{ "docId": "019dd923-5e88-73ef-bd59-6131f37efc2b", "docSlug": "71b5b657f034a972", "documentTitle": "ey net zero centre carbon offset publication 20220530", "authorId": "MorganStanley", "authorName": "Grantham Research Institute", "documentKindSlug": "consulting-deck", "documentKindLabel": "Consulting deck", "sourceTypeSlug": "equity_research", "sourceTypeLabel": "Equity research", "presentationDate": null, "orientation": "portrait", "aspectRatio": 0.707, "pageNumber": 20, "pageCount": 45, "prevPage": 19, "nextPage": 21, "slideType": "other", "function": "summarize", "density": "overcrowded", "nDataPoints": 0, "notes": "This appears to be a page from an academic or policy research paper rather than a standard consulting deck slide.", "elementsJson": [ "paragraph" ], "metadataConfidence": 0.9, "imagePath": null, "slideHref": "/slides/019dd923-5e88-73ef-bd59-6131f37efc2b/20", "deckHref": "/decks/019dd923-5e88-73ef-bd59-6131f37efc2b", "deckJsonHref": "/decks/019dd923-5e88-73ef-bd59-6131f37efc2b.json", "deckAnchorHref": "/decks/019dd923-5e88-73ef-bd59-6131f37efc2b#slide-20", "components": [ { "bbox": null, "kind": "callout", "text": "The ideal number of BLIMPs receiving subsidies is clearly zero. BLIMPs are only a subset of infra-marginal projects, and they are a conservative indicator of infra-marginality.", "attrs": null, "subkind": null, "toolName": "Visual emphasis", "toolSlug": "visual-emphasis", "confidence": null, "componentId": "019dd952-340a-72a9-845a-e81750ec0ed2", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.78, "x": 0.11, "y": 0.81 }, "kind": "paragraph", "text": "The total number of BLIMPs, however, can provide a useful indication of the degree of mis-allocation. To give this number a meaningful interpretation we require an alternative allocation mechanism of known quality that can serve as a benchmark. We can then compare the realized number of BLIMPs in the CDM's allocation to the number of BLIMPs that would have received support in counterfactual allocation scenarios.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "06db9818-306e-4082-a5a3-b64c8c5f75a3", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.22, "w": 0.78, "x": 0.11, "y": 0.41 }, "kind": "paragraph", "text": "The way that the UN Executive Board evaluates applications is by setting V equal to zero and then working out whether the implied internal rate of return r_tilde exceeds some common threshold value or not. This is equivalent to letting r equal the social discount rate and working out whether V exceeds some common reservation payoff. For the purpose of evaluating projects for carbon offsets we should apply a common discount rate to all projects. Since electricity prices and taxes only vary across states and years, and there is no additional variation coming from the discount rate, the \"other things equal\"-condition will be met so long as we are comparing wind farms built in the same state and year. In sensitivity analysis we impose more restrictive comparison groups.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "07b1c8f7-dc24-4abe-a446-353e7d845aac", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.78, "x": 0.11, "y": 0.12 }, "kind": "paragraph", "text": "We have argued that, all else equal, the developer's payoff is increasing in generation capacity and capacity factor, and decreasing in connection distance. But what things need to be held constant? The most important factor is the electricity price, p_lyt. Electricity prices do vary across states and time, but they do not vary across wind farms built in the same state and year. The same goes for maintenance and tax schedules, t_lyt and v_yt.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "3679afba-87a7-41bf-abdc-21fe71389144", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.12, "w": 0.78, "x": 0.11, "y": 0.68 }, "kind": "paragraph", "text": "The ideal number of BLIMPs receiving subsidies is clearly zero. BLIMPs are only a subset of infra-marginal projects, and they are a conservative indicator of infra-marginality. A program could in principle subsidize many infra-marginal projects without subsidizing any BLIMPs. The number of BLIMPs therefore provides a conservative lower bound on the total number of infra-marginal projects. On some level the existence of any BLIMPs is a sign of something having gone wrong in the CDM's decision making process.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "ae46a18e-5f4c-41a2-8f96-bd62db0f85fc", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.08, "w": 0.78, "x": 0.11, "y": 0.9 }, "kind": "paragraph", "text": "We argue that a lottery is a useful benchmark mechanism. A lottery provides a floor for performance. In expectation, a lottery would allocate subsidies in a way that is uncorrelated with whether a project is marginal or infra-marginal. By repeating the lottery many times, we can obtain a distribution of the number of BLIMPs that a lottery would subsidize. Each time the lottery is repeated, we let the CDM Executive Board", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "d41acf09-527a-4887-9e97-e52404ff3c3a", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.15, "w": 0.78, "x": 0.11, "y": 0.25 }, "kind": "paragraph", "text": "The final piece of equation 3 is the discount rate r. If we wanted to determine the real payoff to any particular wind farm developer, we would need to know the rate of interest at which they are able to access capital. However, our objective is somewhat different, in that we are trying to determine whether the a project is worth subsidizing or not. Obviously, we do not want to subsidize wind farms simply because their developers are risky borrowers. The relevant quantity is not the market rate of interest, but the social discount rate.", "attrs": null, "subkind": "paragraph", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "f2da087a-4c62-4845-b9ad-ff15d32169d5", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.45, "x": 0.11, "y": 0.65 }, "kind": "title", "text": "5 How Many BLIMPs is Too Many?", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "980f238d-1055-495d-a299-396d761cb3cd", "frameworkName": null, "frameworkSlug": null }, { "bbox": { "h": 0.02, "w": 0.25, "x": 0.11, "y": 0.09 }, "kind": "title", "text": "4.5 All Else Equal", "attrs": null, "subkind": "headline", "toolName": null, "toolSlug": null, "confidence": null, "componentId": "c0d1bcff-dc2a-47c7-a434-157804cc8ff8", "frameworkName": null, "frameworkSlug": null } ], "metrics": [], "tools": [ { "name": "Analytical method", "slug": "analytical-method", "agent": null, "layer": "slide", "matchId": "0a8fe1b6-9f5a-4600-8bfa-20163043aa46", "evidence": "The way that the UN Executive Board evaluates applications is by setting V equal to zero and then working out whether the implied internal rate of return r_tilde exceeds some common threshold value o", "confidence": 0.7 } ], "frameworks": [], "arcBeats": [], "loops": [], "imagePathAlt": null, "thumbSrc": null, "thumbSrcAlt": null, "locked": true }