Introduction to Climate Change & CDM

Transcription

1 African Development Bank African Carbon Support Programme ONEC3 Introduction to Climate Change & CDM AfDB Tunis 21 st September

2 The African Carbon Support Programme ACSP: Two year programme funded by FAPA (Fund for African Private Sector Assistance) Programme ONEC3, implemented by Carbon Limits Programme Management Unit: Kurt Lonsway, ONEC3 Division manager Uche Duru, ONEC3 focal point consultants Faouzi Senhaji, Carbon ONEC3 Damian C. Barnabas, Carbon ONEC3 Francois Sammut, Carbon CL Office, Oslo ASCP mission: provide technical assistance to promote low carbon development in Africa through CDM 1

3 Outline & expectation Outline 1. Background information on Climate Change (Faouzi Senhaji) 2. Basics on the Clean Development Mechanism (Faouzi Senhaji) 3. Examples of CDM projects (Damian Barnabas) 4. The carbon markets and the future of CDM (Francois Sammut) 5. Integrating the CDM to the Bank s project development cycle (Francois Sammut) ACSP Expectation from AfDB attendees What is a CDM project and why? How to proceed in the Bank? 2

4 1. Background information on Climate Change Outline 1.1 What are the causes of the observed global warming of the Earth? 1.2 What are the observed and predicted impacts of the global warming? 1.3 How to mitigate Climate Change? 1.4 What is adaptation? what is mitigation? 1.5 What is the response of the international community to Climate Change? 3

5 1. Background information on Climate Change ; Global warming : ; result of greenhouse effect amplification due to GHG concentration increase in the atmosphere ; GHG : H 2 O, CO 2, CH 4, N 2 O, HFCs, PFCs, SF 6 ; High GWP 1, 21, 310, ,700.., 23,900 t CO 2 equivalent ; the global surface air temperature increased from 1850 to 2005 ; by 0.76ºC. Best estimate for 2100 : 1.4 to 4 ºC (IPCC, 2007). ; International agreement on 2 0 C target ; Physical and biological ecosystems have already been affected by recent climate changes (IPCC, 2007). 4

6 5

7 1. Background information on Climate Change An exponential increase of GHG concentration in the atmosphere since 1750 Accumulation mainly due to human activities (IPCC, 2007) FAQ 2.1, Figure 1 6

8 1. Background information on Climate Change Correlation between CO 2 Conc. and temperature 2009: 387 ppm CO 2 : Higher levels and more rapid increase 7

9 1. Background information on Climate Change Continued GHG emissions... would induce many changes... that would very likely be larger than those observed... (IPCC, 2007) Change in Temperature ( C), Scenario A2

10 1. Background information on Climate Change Persistent sea-level rise consistent with earlier estimates Merrifield et al., 2009: [ ] (3.1 ±0.7) mm/yr IPCC (2007) [ ] (3.5 ±0.4) mm/yr 9

11 Rapid loss of Arctic sea ice ice-free 10

12 11

13 1. Background information on Climate Change How to mitigate Climate Change two ways : 1. Adapt to unvoidable impacts e.g. to water shortage use saving techniques, recycle, Mitigate GHG emissions e.g. Reduce/avoid the use of fossil fuels, use renewables, capture some emissions, change transport modes,... change our way of life 12

14 1. Background information on Climate Change International response to Climate Change UNFCCC : UN Framework Convention on CC Adopted in 1992, entered into force in 1995 Kyoto Protocol A legal binding instrument of the UNFCCC Adopted in 1997, entered into force in 2005 Annex I countries who ratified the Protocol commited to reduce their GHG emissions by average 5.2% below their 1990 level during the period

15 UNFCCC 1. Background information on Climate Change International response to Climate Change : Climate negotiations under the United Nations Kyoto P. Marrakesh A. KP enter into Force Commitment period COP1 COP3 COP7 COP11 COP MOP Compliance to KP KP New Intl. Agreement? Junction 2007 start of negotiations for post

16 2. The Clean Development Mechanism CDM (MDP in French) The Kyoto Protocol introduced 3 flexible mechanisms Rationale: In order to stabilize GHG emissions, it does not matter where emission cuts are made Reasons - to limit the cost of complianceof countries with commitments - to assist Annex I Parties to KP to achieve their ER commitments - to assist non- Annex I Parties to KP to achieve sustainable development The 3 mechanisms International emissions trading, between Annex I countries of allocated Assigned Amount Units (AAUs) Joint Implementation (JI), between Annex I countries, project based, Carbon market of Emission Reduction Units (ERUs) The Clean Development Mechanisms (CDM), based on projects in Non-Annex I countries, Carbon market of Certified Em Red (CERs) 15

17 2. The Clean Development Mechanism CDM.. CDM credits can be used to meet countries Kyoto targets.. The CDM promotes investments with low abatement costs in developing countries Business as usual Industrialised Countries Greenhouse Gas Emissions CERs Own ERs Kyoto commitment Developing Countries Emissions CERs Business as usual 16

18 2. The Clean Development Mechanism CDM Emission Reduction Purchase Agreement Non Annex I Host country Selling entity Annex I country Buying entity CERs ER offset excess Emission cap $ Revenue Assigned Amount Kyoto commitment Emissions in the Baseline scenario Emissions in the project scenario Co-investment Clean tech

19 2. The Clean Development Mechanism CDM What makes a project eligible to CDM? 1. the host non Annex I country must have ratified the KP and has an operational DNA (designated national authoriy) 2. the project must a. be voluntarily submitted b. reduce one or more KP GHG emissions / baseline emissions c. contribute to Sustainable Development of the host country d. be additional e. use an approved methodology (AM) f. belong to 1-15 CDM sectors sectors 18

20 CDM projects sectors N Sector N Sector 1 Energy industries 9 Metal production 2 Energy distribution 10 Fugitive emissions/fuels 3 Energy demand 11 Fugitive emis. /HFC, SF 6 4 Manufacturing industries 12 Solvent use 5 Chemical industry 13 Waste 6 Building 14 Afforestation / Reforestation 7 Transport 15 Agriculture 8 Mines et mineral production 19

21 2. The Clean Development Mechanism CDM 1 st choice for the crediting period: fixed period of 10 years maximum Emissions Base Line emissions Emission Reductions Carbon credits to be verified, certified and sold each year during the crediting period Project emissions Start of crediting period for a CDM project Registered & Operational 10 years 20 End of crediting period No renewal time

22 2. The Clean Development Mechanism CDM 2 nd choice for the crediting period: 3 periods of 7 years maximum each GHG Emissions Base Line emissions BL may change GHG Emission Reduction Project emissions time 7 years 7 years 7 years 21 Start of crediting period 1 st renewal 2 nd renewal End of crediting period

23 Examples of CDM approved methodologies to estimate baseline & project emissions Methodo 1. Energy Industries Nb project PoA ACM7 ACM13 Conversion from single cycle to combined cycle power generation New grid connected fossil fuel fired power plants using a less GHG intensive technology AM14 Natural gas-based package cogeneration 12 AM48 AM52 New cogeneration facilities supplying electricity and/or steam to multiple customers Increased electricity generation from existing hydropower stations

24 Examples of CDM approved methodologies to estimate baseline & project emissions Methodo ACM14 AM Waste sector Methane avoidance (Liquid waste) Mitigation of greenhouse gas emissions from treatment of industrial wastewater Mitigation of greenhouse gases emissions with treatment of wastewater in aerobic wastewater treatment plants Nb project PoA 32 2 AMS-III.H. Methane recovery in wastewater treatment AMS-III.I. AMS-III.Y. Avoidance of methane production in wastewater treatment through replacement of anaerobic lagoons by aerobic systems Methane avoidance through separation of solids from wastewater or manure treatment systems

25 The CDM Project cycle Project Idea Note (PIN) 1. Elaboration of the PDD Project owner/consultant 2. National Approval LoA DNA 3. Validation (public comment) DOE 1 4. Registration CDM EB 5. Implementation, Monitoring & Reporting Project owner/ consultant 6. Verification& Certification DOE Issuance of CERs CDM EB

26 CDM Project Design Document (PDD) CONTENTS A. General description of project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity/ crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring plan 25

27 The CDM transaction costs Steps in the CDM project cycle 1 Prefeasibility studies, stakeholders consultation & PIN Cost range in USD 15-60,000 2 Project Design Document (PDD) 10-40,000 3 Validation 10 40,000 4 Legal due diligence 10 40,000 5 Registration fee 0 30,000 6 Monitoring & verification/certification 5 15,000 / year Total ,000 26

28 Carbon finance Cash in Debt Equity = annual carbon payments = other sources of revenue from service or production = debt servicing Carbon revenues Operating revenues Construction Yrs Cash out Emission reductions created only after project is implemented and operational. 27

29 Impact of CDM revenues on projects IRR Examples of Projects in Africa CERs/Year 250,000 Without CER income 200,000 With CER income 150, ,000 50, % 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% 40.00% IRR

30 CDM in figures As of 1 st Septembre 2011 Projects in the CDM pipeline CDM status Nb % In Africa % Registered 3, at validation 3, at registration Withdrawn, rejected 1,40 8 Total 8, Approved methodologies active approved methodologies 29

31 CDM in figures As of 1 st Septembre 2011 CERs issuance of registered CDM projects 3,395 registered projects 2,240 No issuance (66%) 1,155 projects (34%) have issued CERs Distribution by region nb kcers % $10/ CER Latin America , Asia & Pacific , , Europe & C. Asia AFRICA 13 8, Middle East 11 1, Total , ,078 LDCs

32 Conclusion on CDM acomplexset of modalities& procedures, a lenghy& costlyprocess, but amechanismthatworks an opportunityfor the front runners(tt, FT, SD) uneven distribution between eligible countries to CDM theremightbea possibilityof adjustmentsif a suitable post 2012 climate regime is adopted! CDM willlikelycontinue, but in a reformedstate

33 Thank you Faouzi Senhaji Carbon Limits AfDB-ONEC3 32