Cost and duration of planning, approving and executing Clean Development Mechanism (CDM) projects

Transcription

1 Cost and duration of planning, approving and executing Clean Development Mechanism (CDM) projects 8 th July,

2 AGENDA Overview of the CDM CDM basic concepts CDM project cycle review Summary 2

3 Overview of the CDM What is the CDM? Twin objectives of CDM: Help Annex I countries meet their objectives in a cost-effective way Contribute to sustainable development of the host country Project implementation Allows Annex B countries to undertake GHG emission reduction projects in non-annex B countries Use the achieved emission reductions to meet their own emission goal Funding Annex B country funds the project and provides any necessary knowhow and technology transfer 3

4 Overview of the CDM CDM organisation Rules, modalities and procedures of CDM are defined in: Kyoto Protocol Follow-up decisions of COP (Conference of the Parties) Decisions of CDM Executive Board CDM EB (Executive Board): Responsible for further development of CDM rules, and supervising implementation Composed of 10 members (and 10 alternates) Reports to the COP 4

5 CDM basic concepts Project profile A CDM project activity is additional if anthropogenic emissions of greenhouse gases by sources are reduced below those that would have occurred in the absence of the registered CDM project activity (3/CMP.1, Annex, paragraph 43) GHG emissions (tco 2 eq) 1. Validation of project design, baseline and monitoring plan 2. Verification / Certification of emission reductions Emissions baseline ADDITIONAL EMISSION REDUCTIONS Emissions after the project Project implementation Years 5

6 CDM basic concepts Conditions for additionality Investment barrier A financially more viable alternative to the project would have led to higher emissions Technological barrier A less technologically advanced alternative to the project (lower risk) would have led to higher emissions Prevailing practice Prevailing practice, existing regulatory or policy requirements would have led to implementation of technology with higher emissions 6

7 CDM project cycle Overview 7

8 CDM project cycle PDD development Standardized format for Project Design Document (PDD) A. General description of the project B. Setting of the baseline C. Duration of the project / Crediting period D. Setting of the monitoring plan E. Estimation of GHG emission reductions F. Environmental impacts G. Stakeholders comments Cost: 30,000 to 40,000 (Consultant fee) Duration: 1 to 3 months (includes feasibility study) 8

9 CDM project cycle Validation Independent assessment by a Designated Operational Entity (DOE) that project meets criteria of the Kyoto Protocol. DOE conducts the following: 1. Reviews the PDD and supporting documentation; 2. Conducts a site visit; 3. Interacts with stakeholders; 4. Publishes the PDD in the web for international stakeholder comments. A successfully validated project can be submitted to CDM Executive Board for registration. Cost: 20,000 to 30,000 (DOE fee) 10,000 to 20,000 (Consultant fee) Duration: 6 months to 1 year 9

10 CDM project cycle Registration Automatic registration of submitted projects unless 3 members of the CDM Executive Board or one of the parties involved file a request for review Registration fees are payable to the Executive Board by the project participants depending on the quantity of emission reductions Fees are not required if the project occurs in a Least Developed Country (LDC) Cost: 8,000 to 200,000 * (CDM EB fee) Duration: 1 to 2 months *Assumes 1,000,000 CER 10

11 CDM project cycle Verification, certification and issuance Monitoring required upon project implementation Monitoring report submitted to DOE for verification Tasks of verification DOE: Verification of data accuracy and completeness and collection in accordance with monitoring plan Preparation of verification report and certification report to CDM EB & public Cost: 5,000 to 20,000 per report (DOE fee) 2% of CERs issued (UN adaptation fund) Duration: 1 to 2 months (periodically) 11

12 Summary CDM statistics Number of CDM projects in pipeline 8,868 Number of APG projects in pipeline 38 (0.4%) Number of CDM projects that have issued CERs 2,337 Number of APG CDM projects that have issues CERs 5 (0.2%) Total number of issued CERs 1.3 billion Total number of CERs issued from APG projects 13.8 million (0.1%) Number of APG projects in CDM pipeline 38 Number of registered APG projects 17 (45%) Number of APG projects in validation 21 (55%) Registered APG projects: 2 Middle East; 3 Africa; 1 South America APG projects in validation: 7 Middle East; 6 Africa; 1 South America 12

13 Summary Key barriers to APG implementation Economic Fluctuating long term gas price makes investment uncertain, especially as APG project infrastructure is capitally intensive Amount of APG in an oil well is often unknown and hard to predict (i.e., gas-to-oil ratio (GOR) changes during field s life) Market demand is hard to predict in developing countries Production Sharing Agreements (PSA) can disincentivize APG capture Geographic Fields are in remote locations, where APG cannot be used locally, so significant investment in gathering infrastructure is required to transport the gas to a major market Low CER price is reducing the incentive to pursue the CDM Average project size is 700,000 CER/year (in validation); equates to 350,000 CER revenue 13