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IHOBE aims to explore the feasibility of using an emission trading scheme to improve the environmental performance of local authorities in the Basque region. It falls under the project “Methodology for Design of a System for the Reduction of Emissions from GHGs from Local Government Bodies in the Basque Country”.

The main objective of the project “Methodology for Design of a System for the Reduction of Emissions from GHGs from Local Government Bodies in the Basque Country” is to explore the feasibility of using an emission trading scheme to improve the environmental performance of local authorities in the Basque region.

The project partner responsible for this task is Metroeconomica Limited. Acting as leader of this task, Metroeconomica Limited has stipulated an agreement with FEEM according to which FEEM is resposible to provide:

  • Background information on local activism to address climate change;
  • Background information on the project “Local governments for Kyoto”;
  • Suggestions and models for inventorying local emissions of greenhouse gases;
  • Report on the options available to participating municipalities for reducing GHGs emissions and evaluating them in terms of cost effectiveness and feasibility;
  • Report on available means of financing interventions at the local level;
  • Report with recommendations of how the ETS scheme for local governments can be designed in the Basque country.

FEEM has worked in close cooperation with Metroeconomica Limited to provide advice on the strategies and methodology documents developed by IHOBE, S.A. for estimating the emissions of GHGs from local authorities and allocating the initial permits. This work has greatly benefited from the experience that FEEM as acquired from the project “KYOTO CLUB – Emission Trading for Local Municipalities and Provinces in Italy”, whose main aim was to build a system for the reduction of emissions from the public building sector and the transport fleet.

IHOBE produced three main reports:

  •  “Review of Local GHG emission inventories in Italy”. This preliminary paper gives background information on measuring GHG emissions at local level, and highlights some interesting actions taken by the Italian regions (e.g. local commitment towards emissions reduction and presentation of the Local GHG emission inventories in Italy).
  • “Options for GHGs reduction at the municipal level”. The report analyses possible mitigation strategies and cost-effectiveness measures to identify the options that are available to reduce emissions of greenhouse gases (GHG) at the municipal level and demonstrates how to calculate the cost effectiveness of the different measures. It also provides a guide to the best practices in the screening and evaluation of options for GHG mitigation at municipal level, with particular focus on transport and buildings sectors. The aim is to come up with a classification of the various polices and measures, with the final objective of defining municipal Action Plans to achieve the Kyoto Protocol objective of GHG reduction. Plans for municipalities to achieve GHG reduction targets not only involve identifying specific interventions and their methodologies, but also require estimation of the costs of such interventions relative to the emissions reductions achieved. The method of assessment is based on cost effectiveness – i.e. estimating the cost per ton of GHGs reduced from different interventions. The objective of this report is therefore to establish a basis for the development of action plans within IHOBE, with particular reference to the economic aspect of emission reduction interventions. Defining methodologies to quantify costs, measuring impacts on public sector, as well as applying discount rates to interventions are all critical to any cost effectiveness study.
  • “Design of the scheme and proposal for implementation”. The final report presents a scheme for the reduction of emissions of GHGs from local governments and explains the way the system can be implemented in the Basque Country. The aim of the report is to provide a methodological base to set up a system able to reward emission reduction initiatives at local level and to gradually introduce the local authorities in the emission trading market.

In order to present the scheme and to suggest an useful approach to describe IHOBE at local level, we adopted an approach similar to the EU-ETS procedure. The report consists of two different parts:

  • The “Directive”, a sort of regulation which sets up the new local system, describing the general principles, fundamental hypothesis and main features;
  • The “Local Allocation Plan” which represents the concrete application of the operating principles illustrated in the Directive and defines individual targets for emissions reduction.

The need to expand the number of local entities that are engaged in reducing GHGs has led the Basque country to explore different approaches to foster local GHGs abatement initiatives. The starting consideration is the EU emissions trading scheme is limited in the sources of emissions covered – more specifically, it does not include transport or the local government bodies, for example. Yet, without the involvement of other emitters in a programme of reducing GHGs, the targets for regions like the Basque country will not be met. For the Basque country, it is therefore important to engage these entities in structured programmes for GHG reduction – and emission trading schemes have the potential of inducing participation in an effective and least cost manner.

IHOBE focuses on local governments and should be seen as a process that, over time, will move them from being relatively ignorant about the climate change issues, to being informed bodies that take decisions related to their normal activities with a view to their GHG implications.