Clean Development Mechanism
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Transcript of Clean Development Mechanism
CLEAN DEVELOPMENT MECHANISM: OPPORTUNITIES FOR THE PHILIPPINES
Climate Change Information CenterManila ObservatoryAteneo de Manila University
Clean Development Mechanism• Enables developed countries (known as
Annex I countries) to meet their emission reduction commitments in a flexible and cost-effective manner
• Assists developing countries (non-Annex I countries) in meeting their sustainable development objectives
• Investors benefit by obtaining Certificates of Emissions Reductions (CERs)
• Host countries benefit in the form of investment, access to better technology, and local sustainable development
Value & Benefits of CDM:From a developing country perspective
• Attract capital for less-carbon intensive projects
• Encourage active participation of private and public sectors
• Technology transfer – environmentally friendly sustainable technologies
• Investment priorities in sustainable development projects
CDM contributions to Sustainable Development objectives
• Transfer of technology and financial resources
• Sustainable ways of energy production• Increasing energy efficiency &
conservation• Poverty alleviation through income and
employment generation• Local environmental side benefits
Simplistic numerical example
Provide electricity for a barangay• “Business-as-usual” (baseline): Diesel
generator sets– Cost of project $10– Emissions 1 tC
• Cleaner project (CDM-eligible): Micro-hydro– Cost of project $13– Zero Emissions
Simplistic numerical example
• CDM Investor (e.g. Japan)– Invests $3 ($13-$10, difference between
cleaner and business-as-usual project)
– Gains Certificate of Emissions Reduction of 1 tC, which it can meet some of its Kyoto Protocol commitments to reduce emissions
Simplistic numerical example
WIN – WIN – WIN
• WIN for the host country– Sustainable development benefit: Cleaner
energy production technology
• WIN for the Annex I country– Credits for emissions reduction
• WIN for the Global Environment– Emissions reduction
CDM Project
• Achieves Sustainable Development objectives for the host developing country
• Reduces GHG Emissions
Baseline and CERs
CO2 emission
year
Reduced emissions
Project implemented
Business as usual:baseline
CDM: A special product
• CER is a payment for the Project Developer not to produce
• To reduce GHG emissions
• Thus, the importance of special requirements– Definition of baselines– Calculation of GHG emission reductions
How CDM can matter
Without CERs
implemented
With CERs not
implemented
No CDM
Without CERs not implemented;
with CERs implemented
CDM
FIRR
CER income
CDM Eligible Projects
• Renewable energy• Fuel switching• End-use energy efficiency improvements• Supply-side energy efficiency improvement• Agriculture (reduction of CH4 & NO2
emissions)• Industrial processes (CO2 from cement,
HFCs, etc)• Sink projects (only afforestation &
reforestation)
Clean Development Mechanism
Types of small-scale projects that could qualify for fast-track approval procedures
• Renewable energy projects up to 15 megawatts (MW) of output capacity
• Energy efficiency improvements that reduce energy consumption on the supply and/or demand side by up to 15 gigawatt-hours (GWh)/year
• Other project activities that both reduce emissions at source and directly emit less than 15 kilotons (kt) of CO2 equivalent annually
Projected CO2 Emissions 1999-2008
0
30,000
60,000
90,000
120,000
150,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
CO
2 e
mis
sio
ns (
Gg
) natural gas
oil
coal
Projected Philippine CO2 Emissions:Potential of CDM Emissions
Reductions Supply
Year Coal Oil N. Gas Total1999 17,988 47,324 7 65,3192000 18,843 50,766 10 69,6192001 19,720 55,653 13 75,3862002 15,890 53,591 5,879 75,3602003 17,530 56,472 6,645 80,6472004 20,750 59,974 7,239 87,9632005 22,854 64,825 7,232 94,9112006 26,897 70,471 7,232 104,6002007 28,281 76,183 8,464 112,9282008 31,055 80,840 9,699 121,594
Estimated CO2 Emissions (in Gg )
Projected Philippine CO2 Emissions:Potential of CDM Emissions
Reductions Supply
-30
-25
-20
-15
-10
-5
0
5
0 3 6 9 12 15
Annual CO2 Reduction Potential (mill t CO2)
Aba
tem
ent Cos
t (U
S $
/ton
CO
2)
Source: ALGAS
PhilippineGHG Abatement Cost
and Potential
Abatement OptionAbatement Potential
(mill t CO2/year)Abatement Cost(US $ / ton CO2)
CFL 1.10 -26.3Industrial Boilers 0.37 -26.0System Loss Reduction 2.32 -17.2Industrial Motors 0.24 -13.7Eff Air Conditioning 1.47 -6.1Eff Refrigerators 0.37 -5.4Heat Rate Improvement 5.26 -5.1Eff Transport 1.34 -2.9Wind Power 0.24 -1.6Biomass Power 0.12 0.3Solar Power 0.12 1.4CC Natural Gas 1.83 2.4
MINDORO ISLAND-ORIENTAL13,500 kW
MARINDUQUE ISLAND 3,000 kW
CUYO ISLAND 330 kW
BUSUANGA ISLAND 330 kW
PALAWAN ISLAND 9,000 kW
LUBANG ISLAND 330 kW
SIQUIJOR ISLAND 1,000 kW
SPECIFIC WIND POTENTIAL POWER SITES
CATANDUANES 2,250 kW
TABLAS ISLAND 1,500 kW
ROMBLON ISLAND1,000 kW
MASBATE ISLAND 3,000 kW
DINAGAT ISLAND3,000 kW
POLILLO ISLAND 500 kW
CASIGURAN500 kWNORTHERN LUZON
120 MW
BATANES1,100 KW
POTENTIAL CAPACITY:
160,340 kW
Solar Energy Resource Potential
Average insolation of 5- 6 kWh/sq. m/day all throughout the country
1990-2025 Equivalent CO2 Emissions from
Municipal Solid Waste Generation (million tons)
5.45
18.97
24.15
30.78
10.499.19
7.335.86
12.1214.23
16.86
20.01
9.87
7.33
12.11
15.04
0
5
10
15
20
25
30
35
1990 1995 2000 2005 2010 2015 2020 2025
Year
constantgenerationrates
changinggenerationrates
Requirements for the Philippines to Participate in CDM
• Ratify the Kyoto Protocol
• Designate the CDM National Authority
Requirements for the Philippines to Participate in CDM
• Status of Philippine ratification of the Kyoto Protocol
• Senate Committee on Foreign Affairs has sponsored the ratification on the floor of the Senate, 2nd June 2003
• Interpellation and voting during the next session of the Senate, August 2003
• Need 2/3 majority of the Senate to concur in the ratification of the Kyoto Protocol
Requirements for the Philippines to Participate in CDM
• Status of efforts to establish CDM Designated National Authority (DNA)
• Proposal to make the Inter-Agency Committee on Climate Change (IACCC) as the DNA
• IACCC is composed of: DENR, DOST, DOE, DFA, DTI-BOI, DOTC, NEDA, DPWH, PAGASA, FMB, EMB, Philippine Network on Climate Change (NGO)
Preparation and review of the Project
Baseline Study and Monitoring Plan (MP)
Validation process
Negotiation of Project Agreements
Periodic verification & certification
Construction and start up
Project completion
3 months
2 months
2 m
onth
s
3 months
1-3 years
Up
to 2
1 ye
ars
• Project Idea Note• Project Concept Note• Project Concept Document (or equivalent)
• Project Design Document • Baseline study and ER projections• Monitoring Plan
• Validation protocol and report
• Project Appraisal and related documentation• Term sheet• Emission Reduction Purchase Agreement
PCF/CDM Project Cycle – The Manufacturing Process for CDM Emissions Reductions
• Initial verification report
• Verification report• Supervision report
Preparation and review of the Project
Baseline Study and Monitoring Plan (MP)
Validation process
Negotiation of Project Agreements
Periodic verification & certification
Construction and start up
Project completion
3 months
2 months
2 m
onth
s
3 months
1-3 years
Up
to 2
1 ye
ars
• Upstream Due Diligence, carbon risk assessment and documentation: $ 50K
• Baseline: $30 K• Monitoring Plan: $25K
• External consultant: $25K• Processing and documentation: $30k
• Consultation and Appraisal: $75K• Negotiations and Legal documentation: $30K
Carbon Asset Creation and Maintenance CostsThe PCF Experience
Total through Negotiations• All expenses: $265 K
• Initial verification at start-up: $25K
• Verification: $10-25 K• Supervision: $10-20K
Demand for CDM Projects
Example:• The Netherlands will reduce 100Mt CO2eq
through CDM/JI (tender, CDM facilities etc) at average costs of ca 4 US$/ton CO2eq
• This means 400 M US$ for CERs/ERUs. Contribution to the capital costs may by be 5-15% (at least for CERs). Consequently an investment of 4,000 M US$ is needed to generate the credits for the Netherlands.
• Note: Should be new and additional
Total GHG emissions in 1990 and 2010, and reduction commitments according to
the Kyoto Protocol based on national communications
Demand Scenario
TotalGHG Emissions in 1990 (mtc)
Total GHG Emissions in 2010 (mtc)
Kyoto Reduction Commitments (mtc)
Excess Emissions (mtc)
Kyoto Commitments minus Excess Emissions
Projected Demand (at $4 per tC) in $M
EU 1,159.50 1095.9 40.6 12.7 27.9 111.60
Australia 113.3 144.1 21.7 86.80
Canada 153 182.4 29.2 116.80
Iceland 0.8 1 0.1 0.40
Japan 337.2 388.2 71.2 284.80
New Zealand 19.8 22.9 3.1 12.40
Norway 15 17.3 2.1 8.40
Switzerland 14.6 14.5 1.1 4.40
United States 1634.4 1943.9 423.9 1,695.60 Eastern Europe 368.4 358.3 26.7 11 15.7 62.80
Former USSR 1,113.50 1032.2 0.9 81.4 -80.5 (322.00)
CDM Funding as Additional
• Public funding for CDM Projects be additional to Official Development Assistance (ODA), Global Environment Facility (GEF) provided by Annex I Parties
• Public funding for CDM projects must not result in the diversion of ODA
• Funding may involve private and/or public entities
Current ‘State of Play’
• Although numerically dominant, renewables account for only 9.4 million tons of the 42 MT of CO2 equivalent being claimed (just over 20%)
• Single greatest source of carbon credits being claimed is hydroelectric projects
Project Type No. of Projects Tons of CO2
Mono-culture Plantation (sinks)
1 (component) 4,299,951
Renewables* 14 9,430,973
Energy Efficiency 1 319,392
Fuel Switching 1 (component) 7,741,405
Gas Capture 1 700,000
Waste Incineration
1 2,800,000
Hydro 7 17,150,767
TOTAL 25 42,442,488
*Hydro projects <10 MW are counted as renewable.
CDM Project CycleProject
Participants
Designated Operational Entity
CDM Executive Board
Project Participants
Designated Operational Entity
CDM Executive Board
Certified Emission Reductions
Design
Validation/registration
Monitoring
Verification/certification
Issuance
Designated National Authority (DNA) for CDM
Applicant Entity
Executive Board and COP/MOP
Designated Operational
Entity
Accreditation/designation
Contents of CDM-PDD
A. General description of project activity
B. Baseline methodology C. Duration of the project activity/
Crediting period D. Monitoring methodology and plan E. Calculations of GHG emissions
by sources F. Environmental impacts G. Stakeholders comments
Roberto C. Yap, S.J., Ph.D.
Environmental Economist
Climate Change Information Center
Manila Observatory
Ateneo de Manila University
Tel +63 2 426-6144
Fax +63 2 426-6070