Clean Development Mechanism(CDM) The Basics. Atul Raturi

Transcription

1 Clean Development Mechanism(CDM) The Basics Atul Raturi CDM Capacity Building Workshop, Apia, August 2012

2 Talk Structure Setting the scene CDM The Basics Project Examples The Way Forward

3 To help protect your privacy, PowerPoint has blocked automatic download of this picture. Many Components of Climate www2.ucar.edu Solar energy is the main driver of our weather Various processes affect our weather and hence the climate Climate Change: Large changes in weather

4 Earth s Energy Balance K. Trenberth, J. Fasullo, and J. Kiehl Without any GHGs- A frigid Earth! average T~-15 0 C)

5 The Greenhouse Effect

6 CO 2 Concentrations over the years Doubled CO 2 Today Pre-Industrial Glacial Billions of tons of carbon (570 ppm) billions of tons carbon (380 ppm) (285p pm) (190pp m) Source:CMI

7 Anthropogenic CO 2 8 billion tons go in Fossil Fuel Burning 800 billion tons carbon 4 billion tons added every year Ocean Land Biosphere (net) = 4 billion tons go out Source:CMI

8 Carbon Emissions by source IPCC

9 Radiative Forcing Components

10 Earth is Warming Up!! IPCC

11 Effects of Global Warming Marshall Islands Majuro atoll could be 80% submerged Puncak Jaya glacierdisappear by 2015? Arctic Sea Ice Thickness Accessscience.com

12 The Green House Gases Six main GHGs 1. CO 2 : Global Warming Potential (GWP )= 1 2. Methane (CH 4 ) : GWP = 21 CO 2e 3. Nitrous Oxide (N 2 O ) : GWP = 296 CO 2e 4. Hydrofluorocarbons (HFCs) : GWP = CO 2e 5. Perfluorocarbons (PFCs) : GWP = 6,500 CO 2e 6. Sulphur Hexafluororides (SF 6 ) : GWP = 23,900 CO 2e 1 CO 2 1 ton CO 2 equivalent reduction = 1 Certified Emission Reduction (CER)

13 The Beginning Policies and measures to deal with climate change should be cost-effective so as to ensure global benefits at the lowest possible cost UNFCCC,Art.3, 1992 UNFCCC : A treaty initiated during the Earth Summit, Rio, 1992.

14 Background Kyoto Protocol(1997): The Common but Differentiated Responsibilities principle Entered into force February Binding GHG emission reduction targets for Annex I countries (developed countries): 5% below 1990 levels by ( First compliance period). Reductions in emissions of 6 Greenhouse Gases, measured in CO2 equivalence. Compliance by Annex I countries: Domestic emission reduction through policies and measures. Flexibility mechanisms

15 CDM Genesis COP14,Poznan COP16, Cancun, Dec 2010 ends First commitment period begins CDM Modalities and procedures established Adapted from ADB

16 3 Flexible Mechanisms There are 3 mechanisms within Kyoto protocol to reduce the emissions in Annex 1 countries 1. International Emission Treaty ( IET): trading of GHG emission reductions (Assigned Amount Units,AAUs) within Annex 1 countries. 2. Joint Implementation (JI): Industrialized countries invest in emission reduction projects in another Annex 1 country and receive carbon credits (Emission Reduction Units, ERUs) 3. Clean Development Mechanism (CDM):Annex 1 countries invest in GHG reducing projects in non-annex 1 countries and receive Certified Emission Reductions (CERs) to fulfill their binding commitments.

17 Clean Development Mechanism Article 12 of the Kyoto Protocol : Two main objectives: 1. Assist host countries ( non-annex 1) achieve sustainable development. 2. Provide flexibility to Annex-1 investors in reducing their emissions.

18 CDM Credo Developed countries (Annex 1)with binding emission caps assist developing countries with no emission limits in developing activities/projects for GHG reduction. The project/activity must contribute to the sustainable development in the host country GHG reductions must create real, measurable and longterm benefits to Climate Change mitigation. Be additional to any reductions that would occur in the absence of the proposed project/activity. A baseline scenario that represents what would have happened in the absence of the proposed project /activity should be developed. The baseline is derived using a methodology approved by the CDM Executive Board. ODA can not be used.

19 CDM Rationale Provides market-oriented means to promote sustainable development (SD) while reducing GHG emissions below what they would have otherwise been. Promote private sector investment in SD( as distinct from ODA). Provides a bottoms up approach regarding project development. Involves public scrutiny. Source: UNFCCC

20 CDM concept IGES, CDM in Charts

21 CDM concept & reality CDM Concept Technology Transfer?? CDM Reality Source:ADB

22 CDM Project Types Emissions reduction Projects Renewable Energy Development Energy Efficiency GHG destruction Afforestation and Reforestation ( A & R ) Projects

23 Additionality A CDM project activity is additional if anthropogenic emissions of GHGs are reduced below those that would have occurred in the absence of the CDM project. Show that the project helps overcome financial barriers. Show that the project helps overcome technical, institutional and other barriers.

24 Methodologies Standardized procedures for the measurement and calculation of GHG reductions Main features: Formulae used Project boundaries Leakage Monitoring EB Approval needed for any new methodology proposed. Different for large scale and smalls scale projects

25 CDM Process: Institutional Framework Project participant 1 : Developing Country, Project developer Project participant 2: Annex 1 Country: Investor, Buyer National Approval: Designated National Authority (DNA) Designated Operational Entity (DOE I) : Verifier of prerequisites Designated Operational Entity (DOE II): Certifies emission reductions CDM Executive Board (EB) : CER issuer

26 Role of DNA ( Designated National Authority) A must for participation in the CDM process Single Window Office for CDM with a point of contact for CDM project developers Co-ordinate with all other government departments and institutions Approve CDM projects under the National Sustainable Development criteria (economic, social and environmental) Crucial role in attracting foreign investment

27 CDM Project Types Three Schemes: Normal (Large ) CDM projects Small Scale CDM projects Programmatic CDM projects

28 Micro scale projects For Micro Scale Projects Additionality Test is Not required : If the project activity is an off grid activity supplying energy to households/communities (less than 12 hrs grid availability per 24 hrs day is also considered as off grid for this assessment); and is located in a SIDS or an LDC and is either of the following types: Type 1: Type 2: Type 3: Renewable Energy Project with < 5 MW electricity ( or <15 MW thermal). Energy efficiency projects with < 20 GWh savings per year. Any other project with < 20 Kilo tonnes of CO 2 reduction per year. The project activity is considered to be Additional

29 Small Scale Projects A Small-Scale CDM project is defined as: Type 1: Renewable energy systems with <15MW( electrical) capacity Type 2: Energy Efficiency projects with a saving of < 60 GWh per year Type 3 : Any other project reducing < 60 Kilo tonnes CO 2 per year. Simplified Methodologies

30 Bundling Several small-scale GHG reduction projects can be combined to form a Bundled CDM project Bundling entity CER Investor Bundling can be done across countries and regions

31 Unilateral CDM Projects No declared investor- only host country Nearly half the registered projects are unilateral Reduced transaction costs Increased price of CERs Good for small-scale projects In-country capacity building required Less technology transfer Example: Majority CDM projects in India 31

32 CDM Project Activity PIN Project Design document Sustainable development Checklist Source: UNEP

33 Crediting Period 10 years non renewable 7 years Renewable ( twice)=21 years

34 Registration Fee SOP(Admin)- Share of Proceeds Covers administrative expenses SOP( Adaptation) 2% of CER - towards CC adaptation in developing countries LDCs exempted. Source:CDM in charts

35 Indicative Timelines and Costs Source: World Bank

36 CDM Projects Status Number registered 4,474 (on 15 th August 2012) Criticism Delay in registration ( 3 years average) (WB 2010)

37 Registered Projects By Country ( 15 th August 2012) Total 4,474 LAC-Latin American AFR-Africa ASP-Asia- Pacific

38 Projects by scope(aug 2012)

39 Projects by scale (15 th August 2012)

40 Approved Methodologies (July 2012) Energy (RE/non RE) Manufacturing industries Waste handling and disposal Chemical Industry

41 CER growth

42 CDM projects distribution DNA+ No Project DNA+ Project No DNA+ No Project

43 Failure of CDM in the PICs Dispersed nature of population: Small projects. Low potential for GHG reduction hence low CER generation. Investors not keen. High transaction costs. Lack of awareness, Capacity ( institutional, technical, regulatory) DNAs not set-up in most of the PICs - Only Fiji, PNG and Samoa ( Vanuatu, Solomon Islands).

44 Programmatic CDM (p- CDM) Called the Future of CDM - a new concept PoA : Bundle and register a number of similar GHG reduction activities (CPA) over a period of time. Can be undertaken by public/private entities that follows a goal of anthropogenic GHG reduction. Incentive for developing countries to implement policies and measures. A number of RE based CPA s can be bundled to form a PoA. The guidance and procedures were approved by CDM EB in June 2007.

45 CDM in the PICs: Fiji Hydro Small Scale and bundled projects Pacific Hydro 2 run-of-river hydro projects. Vaturu (3 MW) and Wainikasou (6.5 MW)- displace diesel generation Developed by Pacific Hydro and FEA ( SEL) Combine output: 35 GWh/year CDM registration : October ,928 tonnes of CO 2 reduction per year

46 CDM in the PICs: Fiji Kinoya sewerage Treatment Plant: GHG reduction Project Small Scale project Activity: -To recover methane by anaerobic decomposition -To convert Methane ( High GWP) into CO 2 (low GWP) CDM registration : May 2011, activity start- May, ,469 tonnes of CO 2e reduction per year Project supported by ADB Asia Pacific Carbon fund.

47 CDM in the PICs : PNG : Geothermal LGL LGL Lihir Gold Mines: Geothermal plant replacing diesel generation 55 MW plant. 411 GWh per year First and only CDM project in PNG* Will reduce 2,789,037 tonnes of CO 2 over 10 years * A Programmatic CDM project is in the process of registration.

48 ADB s Asia Pacific Carbon Fund Summary of APCF features* Pay up front for carbon credits Technical support for CDM project development Transaction costs for CDM development PDD costs Capacity building for monitoring the emission reductions Validation / registration costs Transaction costs for CDM development small scale projects Focus on Pacific Bundling and programmatic CDM Future carbon fund for post 2012 Cooperate with other ADB resources (ex Clean Energy Fund) Additional funding Support for DNA establishment *ADB

49 THANK YOU FOR YOUR ATTENTION

50 THANK YOU FOR YOUR PATIENCE