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Accounting for flexibility against uncertain baselines: lessons from case studies in the eastern European energy sector

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  • Stuart Parkinson
  • Katie Begg
  • Peter Bailey
  • Tim Jackson

Abstract

The Kyoto Protocol defines two project-based flexibility mechanisms: joint implementation (JI) and the cleandevelopment mechanism (CDM). The main methodological problem associated with both these mechanisms isthe choice of an appropriate baseline: since the baseline is, by definition, counterfactual, it imposes considerable uncertainty on the accounting framework. Little work to date has been carried out on trying to estimate how largethis uncertainty might be for particular project types. This paper aims to fill this gap by proposing an approach to baseline construction which explicitly acknowledges this uncertainty. This approach is illustrated through theexamination of pilot JI projects in the energy sector in eastern Europe, and then discussed in terms of its implicationsfor climate policy. The results presented are estimates of the range of counterfactual uncertainty in greenhouse gas emission reductions based on the construction of a number of possible baselines for each project. This range is found to be about ±35% for demand side projects, ±45% for heat supply projects, ±55% for cogeneration projects, and ±60% for electricity supply projects. Estimates of uncertainty in the costs of the pilot projects are also found to be high. The paper discusses the problems arising from such large uncertainty and starts to indicate how this uncertainty may be managed.

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  • Stuart Parkinson & Katie Begg & Peter Bailey & Tim Jackson, 2001. "Accounting for flexibility against uncertain baselines: lessons from case studies in the eastern European energy sector," Climate Policy, Taylor & Francis Journals, vol. 1(1), pages 55-73, March.
    • Handle: RePEc:taf:tcpoxx:v:1:y:2001:i:1:p:55-73
    DOI: 10.3763/cpol.2001.0106
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    Cited by:

    1. Diakoulaki, D. & Georgiou, P. & Tourkolias, C. & Georgopoulou, E. & Lalas, D. & Mirasgedis, S. & Sarafidis, Y., 2007. "A multicriteria approach to identify investment opportunities for the exploitation of the clean development mechanism," Energy Policy, Elsevier, vol. 35(2), pages 1088-1099, February.
    2. Urs Springer, 2003. "Can the Risks of the Kyoto Mechanisms be Reduced Through Portfolio Diversification? Evidence from the Swedish AIJ Program," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 25(4), pages 501-513, August.
    3. Scott Murtishaw & Jayant Sathaye & Christina Galitsky & Kristel Dorion, 2006. "Methodological and Practical Considerations for Developing Multiproject Baselines for Electric Power and Cement Industry Projects in Central America," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 11(3), pages 645-665, May.
    4. Afshari, Afshin & Friedrich, Luiz, 2016. "A proposal to introduce tradable energy savings certificates in the emirate of Abu Dhabi," Renewable and Sustainable Energy Reviews, Elsevier, vol. 55(C), pages 1342-1351.
    5. Katherine Begg & Dan Van der Horst, 2004. "Preserving Environmental Integrity in standardised baselines: The role of additionality and uncertainty," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 9(2), pages 181-200, June.
    6. Jayant Sathaye & Kenneth Andrasko, 2007. "Land use change and forestry climate project regional baselines: a review," Mitigation and Adaptation Strategies for Global Change, Springer, vol. 12(6), pages 971-1000, July.
    7. Janos Szlavik & Maria Csete, 2012. "Climate and Energy Policy in Hungary," Energies, MDPI, vol. 5(2), pages 1-24, February.
    8. Passey, Robert & MacGill, Iain & Outhred, Hugh, 2008. "The governance challenge for implementing effective market-based climate policies: A case study of The New South Wales Greenhouse Gas Reduction Scheme," Energy Policy, Elsevier, vol. 36(8), pages 2999-3008, August.

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