Clean Development Mechanism:

A Business Opportunity In Peru

Geographic Distribution of Peruvian CDM Projects

Calle Hermanos Quinteros 103 Urb. La Castellana, Surco

Lima 33 - Perú

Telefax: (511) 449-6200

fonam@fonamperu.org

www.fonamperu.org

LoretoAmazonas

Cajamarca

Piura

Tumbes

Lambayeque

La Libertad

SanMartin

Ancash

UcayaliHuánuco

Pasco

JunínLima

ApurímacAyacuchoIca

Arequipa

Puno

Moquegua

Tacna

EcuadorColombia

Brasil

Bolivia

PacificOcean

Huancavelica Cusco

Madre de Dios

Legend

Hydroelectric

Wind

Solid Waste

Transportation

Biomass

Fuel Switching

Transmission Line

Afforestation / Reforestation

Wastewater

Cogeneration

Energy Efficiency

Geothermy

Chile

CDMin peru

NATIONAL ENVIRONMENTAL FUND - PERU

NATIONAL ENVIRONMENTAL FUND - PERU

CDM Promotion Office in Peru

Sectors promoted by FONAM in the CDM

CDM Project PortfolioAt international level, Peru has carried important actions to consolidate its position as one of the most proactive and attractive countries in terms of CDM project development, being considered as one of the ten most attractive Hosts Countries (sellers) at a world-wide level. By the first semester of 2008, Peru has a portfolio of 106 CDM projects which represents US$ 5 908.33 millions in investments.

83 projects in the energy sector with 14.28 million reductions of tCO2e per year. 23 projects in the forestry sector (21 A/R projects and 2 REDD

initiatives) with 46.38 million reductions of TCO2e in twenty years.

Progress of the CDM Project Portfolio:

25 projects approved by the Designated National Authority (CONAM).

11 projects registered by the CDM Executive Board.

12 projects on validation and in registration process.

14 projects with PDD under elaboration.

1 project approved at methodology level.

All the projects have at least a Project Idea Note (PIN)

At least 20 projects have signed purchase agreements, and have letters

of purchase commitment.

CDM PROJECTS ENERGY SECTORBy the first semester of 2008, there are 83 energy CDM projects. They have a

great GHG emission reduction potential, calculated in 14 289 069 tCO2e per

year and representing investments of US$ 5 820 millions.

Most of the projects are Hydroelectric (40) representing 56.38% of the total of reductions of tCO2e. Transportation projects have the second place with 10.05% , while biomass represent 9.03%. Additionally, for this year, 4 new sector have been added, wastewater treatment, cogeneration, energy efficiency and geothermal power.

In 1992, the United Nations recognized the evidence showing that human activity was affecting the temperature of the planet, due to the increase of greenhouse gases (GHG) concentration in the atmosphere. In an attempt to control this problem, the United Nations Frame Convention of Climate Change (UNFCCC) was created. Peru is a member of this Convention.

In the Third Conference of Parties (CoP 3, 1997) the Kyoto Protocol (KP) was signed. In this document, developed countries and transition economies made the commitment to reduce, between 2008 and 2012, their GHG emissions in an average of 5,2% of the amount accounted for 1990. In order to accomplish this objective, financial mechanisms that diminish the implementation costs of the reduction measures were created. One of them is the Clean Development Mechanism (CDM), which allows countries with GHG emission reduction commitments to acquire these reductions from projects executed in developing countries. Peru has ratified the KP in 2002 hence, it is possible to be benefited from this mechanism.

To show that businesses and lucrative investments can be done through environment friendly projects.

For new businesses. Peru has great potential in different sectors to

develop projects that reduce GHG emissions. To promote investments with extraordinary incomes. CDM could be the

last push to finance these new investments. At this moment, Peru has a 106 project portfolio, which represents estimated investments of around US$ 5 908.33 million.

To contribute to the sustainable development, implementing CDM projects that promote transference of technology, use of renewable energies, generation of job posts and the improvement of the quality of life for the society.

In this way, CDM becomes for our country an opportunity:

CDM in Peru

Peru has carried out a series of actions for the implementation, promotion and development of projects that could apply to the CDM. These had allowed us to be recognized as one of the most attractive countries in this market at a world-wide level.

In Peru, the actions related to the climate change, particularly to the Clean Development Mechanism (CDM), has been managed by two institutions: CONAM, as the National Environmental Authority, and FONAM, as the promoter of environmental investments.

CONAM is the institution that establishes the National Environmental Policy, the Focal Point of the UNFCCC and the Designated National Authority (DNA) for CDM. CONAM has developed and implemented the ISO P-34 procedure for a rapid assessment of CDM projects. Within 45 days the Project Participants obtain a declaration stating the approval or disapproval of the of the proposed project activity. This approval refers exclusively to the project contribution to the sustainable development of the country.

National Environmental Fund - FONAM

FONAM is an environmental fund created by a congress law, but ruled under the private regimen. It is a non-profit institution of public and social interests, with the objective of promote and support the financing of public and private investment in environmental projects, as well as support the financing of the environmental policy and environmental management of the country.

FONAM is the official CDM Promotion Office. It works directly with the private and public sector, offering counselling in the development of CDM projects, supporting the process of fundraising and financing with national and international financial organisms, and undertaking the international promotion of the Peruvian projects in front of potential buyers and investors.

FONAM, is also the Focal Point of the World Bank's Carbon Finance in Peru.

National Environmental Council - CONAM

Peru Achievements in the Clean Development Mechanism (CDM)

Peru is a member of the UNFCCC and have ratified the Kyoto Protocol. We count with agile Institutions for CDM with high technical capacity. We have a 45 day-process for the assessment and approval of CDM projects. We are recognized as one of the 10 most attractive countries for the development of CDM projects in the world. CDM is promoted in the country by FONAM, with a vision of "promotion of investments, source of job posts, use of renewable energies and contribution to the

sustainable development" Capacity building has been developed within possible investors in the country. There is an increasing number of companies associations, and public sector that

knows about CDM potential an how to apply to the mechanism. Local capacities in the National Financial System have been developed, in order to generate financial support to Peruvian CDM projects. Among these financial

institutions there are Commercial Banks, Financial Institutions, and Bank Associations. FONAM promotes the National CDM Portfolio in International Carbon Fairs, International Environmental Forums, and among diverse actors of the carbon

market including Governments, Carbon Funds, Investors and Technology Suppliers. Local capacities have been developed through the participation on international events and the organization of international seminars and forums within the

country. These events include: Meetings and Conferences of the Parties of the UNFCCC COPs / MOPs International Carbon Seminars and Forums

Other international and national carbon events Peru has signed cooperation agreements with: Canada, Austria, Japan - JBIC, Spain and Germany, France, ENDESA and UNDP.

Services offered by FONAM for the development of CDM projects

We elaborate the Project Design Document (PDD), including the baseline study.

We elaborate the Official File for the presentation of the project to the Designated National Authority (CONAM) to obtain the approval of the Host Country.

We do the Public Awarenes of the CDM project among stakeholders in the area of influence of the project.

We advise the project developers in the processes of validation and registration in front of the CDM Executive Board.

We give counselling in the emission reduction monitoring, and in the verification process.

We develop the chapter of environmental and social commitments of CDM projects, and give counselling for their accomplishment.

We promote the Peruvian CDM Project Portfolio at international level. Serving as a nexus among the international stakeholders of the carbon

market, specifically between the CER buyers and the Peruvian CDM project developers, in this case, the sellers.

We give support for the financial design of CDM projects, serving as a bridge between national and international financial institutions and the national economic agents or project developers.

We give counselling in the development of a suitable legal frame for the

accomplishment of CDM projects.

We promote projects that foster synergies among the three environmental conventions of the United Nations: Climate Change, Desertification and Biological Diversity.

FONAM has a remarkable position within the country regarding public awareness of the Carbon Market opportunities, identifying eligible projects under the CDM and offering counselling to the project developers in a successful way. Among the main services that we offer are:

We do the identification of projects that can be eligible within the CDM framework, by doing a personalized work with the private sector and organizations of the public sector.We develop local capacities and give counselling to project participants in the preparation of CDM projects through all the project cycle:

We prepare the initial document, Project Idea Note (PIN), and we made the eligibility analysis of the project.

FONAM Capacities

FONAM has a staff of national consultants trained in carbon market

organizations, experts in the CDM both in energy and forestry sector, and also

experts in the strengthening of the CDM institutions. FONAM has the capacity to

summon international experts in order to advise competitively CDM project

developers. This is possible because of FONAM´s institutional responsability

and participation in international networks on CDM in diverse sectors such as

renewable energy, transportation, biomass, bio-fuels, and solid waste

management, among others.

FONAM is recognized by its efficiency and pro activity, and is supported by

multilateral and bilateral international organisms to maintain its

competitiveness in carbon market issues. In this sense, FONAM as CDM

expert is invited to participate in diverse CDM meetings and forums.

As part of its promotion activities, FONAM runs a Web Site, a News Bulletin,

an Electronic Group on CDM, among other publications that are

permanently updated.

Participation of the Official Peruvian Delegation, leaded by FONAM, in the

Carbon Expo since its first edition in 2004. Been recognized as one of the

most important delegations, with the participation of the private and public

sector, and with an outstanding CDM Project Portfolio, as follows:

2004: 18 projects and estimated investment of US$ 700 millions

2005: 39 projects and estimated investment of US$ 1 200 millions

2006: 50 projects and estimated investment of US$ 1 441.85 millions

2007: 71 projects and estimated investment of US$ 2 944.4 millions

2008: 106 projects and estimated investment of US$ 5 908.33 millions

CDM PROJECTS FORESTRY SECTORAfforestation & Reforestation activities are crucial since they remove CO2 from the atmosphere, beside their contribution to sustainable development. FONAM has identified opportunities in non-forest lands, all around the country. FONAM’s A/R CDM Project Portfolio consists of 21 projects which means potential GHG removals of around 46 381 656 TCO2e in 20 years.

FONAM also promotes projects based on programs, denominated CDM

Programmatic, especially those of fuel switch to natural gas, energy efficiency,

efficient lighting, transportation, solid waste management and afforestation and

reforestation

Renewable energies: solar, biomass,wind and mini hydros

Energy Generation

Alternative energy sources: ethanol and biodiesel

Fuel switch to Natural Gas

Afforestation and reforestation

Programmatic CDM

Transportation

Energy Efficiency

Solid Waste Management

GHG Emission Reduction in tCO2e, by Project Type, April 2008

Source: FONAM

Sectors promoted by FONAM in the CDM

Transmission

Line 0.27%

Wind Power2.72%

Solid Waste

Management6.62%

Wastewater Management

0.55%

Transportation10.05%

Biomass9.03%

Fuel Switching2.11%

Cogeneration7.86%

Energy Efficiency1.27% Geothermal

Power3.14%

Hydropower56.38%

GHG Emission Reduction in tCO2e by Project Type, April 2008Type of Project Quatity

Investment (US$ millions)

tCOe reduced per year

Hydropower 40 2 590 8 056 853

Transmission Line 4 37 38 330

Wind Power 3 416 388 128

Solid Waste Management 7 534 945 687

Wastewater Management 1 2 78 840

Transportation 4 1 006 1 435 434

Biomass 12 166 1 290 829

Fuel Switching 3 8 301 459

Cogeneration 4 732 1 123 551

Energy Efficiency 3 50.15 181 146

Geothermal Power 2 280 448 812

TOTAL 83 5 820 14 289 069

Source: FONAM

Source: FONAM

Source: FONAM

Project Name Project Developer Area(ha)

Avoided deforestation through forest management in FSC certified forests from indigenous communities in Peruvian Amazon

NGO AIDER

NGO ACCAConservation concession “Los Amigos” – CCLA

135 000

145 690

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April 2008

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Reducing Emissions from Deforestation and Degradation Projects (REDD)

Peru is the second country in South America with the largest extension of tropical rainforest. Almost 60% of Peru's area is located within this region. This represents opportunities for REDD projects.

FONAM's Projects Portfolio includes projects under the scheme of REDD. These initiatives will be developed over more than 280 900 ha of tropical rainforests and intend to reduce CO2 emissions from deforestation as well as conserve the biodiversity and improve life conditions of local families.