CO 2 credits

The future climate institutional framework remains filled by uncertainties. The Kyoto protocol regulates climate policies until 2012. Following COP17 in Durban, it will now be possible to continue the Kyoto protocol beyond 2012 without any gaps in its implementation191. According to the resolution passed in Durban, the negotiations for a legally binding climate protection agreement shall be concluded by 2015 with the agreement becoming effective from 2020. This affects Swiss policy making.

New thermal plants in Switzerland, e.g. gas-fired combined cycle (GCC) plants, will not be operational before 2013. It is therefore in a post-Kyoto context that such plants will need to compensate their GHG emissions. In January 2011, the ordinance on CO2 compensation for fossil-thermal power plants became effective 192. 70% of

the compensation has to occur nationally. The minimum technical efficiency for new sites is 62% and for existing sites 58.5% (e.g., Chavalon). However, the lower chamber of the Federal parliament suggested in their summer session 2011 that if nuclear power plants are taken from the grid before 2020, thermal power plants would have to compensate only 20% of their emission nationally instead of 70% initially193. The compensation scheme continues to be reviewed.

In 2011, the Swiss government started negotiations with the EU to merge the Swiss emission trading scheme (ETS) with the EU ETS by 2013194. A report on the topic requested by the Federal administration shows that such a merger is slightly favourable for Switzerland (First Climate and Econability, 2009). The merger would allow Switzerland to obtain cheaper certificates on the EU ETS for CO2 compensation.

189 _{E.g. http://www.topten.ch/deutsch/oekoenergie/oekostrom/wasser.html (accessed on 27.09.2011)} 190 _{Personal communication with Interviewee CH-1}

191 _{http://www.bafu.admin.ch/dokumentation/medieninformation/00962/index.html?lang=en&msg-id=42645 (accessed on}

12.12.2011). Even though not all countries which signed the initial Kyoto protocol will continue (e.g. Russia, Canada, Japan). 192

http://www.admin.ch/ch/d/sr/641_713/index.html (accessed on 03.02.2012)

193

http://www.parlament.ch/d/mm/2011/Seiten/mm-urek-n-2011-06-21.aspx (accessed on 27.09.2011)

6. Analysis and discussion of alignment between small hydropower and its institutional framework in Switzerland

The current compensation scheme does not allow use of RETs producing electricity, except biomass, for CO2

compensation (BAFU and BFE, 2008). Therefore, SHP cannot currently contribute to the Swiss ETS and CO2

compensation scheme by generating CO2 credits. This is not coherent. A clear majority of the interviewees is in

favour when asked whether SHP should be part of the CO2 compensation scheme195.

The most advanced GCC plant in Switzerland is Chavalon with an installed capacity of 400 MW and a production of 2.2 TWh per year. The plant could become operational in 2017. The plant would emit 750‘000 t of CO2 per

year196, which corresponds to 340 gCO2/kWh. Taking a general average of 480 t of CO2 avoided per 1 GWh

produced with SHP (ESHA, 2006), 1‘560 GWh of SHP would compensate Chavalon. This amount accounts approximately for the remaining SHP potential (see Section 4.2.2). Thus, if SHP was part of the CO2

compensation scheme and several GCC plants were built in Switzerland, the compensation could facilitate more than the remaining SHP potential without the need of the FIR.

The compensation scheme currently aims more at measures within the building and transport sector than RET for electricity production. Yet, if more electrical cars are introduced in order to reduce the CO2 emissions, then the

additional electricity should come as much as possible from RET to substitute completely the fossil fuel. Therefore, the CO2 compensation scheme should also facilitate the production of the additional electricity from

RETs, for example with CO2 credits for RETs, including SHP.

To reduce transaction costs for CO2 credits for SHP plants, and therefore align better the size of procedures with

the size of the technology, programmatic credits (Africa Progress Panel, 2009) could be developed instead of certifying each single plant. Several SHP size categories and type categories (run-of-the-river, storage, within infrastructures) would be defined and accredited a certain amount of CO2 credits per produced kWh. New plants

could refer to these categories and be allocated their CO2 credits thus reducing administrative procedures and

costs.

If RETs, excluding biomass, cannot generate CO2 credits, then instead of increasing the amount paid by the

customers per kWh to finance the FIR, the latter could also be financed partly through the CO2 compensation

scheme. A given amount of CHF per t of emitted CO2 would be paid into the FIR fund by the GCC plant operators.

The FIR payment of electricity consumers would not have to be increased.

In summary, all RETs should be included in the CO2 compensation scheme. Gas power might replace nuclear

power and cover part of the increasing demand. To do so, they should be able to compensate their CO2

emissions with RETs producing electricity.

Finally, in the on-going climate negotiation, technology transfer represents a key topic. SHP as a technology for developing countries offers exportation opportunities for the Swiss hydropower industry and could be further facilitated by generating CO2 credits under improved and post-Kyoto ―Clean Development Mechanisms (CDM)‖.

This could be part of the CO2 compensation of Swiss thermal plants197. Multipurpose SHP plants with flood

protection in developing countries would be an example of both a climate adaptation and mitigation measure generating CO2 credits for Swiss GCC plants.

195

In favour: CH-1, CH-2, CH-11, VS-5, VS-6, VS-7. In favour with specific conditions: CH-9 196