3 – Clean Development Mechanism Introduction to Climate Change Wim Maaskant BGP Engineers – The...

3 – Clean Development Mechanism3 – Clean Development Mechanism

Introduction to Climate ChangeIntroduction to Climate Change

Wim MaaskantWim MaaskantBGP Engineers – The NetherlandsBGP Engineers – The Netherlands

www.bgpengineers.comwww.bgpengineers.com


The basics: the The basics: the carbon cyclecarbon cycle

Fossil fuel (= carbon stored in the earth, not taking part in cycleFossil fuel (= carbon stored in the earth, not taking part in cycle


Climate ChangeClimate Change

Why is global warming a problem?Why is global warming a problem?

(1)(1)Very substantial Very substantial damage to agriculture damage to agriculture (land + sea) causing:(land + sea) causing:-high prices and therefore povertyhigh prices and therefore poverty-food shortage and therefore hungerfood shortage and therefore hunger(2) (2) FloodingFlooding (Bangla Desh, Fiji Islands, Netherlands and many others) causing: (Bangla Desh, Fiji Islands, Netherlands and many others) causing:-economic damageeconomic damage-migrationmigration(3) Very substantial damage to (3) Very substantial damage to biodiversitybiodiversity causing: causing:-diseasesdiseases-loss of genetic resourcesloss of genetic resources-extinction of speciesextinction of species

Global warming (1)Global warming (1)



Why should we do anything about global warming?Why should we do anything about global warming?

(1)(1)Economic interest (see next sheet)Economic interest (see next sheet)

(2) Economic justice (richer & poorer nations)(2) Economic justice (richer & poorer nations)

(3) Taking care of Creation(3) Taking care of Creation

(4) Business opportunity(4) Business opportunity




Global warming (6) Global warming (6) (just for sceptics…)(just for sceptics…)




REDDREDD



Kyoto Protocol (1)Kyoto Protocol (1)

The Kyoto Protocol:The Kyoto Protocol:

•is part of the United Nations Framework Convention on Climate Change (UNFCCC)is part of the United Nations Framework Convention on Climate Change (UNFCCC)•Opened for signature December 11, 1997 in Kyoto, JapanOpened for signature December 11, 1997 in Kyoto, Japan•Conditions for entry into force Conditions for entry into force 55 parties and at least 55% 55 parties and at least 55% COCO22 1990 emissions by 1990 emissions by

UNFCCC Annex I parties. (NB condition met on 16 February 2007)UNFCCC Annex I parties. (NB condition met on 16 February 2007)•Parties Parties 175 countries 175 countries and other governmental entities (as of November 2007)and other governmental entities (as of November 2007)

•175 parties have ratified the protocol. Of these, 36 developed countries (plus the EU 175 parties have ratified the protocol. Of these, 36 developed countries (plus the EU as a party in its own right) are required to reduce greenhouse gas emissions to the as a party in its own right) are required to reduce greenhouse gas emissions to the levels specified for each of them in the treaty (representing over 61.6% of emissions levels specified for each of them in the treaty (representing over 61.6% of emissions from from Annex I countriesAnnex I countries))•One hundred and thirty-seven (137) developing countries have ratified the protocol, One hundred and thirty-seven (137) developing countries have ratified the protocol, including Brazil, China and India, but have no obligation beyond monitoring and including Brazil, China and India, but have no obligation beyond monitoring and reporting emissions.reporting emissions.




The Kyoto Protocol establishes the following principles:The Kyoto Protocol establishes the following principles:

(1)(1)Kyoto is underwritten by Kyoto is underwritten by governmentsgovernments and is governed by global legislation and is governed by global legislation enacted under the UNenacted under the UN

(2)(2)Governments are separated into Governments are separated into two general categoriestwo general categories: developed : developed countries, referred to as Annex I countries (who have accepted greenhouse gas countries, referred to as Annex I countries (who have accepted greenhouse gas emission reduction obligations and must submit an annual greenhouse gas emission reduction obligations and must submit an annual greenhouse gas inventory); and developing countries, referred to as Non-Annex I countries (who inventory); and developing countries, referred to as Non-Annex I countries (who have no greenhouse gas emission reduction obligations but may participate in have no greenhouse gas emission reduction obligations but may participate in the the Clean Development MechanClean Development Mechanism); ism);

(3)(3)Any Annex I country that fails to meet its Kyoto obligation will be penalized by Any Annex I country that fails to meet its Kyoto obligation will be penalized by having to submit emission allowances in a second commitment period for every having to submit emission allowances in a second commitment period for every ton of greenhouse gas emissions they exceed their cap in the first commitment ton of greenhouse gas emissions they exceed their cap in the first commitment period (i.e., 2008-2012); period (i.e., 2008-2012);




(4) As of January 2008, and running through 2012, (4) As of January 2008, and running through 2012, Annex I Annex I countries have to countries have to reduce their greenhouse gas emissions by a collective average of 5% below reduce their greenhouse gas emissions by a collective average of 5% below their 1990 levels (for many countries, such as the EU member states, this their 1990 levels (for many countries, such as the EU member states, this corresponds to some 15% below their expected greenhouse gas emissions in corresponds to some 15% below their expected greenhouse gas emissions in 2008). 2008).

(5) While the average emissions reduction is 5%, (5) While the average emissions reduction is 5%, national limitations national limitations range from range from an 8% average reduction across the European Union to a 10% emissions an 8% average reduction across the European Union to a 10% emissions increase for Iceland; but since the EU's member states each have individual increase for Iceland; but since the EU's member states each have individual obligations, much larger increases (up to 27%) are allowed for some of the less obligations, much larger increases (up to 27%) are allowed for some of the less developed EU countries (see below increase in greenhouse gas emission since developed EU countries (see below increase in greenhouse gas emission since 1990). Reduction limitations expire in 2013; 1990). Reduction limitations expire in 2013;




Kyoto includes "Kyoto includes "flexible mechanismsflexible mechanisms" which allow Annex I economies to meet " which allow Annex I economies to meet their greenhouse gas emission limitation by purchasing GHG emission their greenhouse gas emission limitation by purchasing GHG emission reductions from elsewhere. reductions from elsewhere. These can be bought either from financial exchanges, from projects which These can be bought either from financial exchanges, from projects which reduce emissions in non-Annex I economies under the Clean Development reduce emissions in non-Annex I economies under the Clean Development Mechanism (CDM), from other Annex 1 countries under the JI, or from Annex I Mechanism (CDM), from other Annex 1 countries under the JI, or from Annex I countries with excess allowances. countries with excess allowances.

Only CDM Executive Board-accredited Certified Emission Reductions (CER) Only CDM Executive Board-accredited Certified Emission Reductions (CER) can be bought and sold in this manner. Under the aegis of the UN, Kyoto can be bought and sold in this manner. Under the aegis of the UN, Kyoto established this Bonn-based Clean Development Mechanism Executive Board established this Bonn-based Clean Development Mechanism Executive Board to assess and approve projects ("CDM Projects") in Non-Annex I economies to assess and approve projects ("CDM Projects") in Non-Annex I economies prior to awarding CERs. (A similar scheme called "Joint Implementation" or "JI" prior to awarding CERs. (A similar scheme called "Joint Implementation" or "JI" applies in transitional economies mainly covering the former Soviet Union and applies in transitional economies mainly covering the former Soviet Union and Eastern Europe). Eastern Europe).




In practice this means that Non-Annex I economies have no GHG emission In practice this means that Non-Annex I economies have no GHG emission restrictions, but when a greenhouse gas emission reduction project (a restrictions, but when a greenhouse gas emission reduction project (a "Greenhouse Gas Project") is implemented in these countries the project will "Greenhouse Gas Project") is implemented in these countries the project will receive Carbon Credits, which can then be sold to Annex I buyers.receive Carbon Credits, which can then be sold to Annex I buyers.

Indonesia is a non-Annex-1 country under CDMIndonesia is a non-Annex-1 country under CDM



Kyoto Protocol (7) – Kyoto Protocol (7) – Global EGlobal Emissions Trading frameworkmissions Trading framework

UNFCCC (1992)UNFCCC (1992)

Kyoto Protocol Kyoto Protocol (1997)(1997)

ECCP: European Climate ECCP: European Climate Change ProgramChange Program

Project-basedProject-based Cap and tradeCap and trade

Clean Development Clean Development MechanismMechanism

Art. 12 Kyoto ProtocolArt. 12 Kyoto ProtocolCERsCERs

Joint Joint ImplementationImplementation

Art. 6 Kyoto ProtocolArt. 6 Kyoto ProtocolERUsERUs

International International Emission TradingEmission Trading

Art. 17 Kyoto ProtocolArt. 17 Kyoto ProtocolAAUsAAUs

Between industrial countriesBetween industrial countries and developing countriesand developing countries

Between industrial countries Between industrial countries (Annex I countries = countries(Annex I countries = countrieswith GHG emission reduction with GHG emission reduction

targets)targets)

Trade of allocated AAUs Trade of allocated AAUs between industrial countries between industrial countries

(annex I countries)(annex I countries)

Voluntary MarketVoluntary MarketClimate-friendly & climate neutral Climate-friendly & climate neutral

products and servicesproducts and services

EU-ETS (also cap and trade)EU-ETS (also cap and trade)linkinglinking

Trade in EUATrade in EUA



Flexible mechanisms, CDM (1)Flexible mechanisms, CDM (1)

Industrialized Nations can submit their CERs to meet their target in 2008-2012. Industrialized Nations can submit their CERs to meet their target in 2008-2012. -> there is a worldwide demand for projects and activities for ‘carbon’ -> there is a worldwide demand for projects and activities for ‘carbon’ reduction or fixationreduction or fixation-> many of these projects will be in Transition Countries. -> many of these projects will be in Transition Countries.

Purpose of CDM:Purpose of CDM:

-> to assist developing countries in achieving sustainable development-> to assist developing countries in achieving sustainable development

-> to assist developed countries in achieving compliance with part of their -> to assist developed countries in achieving compliance with part of their

quantified emission reduction commitmentsquantified emission reduction commitments



Flexible mechanisms, CDM (2)Flexible mechanisms, CDM (2)

Annex 1 CountryAnnex 1 Country Govt. and companies want to reduce Govt. and companies want to reduce

GHG emissions GHG emissions

Invest in their own Invest in their own countrycountry

Invest in a project in Invest in a project in Transition CountryTransition Country

Transition CountryTransition Country Many opportunities for projects that Many opportunities for projects that

reduce emissions e.g.reduce emissions e.g.

Forestry plantingForestry planting Renewable electricityRenewable electricity Energy efficiencyEnergy efficiency Clean transportClean transport Biomass energyBiomass energy

Project Produces CERsProject Produces CERs

InvestmentInvestment

CERsCERs

$ $



CDM: how to develop a project (1)CDM: how to develop a project (1)

1)1) An industrialized country An industrialized country investsinvests into host country and into host country and receives credits receives credits from from a CDM project a CDM project

2)2) It must obtain the consent of the developing country hosting the project that it It must obtain the consent of the developing country hosting the project that it will contribute to sustainable development. will contribute to sustainable development.

3)3) Methodologies approved by the CDM Executive Board (EB) must be used by Methodologies approved by the CDM Executive Board (EB) must be used by the applicant and it must make the case that the carbon project would not the applicant and it must make the case that the carbon project would not have happened anyway (establishing have happened anyway (establishing additionalityadditionality), and ), and

4)4) It must establish a It must establish a baselinebaseline estimating the future emissions in absence of the estimating the future emissions in absence of the registered project. registered project.




5)5) The project is then The project is then validatedvalidated by a third party agency, called a Designated by a third party agency, called a Designated Operational Entity (DOE), to ensure the project results in real, measurable, Operational Entity (DOE), to ensure the project results in real, measurable, and long-term emission reductions. and long-term emission reductions.

6)6) The Executive Board (EB) then decides whether or not to register (approve) The Executive Board (EB) then decides whether or not to register (approve) the project. the project.

7)7) If a project is registered and implemented, the EB issues credits, called If a project is registered and implemented, the EB issues credits, called Certified Emission Reductions (CERs) to project participants based on the Certified Emission Reductions (CERs) to project participants based on the monitored difference between the baseline and the actual emissions, verified monitored difference between the baseline and the actual emissions, verified by the DOE.by the DOE.

8)8) During project operation, the DOE shall monitor the realized emissions During project operation, the DOE shall monitor the realized emissions reductions.reductions.


CDM: career opportunities !CDM: career opportunities !

Career opportunities:Career opportunities:

– Drafting baseline studies (engineers, chemists, biologist) Drafting baseline studies (engineers, chemists, biologist)

– Feasibility studies (engineers, economists)Feasibility studies (engineers, economists)

– Stakeholders consultations (all)Stakeholders consultations (all)

– Community development (all)Community development (all)

– Forest management (biologists, forestry experts)Forest management (biologists, forestry experts)

– Environmental impact assessment (environmentalists)Environmental impact assessment (environmentalists)

– Financing of projects (economists, financial specialists)Financing of projects (economists, financial specialists)

– Trading (economists, financial specialists)Trading (economists, financial specialists)

– Management (managers, public & private)Management (managers, public & private)

– Municipal services (all)Municipal services (all)

– Policy development (managers, public & private)Policy development (managers, public & private)

– Investment advisors (economists, financial specialists)Investment advisors (economists, financial specialists)


CDM: business opportunities !CDM: business opportunities !

Business opportunities:Business opportunities:

– Investments in renewable energy projectsInvestments in renewable energy projects

– Equipment manufacturing & trading (solar, wind, biofuel, etc.)Equipment manufacturing & trading (solar, wind, biofuel, etc.)

– Engineering companiesEngineering companies

– New waste management servicesNew waste management services

– Indonesian investment fundsIndonesian investment funds

– and many others!and many others!

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