioo

Global Methane Initiative

Carbon Finance: Price Variations Carbon price, share of emissions covered and carbon pricing revenues

of implemented initiatives Sector coverage, allocation and compensation methods and specific exemptions may differ between initiatives.

Carbon price uncertainty – Supply and demand dynamics

Historic CDM and JI issuances and CER prices

Source: World Bank Group 6

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[YERRA I Gold Standard·

Climate Security!,. Sustainable Dei•elopment

(~, l~J ~

United Notions Climate Change Carbon Meehan isms

~ American ~Carbon

#1' Registry

<v' 60 -d" Id ~ ~ 50 -c: "' ;

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- VCS VCUs - Gord Sta n da rd VERs

Global Methane Initiative

Greenhouse Gas Markets: Voluntary

Voluntary vs Compliance Markets – Allowances and Offsets

Voluntary markets serve as an important testing ground for piloting new ideas.

Verra’s Verified Carbon Standard (VCS) and the Gold Standard are two of the largest voluntary standards.

Source: World Bank Group, CORE 7

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Methane Initiative

CMM Project Incentives: Country-Level*China and the U.S. addressed by other presenters on the panel

Country Incentives CMM

Offsets Feed-in-Tariffs

Tax Credits/ Exemptions

Royalty Agreements Grants Legal/

Regulatory Subsidies

Australia Canada Colombia Germany India Kazakhstan Korea

Implemented In development 8

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Methane Initiative

CMM Project Incentives: Country-Level*China and the U.S. addressed by other presenters on the panel

Country Incentives

CMM Offsets

Feed-in-Tariffs

Tax Credits/ Exemptions

Royalty Agreements Grants Legal/

Regulatory Subsidies

Mexico Poland Russia Turkey Ukraine United Kingdom

Implemented 9

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Methane Initiative

Example project: grant incentives

45 MW German Creek Power Station – Owned and operated by EDL in

Queensland, Australia. – Initially awarded an $11 million grant

under the GHG Abatement Program (GGAP) in 2001.

– Operations started in 2006- captures and combusts waste coal mine gas.

– Project converts gas to electricity for sale into the national electricity market.

– Abates roughly 1.3 million tonnes of CO2e per year.

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Methane Initiative

International Civil Aviation Carbon Market International Civil Aviation Organization (ICAO)

passed an Assembly Resolution for carbon neutral growth from 2021 onwards.

Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA).

Phased implementation: Pilot, First and Second Phase (2021, 2024, 2027).

79 states (more than 75% of global aviation performance) have agreed to voluntary participation between 2021 and 2026.

Expected to offset 2.5 billion tonnes of CO2. CO2 price unknown but could generate over

$40 billion (USD) in climate finance from 2021 to 2035

Source: ICAO, IATA 11

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Methane Initiative

Acknowledgements

Oleg Tailakov, Uglemetan (Russia) Meredydd Evans, Pacific Northwest National Labs Burke Plater, ARI Eric Ripley, American Carbon Registry

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Methane Initiative

Thank You!

Contact Information:

Clark Talkington Vice President, ARI

ctalkington@adv-res.com (703) 528-8420

Supported by US EPA under the auspices of GMI

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Appendix: Country Tables Country Incentives

Australia

• The Direct Action Plan- climate policy supports emissions reductions projects. • Recovered CMM is exempt from royalties in New South Wales (NSW) per the Mining

Act of 1992 and the Petroleum (Onshore) Act of 1991. • The Greenhouse Gas Abatement Programme (GGAP) supported the development of

CMM through the direct funding of four electric power projects worth over $30 million.

• Quebec- Voluntary GHG market: offset credits can be generated in cap-and-trade system through CMM (CH4) destruction. Canada • Alberta- GHG reduction program requires facilities emitting > 100,000 tonnes CO2e/year to reduce emissions intensity by 12%

• Per Decree 1886 of 2015, Article 59 states mine owners can use methane gas for generation or flaring, in line with internationally accepted practices, if feasible.

Colombia • A 40% reduction in royalties applicable to unconventional hydrocarbons. • Regulated entities can achieve emission reductions through recognized voluntary GHG

programs (i.e. VCS, CDM, etc.).

• Renewable Energy Sources Act provides a feed-in-tariff for authorized projects to generate electricity with CMM and AMM. Germany • The Federal Network Agency will pay a market premium for AMM and CMM generated power.

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Appendix: Country Tables Country Incentives

India • “Ease of Doing Business” initiatives to increase unconventional natural gas production-

relaxes rules on extraction of natural gas via CBM and CMM technology. • CMM/CBM production became exempt from price controls in 2017 under HELP.

• Recovered CMM is not taxed if coal mines use the gas onsite. Kazakhstan • CMM projects are eligible to earn emission reduction credits through the CDM.

• Working on a domestic offset system to include non-CO2 GHGs.

• Korean entities under the Korean Emissions Trading System (KETS) can meet up to Korea 5% of their compliance obligation with international offset credits.

• KETS KOC (offset) credit is priced at roughly $30 per t/CO2e

• Carbon tax excludes natural gas (CMM). Mexico • Voluntary carbon credit exchange supports a 7.95 Mwh CMM capture and energy-

generation project.

• CMM-based electricity is exempt from excise taxes. Poland • Utilities are obliged to purchase up to 2.3% of electricity from highly efficient

cogeneration, like CMM. 15

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ane Initiative

Appendix: Country Tables Country Incentives

Russia

• Ratified the Paris Agreement in September 23rd 2019, which is expected to stimulate CMM projects.

• Major coal producers have made public commitments to minimize emissions and make use of secondary fuels like CMM.

• Conditional on a royalty payment, foreign investors can transfer their capital payments after starting production. Turkey • Employment of foreign personnel is exempt from Law No 4817 for 6 months or shorter, allowing temporary working permits.

• 2009 Law on Gas from coal beds states that profits from the production and use of CMM are not subject to taxation from 2010 to 2020.

• The environmental tax on CMM emissions without utilization was increased by 11.2%, Ukraine to $3.50 USD/ton. • Safety standards require degasification measures before coal production in CH4-rich

seams.

United Kingdom • CMM and AMM projects are subject to a tax exemption from the Climate Change Levy.

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