NEWS

WIRES

OTHER

Sectoral Crediting Mechanisms Can Spur Mitigation in Power Sector

The report, Sectoral Crediting Mechanisms for the Power Sector, was written by Bloomberg New Energy Finance by request and under supervision of the Spanish Climate Change Office and will be presented on 27 May at "Sectoral crediting mechanisms for the power sector," a jointly hosted side event at the 2010 Carbon Expo in Cologne, Germany. The report suggests that in developing economies, carefully designed sectoral no-lose targets (SNLTs) - a type of sectoral crediting mechanism where non-compliance is not punished - would be the most suitable SCM design option for the power sector.

"According to our latest models, emissions from developing countries could reach just under 38GtCO2e/yr by 2030 if governments take no further action to tackle climate change," said Guy Turner, Director of Carbon Markets for Bloomberg New Energy Finance. "We took a detailed look at the power sector and found that sectoral no-lose targets appear to provide the best answer to cut power sector emissions in developing economies. However, upfront financing and domestic renewable policy initiatives are key to ensuring private sector participation."

With regard to the study, Pedro Huarte-Mendicoa, a spokesman for the Spanish Ministry of the Environment, said: "The climate negotiations to be held this year will discuss elements for new UN market-based mechanisms. To help the discussion, this study aims to provide some thoughts on how to design future market mechanisms suited to support the delivery of renewable electricity in Non-Annex I countries. With the proper design of crediting mechanisms and financial structures and careful recognition of country and sector specific conditions, SCMs can be an effective instrument to scale-up investment in clean technologies while providing carbon finance for developing countries."

The report finds that the power sector would be suited to SNLTs because the homogeneity of electricity production means that performance targets can be readily calculated. The report assesses the use of intensity targets as they cap emissions per unit of output, constraining emissions growth but allowing for an absolute increase in emissions - as a more politically palatable option for developing countries.

Additionally, domestic renewable policies and upfront financial assistance are crucial to motivating private sector participation - a prerequisite to the successful achievement of the target. Financing is needed to fund these investment decisions upfront while domestic policies must be designed in such a way as to guarantee reward at the company level even if the sector does not hit the required target.

The report also found that SNLTs could provide a source of revenue over and above that from the UN's Clean Development Mechanism (CDM): for example, assuming compliance with a 30% carbon intensity reduction target on 2007 levels and demand permitting, China could generate up to €22bn in revenue from credit sales in 2020 relative to an expected €2bn under the CDM.

A full copy and executive summary of the report will be available on 27 May at: http://www.mma.es/portal/secciones/cambio_climatico/bnef.htm

ABOUT BLOOMBERG NEW ENERGY FINANCE

Bloomberg New Energy Finance (BNEF) is the world's leading independent provider of news, data, research and analysis to decision-makers in renewable energy, energy smart technologies, carbon markets, carbon capture and storage, and nuclear power. BNEF has staff of more than 130, based in London, Washington D.C., New York, Beijing, New Delhi, Hyderabad, Cape Town, São Paulo, Singapore, and Sydney.

BNEF Insight Services provide deep market analysis to investors in wind, solar, bioenergy, geothermal, carbon capture and storage, energy efficiency, and nuclear power. The group offers Insight Services for each of the major emerging carbon markets: European, Global Kyoto, Australia, and the US, where it covers the planned regional markets as well as potential federal initiatives and the voluntary carbon market. Bloomberg New Energy Finance's Industry Intelligence Service provides access to the world's most comprehensive database of investors and investments in clean energy and carbon. The News and Briefing Service is the leading global news service focusing on clean energy investment. The group also undertakes applied research on behalf of clients and runs senior-level networking events.

New Energy Finance Limited was acquired by Bloomberg L.P. in December 2009, and its services and products are now owned and distributed by Bloomberg Finance L.P., except that Bloomberg L.P. and its subsidiaries (BLP) distribute these products in Argentina, Bermuda, China, India, Japan, and Korea. For more information on Bloomberg New Energy Finance: http://www.newenergyfinance.com

ABOUT BLOOMBERG

Bloomberg is the world's most trusted source of information for businesses and professionals. Bloomberg combines innovative technology with unmatched analytic, data, news, display and distribution capabilities, to deliver critical information via the BLOOMBERG PROFESSIONAL service and Multimedia platforms. Bloomberg's media services cover the world with more than 2,300 news and Multimedia professionals at 146 bureaus in 72 countries. The BLOOMBERG TELEVISION 24-hour network reaches more than 240 million homes. BLOOMBERG RADIO services broadcast via Sirius XM Radio and 1worldspace satellite radio globally and on WBBR 1130AM in New York. BLOOMBERG MARKETS magazine, Bloomberg Businessweek magazine and the BLOOMBERG.COM Web site provide news and insight to business leaders and financial professionals. For more information, please visit http://www.bloomberg.com .

The BLOOMBERG PROFESSIONAL service and data products are owned and distributed by Bloomberg Finance L.P. (BFLP) except that Bloomberg L.P. and its subsidiaries (BLP) distribute these products in Argentina, Bermuda, China, India, Japan and Korea. BLOOMBERG, BLOOMBERG NEWS, BLOOMBERG TELEVISION, BLOOMBERG RADIO, BLOOMBERG MARKETS AND BLOOMBERG.COM are trademarks and service marks of Bloomberg Finance L.P., a Delaware limited partnership, or its subsidiaries. All rights reserved.

Bloomberg LP
Jill Goodkind, +1-212-617-3669
jgoodkind@bloomberg.net