Quantifying and Monetizing Quantifying and Monetizing Co-benefits: The Case of Pro-Co-benefits: The Case of Pro-

Poor Waste-to-Resource Poor Waste-to-Resource Strategies In Developing Strategies In Developing

Countries Countries

 

Quantifying and Monetizing Quantifying and Monetizing Co-benefits: The Case of Pro-Co-benefits: The Case of Pro-

Poor Waste-to-Resource Poor Waste-to-Resource Strategies In Developing Strategies In Developing

Countries Countries

 

 Paper by Lorenzo Santucci, Ingo Puhl, Abu Hasnat Md. Maqsood,

Iftekar Enayetullah and William Kojo Agyemang-Bonsu

PART I

NAMA DESIGN PRINCIPLES TO HARNESS SUSTAINABLE DEVELOPMENT CO-BENEFITS

NAMA Design Principle No 1:…a successful NAMA is driven by the value it generates towards domestic policy priorities.

•NAMA support/NAMA finance monetizes international willingness to pay (WtP) for climate related outcomes. Co-benefits are a decision factor but are not valuated per se’•Need to identify the existing domestic WtP and beneficiary mapping for co-benefits:

• How much does it cost society to treat a sick person? How much productivity is lost?• How much does it cost to clean up dirty water, or bring in clean water from elsewhere?• What is the value/willingness to pay for energy from waste? And for raw materials from waste?• What is the value of having poor people raising their income & reducing inequality?• What is the value of a more competitive economy (that generates more GDP)?

Key: identify the key entities/stakeholders that are willing to pay for such outcomes.

NAMA Design Principle No 2:…a successful NAMA has a mechanism to transfer value from those that benefit to those that create the benefit.

• Project developers need to benefit from the value they are producing to incentivize investment. What is the simplest way to transform society’s willingness to pay (i.e., environmental valuation) for those co-benefits into additional revenue for waste management projects?

• Tipping fees (this can be channeled by the beneficiary entity that receives savings for example)• Feed-in-tariffs• Tax exemptions / Subsidies• Carbon credit payments• Pay for performance schemes• …in general, result-based finance (RBF) schemes are very well adapted to this

Key: identify the NAMA financial architecture and mechanisms to channel that revenue

NAMA Design Principle No 3:…a successful NAMA has tangible, accessible and substantial incentives

•A NAMA must provide incentives for actions the CDM could not reach…

• CDM carbon credits were ex-post and not bankable:• They take three years to issue, prices are volatile, some red-tape and excessive bureaucracy. • Many banks in developing countries never recognized carbon credits as collateral.• NAMA incentives should include the value of local benefits.

•NAMA incentives needs to be “bankable”: easily accessible to qualified project-level implementers

• Mitigation impacts at the end of the day still result from on the ground investment decisions by private sector, municipal organizations, etc…

Key: identify the ideal set of incentives that will allow for the above

NAMA Design Principle No 4:…a successful NAMA requires inter-agency cooperation

•Agencies that are expected to benefit from impacts within their jurisdiction and the NAMA implementing entity, that coordinates the transfer of incentives to the implementers of NAMA’s underlying mitigation actions.

•Domestic benefits from NAMA accrue in different sectors which fall under the authority of different agencies (many times different than the NAMA entity). Therefore, the WtP for these benefits rests in different agencies.•NAMA “beneficiary agencies” and NAMA management entity need to cooperate and jointly design a financial mechanism that provides incentives to those that are expected to implement mitigation actions within the NAMA.

Key: identify the required NAMA institutional & regulatory set-up that facilitates the above

PART II

• Example of Ongoing Case Studies: Waste Management

Presentation Outline

I. Waste Generation Worldwide and In Developing Countries

II. Present Situation In Developing CountriesIII. What Is Waste to Resource Approach?IV. Economic Opportunities From Climate Change

Mitigation ProjectsV. Steps to Quantify and Monetize Co-benefitsVI. Way Forward

Waste Generation Worldwide and in Developing Countries

It is estimated that 5.2 million tons of solid waste are generated daily worldwide, of which 3.8 million tons are from developing countries.

5.2 million tons/ day Worldwide

3.8 million tons/ day Developing countries.

Waste Generation

60-70% organic 60-70% organic

Source: World Bank 2013, What a WasteSource: World Bank 2013, What a Waste

LEACHATEPolluting Ground& Surface Water

VERMINSSpreading more than

40 Diseases

METHANE GASBad Odor &Green Housegas

Current approach: waste management not resource recovery…

PROBLEMS FROM PRESENT PRACTICE

80% Compost

6-10% Recyclables

10-14% Non-compostable

GHG Reduced

Agriculture

CER

Local market

Landfilled

IRRC

100% Collected with user fee

House-to-house waste collection method

86% RECYCLED

Waste

EnergyRefuse Derived Fuel

What is Waste to Resource Approach? Since 2007, the United Nations Economic and Social Commission for Asia and the Pacific (ESCAP), in partnership with Waste Concern, has been promoting decentralized and Integrated Resource Recovery Centers (IRRCs) in secondary cities and small towns in Asia-Pacific with the objective to recover value from waste and provide livelihood opportunities to the urban poor.

IRRC is a facility where significant portion (80-90%) of waste can be composted/recycled and processed in a cost effective way near the source of generation in a decentralized manner. IRRC is based on 3 R Principle.

2009 2010 2011 2012 2013 2014 2015January 10.37775 11.65613 11.29042 4.4433 0.420182 0.456273 0.03February 8.9878 11.54475 11.7965 5.02381 0.3665 0.4692 0.38March 10.68018 11.5338 12.96922 4.689364 0.3598 0.361048 0.39April 11.1527 12.589 13.54568 4.320526 0.327524 0.3163 0.50May 12.3952 12.90513 13.22667 3.927913 0.417826 0.247818 June 11.743 12.85943 12.16909 3.965143 0.5054 0.224762 July 12.41739 12.02466 10.48981 3.620364 0.582609 0.306 August 12.93619 12.52295 9.174609 3.202957 0.334545 0.31 September 12.56833 13.34953 8.805909 2.3412 0.671905 0.289455 October 12.79182 12.95286 7.757619 1.682783 0.56687 0.266435 November 12.43595 11.85545 6.779273 1.055909 0.45181 0.3511 December 12.2381 11.42254 5.2501 0.591158 0.4343 0.443111 Yearly Avg. 11.72703 12.26802 10.27124 3.238702 0.453272 0.336792 0.31

Source: https://www.theice.com/marketdata/reports/icefutureseurope/ECXCERIndex.shtml

CLIMATE CHANGE MITIGATION PROJECTS

Waste SectorWaste Sector

YES YES

Low price of Carbon Low price of Carbon Public/Private BenefitPublic/Private Benefit

ECONOMIC OPPORTURNITIES FROM CLIMATE CHANGE MITIGATION PROJECTS

GHG EMISSION REDUCTION

CO-BENEFITS

What is Co-benefit

How to Quantify and Monetize Co-benefits

The calculations and data reported here refer to a registered CDM composting project operated by Waste Concern in Dhaka, Bangladesh. The project was approved in July 2006 as a registered CDM project. Verification of CERs was completed by DNV in June 2011 and December 2013, and CERs have been issued from 2009 to 2012.

We have also collected and used data from our partner organizations (Sevanatha and ENDA) from Sri Lanka and Vietnam respectively to develop this paper.

Quantify emission reduction from composting of municipal organic waste Step 1

Collect baseline data for the co-benefit indicators identified

Collect baseline data for the co-benefit indicators identifiedStep 3

Collect data of quantifiable indicators after implementation of the project

Collect data of quantifiable indicators after implementation of the projectStep 4

Calculate the net co-benefits of the project Calculate the net co-benefits of the project Step 5

Step 2 Identify quantifiable impact indicators of the project apart from GHG emission reduction

Steps to Quantify and Monetize Co-benefits

Problem Co-benefits Co-Benefit Indicators

Type of Benefit

Baseline Data Condition After Implementation of the Project

Net Co-benefit

Unmanaged organic waste generates methane if kept anaerobic.

Aerobic composting technique can produce good quality compost and at same time avoid GHG emissions.

Amount of GHG reduced.

Public 0. 0.5 tons per ton of organic waste composted

0.5 tons per ton of organic waste composted.

Reduce 0.5 tons of CO2eq GHG emissions by recycling 1 (one) ton of organic waste

GHG Mitigation through Composting of Organic

Emission Reduction by Processing 1 (one) ton of organic waste

SL Problem Co-benefits Co-Benefit Indicators

Type of Benefit

Baseline Data Condition After Implementation of the Project

Net Co-benefit

1 Lack of job opportunities for poor prevailing in the towns and cities.

Can create safe job opportunity for waste pickers engaged in recycling of mixed waste without any protection.

Number of safe jobs created for low income people and waste pickers.Increase in income of workers by having safe jobs.

Both public and private

Average income of waste picker in is Taka 2600 per month out of which 15% are medical expenses per month. Average disposable income is Taka 2210 per month.

2 jobs per ton.Average income of waste pickers working in the plant is Taka 7000 per month.

2 jobs per ton.Average increase in income of waste pickers by working in the compost plant is Taka 4400 per month.

Creation of New Jobs= 2 nos.

Create 2 new jobs for the urban poor,

including waste pickers

Co-benefits of recycling 1 (one) ton of organic waste

SL Problem Co-benefits Co-Benefit Indicators

Type of Benefit

Baseline Data Condition After Implementation of the Project

Net Co-benefit

2. Unmanaged organic waste full of nutrients are remaining unutilized and creating pollution.

If waste is segregated properly and appropriate technology is used, compost can be produced and used in the agriculture.

Amount of compost produced.

Both public and private

No compost plant was operational in city using the market waste.

200-250 kg per ton of organic waste treated.

200-250 kg per ton of organic waste treated.

Produce 0.20-0.25 tons of good quality compost

Co-benefits of recycling 1 (one) ton of organic waste

SL Problem Co-benefits Co-Benefit Indicators

Type of Benefit

Baseline Data Condition After Implementation of the Project

Net Co-benefit

3. Land for landfill sites are becoming scarce in most of the developing countries due to increase in land price and environmental regulations.

Composting can save landfill areas as well as land filling cost for the local governments.

Amount of waste diverted.Cost saved for the municipality from disposal of waste.

Public In the baseline scenario, no waste is diverted towards composting.city spends Taka 600/ton for transportation of waste and Taka 300/ton for landfilling of waste.

1.1 cubic meter of landfill area per ton of organic waste composted.USD 11.68/ton (transportation and landfilling cost)

1.1 cubic meter of landfill area per ton of organic waste composted.USD 11.68/ton (transportation and landfilling cost).

Save 1.1 cubic meter of landfill area

Co-benefits of recycling 1 (one) ton of organic waste

SL Problem Co-benefits Co-Benefit Indicators

Type of Benefit

Baseline Data Condition After Implementation of the Project

Net Co-benefit

4. Due to heavy use of chemical fertilizer, lack of crop rotation, high cropping intensity, drought, and other reasons, the soil is losing its fertility thus causing threat to food security.-Chemical fertilizer cost is subsidized by the government.

-Use of compost can lower the use of chemical fertilizer at the same increase crop yield due to improved. -Increase in crop yield of 0.21 ton per of rice per half ha Consideration: from 2 tons of waste 0.5 ton of compost can be produced

Increase in crop yield per hectare.Amount of chemical fertilizer avoided by use of compost.-Expense of subsidy on chemical fertilizer reduced 25%.

Public and Private

Yield: 4.16 tons/ha

(BIRRI Rice 46) NPKS @80-35-40-10 kg/ha) + no compost Taka 19,676 /ha (excluding fertilizer application and labor cost).-Amount of subsidy on chemical fertilizer by the government of Bangladesh is Taka 7793.17/tons.

Yield: 4.58 tons/ha

(BIRRI Rice 46) 75% NPKS @80-35-40-10 kg/ha) + 1 ton/ha compostTaka 18,161/ha (excluding fertilizer application and labor cost)-25% subsidy on chemical fertilizer saved.

0.42 tons/ha (BIRRI Rice 46) which has a value of Taka 7560.25% savings in use of chemical fertilizer resulting in savings of Taka 1515/ha.

-use of compost can increase crop production between 25-30% and reduce use of chemical fertilizer by 25-35%-25% less subsidy on chemical fertilizer.

Co-benefits of recycling 1 (one) ton of organic waste

Type of Benefit

Sector of Benefit

Co-Benefits/ GHG emission reduction Value of Co-benefits/ GHG emission reduction

Public and Private

Social Sub sector: Employment generation

Creation of additional income for four waste pickers by working in the compost planConsideration: 4 jobs created to process 2 tons of organic waste to reduce 1 ton CO2eq

US $ 7.53

Public Economic Sub-sector: urban/municipal

Cost saved for the municipality from disposal of wasteConsideration:1.1 cubic meter of landfill area per ton of organic waste composted. US$ 23.36 saved by avoiding 2 tons of organic waste to be land filled. Presently USD 11.68/ton spent for (transportation and land filling cost)

US $ 23.36

Private EconomicSub sector: agriculture

25% saving in chemical fertilizer usage by use of compostConsideration: 25% savings in use of chemical fertilizer resulting in savings of Taka 1515/ha.

US $ 9.71

Public Economic Sub-sector: Agriculture

25% less subsidy on chemical fertilizer Consideration: At present Government of Bangladesh (GOB) is giving BDT 7793.17/Ton on chemical fertilizer.

US $ 4.13

Private and Public

Environmental and Economical

Increase in crop yield of 0.21 ton per of rice per half ha Consideration: from 2 tons of waste 0.5 ton of compost can be produced

US $ 49.09

Total value of co-benefits per ton of GHG emission reduction through composting US $ 93.82

Potential Co-benefits by Reducing 1 (One) Ton of CO2e

2 Tons Organic Waste

if Processed into Compost

1 ton CO2eq

Reduced

Co-benefit TypeValue (US$)

Bangladesh Sri Lanka Viet Nam

Job creation: additional income for waste-pickers employed in compost plants

Social/Economic – Public & Private

7.53 6.00 N/A (*)

Cost savings for the municipality for avoided landfilling of waste

Economic – Public 23.36 57.50 69.70

Savings in chemical fertilizer use (25% reduction)

Economic/Environmental – Private & Public

9.71 2.26 21.09

Savings in subsidy to chemical fertilizers

Economic – Public 4.13 5.48 N/A (**)

Increase in crop yields (***)Economic – Private & Public

49.09 43.05 93.42

Total 93.82 114.29 184.21

Value of Co-benefits Generated by Composting Projects in 3 (three) Countries

100 Tons/day Capacity Composting Project (with10 (ten) Years Life)

Income from Carbon Finance

CERs

Income from Carbon Finance

CERs

INCOME: US$ 9,125/ year50 tons*365 day*US$ 0.5

Price of 1 (ton) CO2e Reduction: Euro 0.3 / US$ 0.5

Value from

CO-BENEFITS

Value from

CO-BENEFITS

INCOME: US$ 1.71 million/ year50 tons*365 day*US$ 93.8

Co-benefit from 1 (ton) CO2e Reduction: US$ 93.5

BENEFIT OF A 100 TONS/DAY CAPACITY COMPOST PLANT

Mitigation

Adapt

ation

Mitigation-Adaptation Loop

Co-benefits

Way Forward

Clear cut policy to create conducive environment for investment.

Inter-ministerial co-ordination essential for easy implementation of projects with priority basis.

Incentives Required: tipping fees/ free delivery of waste to recycling facility, feed-in tariff, low interest rate/ soft loan, tax holiday, land etc.

Capacity building training programs: for monitoring of the projects especially MRVs

Standardization of technology is important by the Govt.

ConclusionCo-benefits are key for NAMA:–Conception and design–identification & selection, and –implementation–This was successfully demonstrated for the waste in Bangladesh:

• The NAMA Waste in Bangladesh is now ready to move forward to next phases–Bangladesh case study should be replicated elsewhere:

• UN ESCAP is replicating similar projects in Viet Nam and Sri Lanka–The conceptual approach for the valuation and monetization of co-benefits should also be tried out in other sectors and initiatives:

• South Pole is developing a NAMA in the cement sector where co-benefits play a key role• Similar applications could be carried out for other NAMA ideas with a high “no regrets”

angle i.e. NAMA Forestry, NAMA Agriculture (climate-smart agriculture, sustainable livestock management, etc.), NAMA RE (FiT NAMA, rural electrification NAMA).

THANK YOU