03.0 Clean Development Mechanism

3 – Clean Development Mechanism

Introduction to Climate Change

Wim Maaskant
BGP Engineers – The Netherlands

www.bgpengineers.com

3 – Clean Development Mechanism

The basics: the
carbon cycle

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

3 – Clean Development Mechanism
Global warming (1)

Why is global warming a problem?
(1)Very substantial damage to agriculture (land + sea) causing:

-high prices and therefore poverty
-food shortage and therefore hunger
(2) Flooding (Bangla Desh, Fiji Islands, Netherlands and many others) causing:
-economic damage
-migration
(3) Very substantial damage to biodiversity causing:
-diseases
-loss of genetic resources
-extinction of species

Climate Change

3 – Clean Development Mechanism
Global warming (2)

Why should we do anything about global warming?
(1)Economic interest (see next sheet)
(2) Economic justice (richer & poorer nations)
(3) Taking care of Creation
(4) Business opportunity

Climate Change

3 – Clean Development Mechanism
Global warming (3)

Climate Change

3 – Clean Development Mechanism
Global warming (4)

Climate Change

3 – Clean Development Mechanism
Global warming (5)

Climate Change

3 – Clean Development Mechanism
Global warming (6) (just for sceptics…)

Climate Change

3 – Clean Development Mechanism
Global warming (7)

Climate Change

3 – Clean Development Mechanism
Global warming (8)

REDD
Climate Change

3 – Clean Development Mechanism
Global warming (9)

Climate Change

3 – Clean Development Mechanism

Kyoto Protocol (1)

The Kyoto Protocol:
•is part of the United Nations Framework Convention on Climate Change (UNFCCC)
•Opened for signature December 11, 1997 in Kyoto, Japan
Conditions for entry into force 55 parties and at least 55% CO2 1990 emissions by
•Conditions
UNFCCC Annex I parties. (NB condition met on 16 February 2007)
•Parties 175 countries and other governmental entities (as of November 2007)
•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
levels specified for each of them in the treaty (representing over 61.6% of emissions
from Annex I countries)
•One hundred and thirty-seven (137) developing countries have ratified the protocol,
including Brazil, China and India, but have no obligation beyond monitoring and
reporting emissions.
Climate Change

3 – Clean Development Mechanism
Kyoto Protocol (2)

The Kyoto Protocol establishes the following principles:
(1)Kyoto is underwritten by governments and is governed by global legislation
enacted under the UN
(2)Governments are separated into two general categories: developed
countries, referred to as Annex I countries (who have accepted greenhouse gas
emission reduction obligations and must submit an annual greenhouse gas
inventory); and developing countries, referred to as Non-Annex I countries (who
have no greenhouse gas emission reduction obligations but may participate in
the Clean Development Mechanism);
(3)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
ton of greenhouse gas emissions they exceed their cap in the first commitment
period (i.e., 2008-2012);

Climate Change

3 – Clean Development Mechanism
Kyoto Protocol (3)

(4) As of January 2008, and running through 2012, Annex I countries have to
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
corresponds to some 15% below their expected greenhouse gas emissions in
2008).
(5) While the average emissions reduction is 5%, national limitations range from
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
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
1990). Reduction limitations expire in 2013;

Climate Change

3 – Clean Development Mechanism
Kyoto Protocol (4)

Kyoto includes "flexible mechanisms" which allow Annex I economies to meet
their greenhouse gas emission limitation by purchasing GHG emission
reductions from elsewhere.

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

3 – Clean Development Mechanism
Kyoto Protocol (5)

Climate Change

3 – Clean Development Mechanism
Kyoto Protocol (6)

In practice this means that Non-Annex I economies have no GHG emission
restrictions, but when a greenhouse gas emission reduction project (a
"Greenhouse Gas Project") is implemented in these countries the project will
receive Carbon Credits, which can then be sold to Annex I buyers.
Indonesia is a non-Annex-1 country under CDM

Climate Change

3 – Clean Development Mechanism
Kyoto Protocol (7) – Global Emissions Trading framework
Voluntary Market
Climate-friendly & climate neutral
products and services

UNFCCC (1992)

Kyoto Protocol
(1997)

Project-based

Clean Development
Mechanism
Art. 12 Kyoto Protocol
CERs

Between industrial countries
and developing countries

Joint
Implementation
Art. 6 Kyoto Protocol
ERUs
Between industrial countries
(Annex I countries = countries
with GHG emission reduction
targets)

ECCP: European Climate

Change Program

Cap and trade

International
Emission Trading
Art. 17 Kyoto Protocol
AAUs

EU-ETS (also cap and trade)
linking

Trade of allocated AAUs
between industrial countries
(annex I countries)

Trade in EUA

Climate Change

3 – Clean Development Mechanism
Flexible mechanisms, CDM (1)

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

Purpose of CDM:
-> to assist developing countries in achieving sustainable development
-> to assist developed countries in achieving compliance with part of their
quantified emission reduction commitments

Climate Change

3 – Clean Development Mechanism
Flexible mechanisms, CDM (2)



$


Annex 1 Country
Govt. and companies want to reduce
GHG emissions




Invest in their own
country
Invest in a project in
Transition Country

Transition Country
Many opportunities for projects that
reduce emissions e.g.



Investment






Forestry planting
Renewable electricity
Energy efficiency
Clean transport
Biomass energy

Project Produces CERs

CERs

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism

Climate Change

3 – Clean Development Mechanism
CDM: how to develop a project (1)

1) An industrialized country invests into host country and receives credits from
a CDM project
2) It must obtain the consent of the developing country hosting the project that it
will contribute to sustainable development.
3) 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
have happened anyway (establishing additionality), and
4) It must establish a baseline estimating the future emissions in absence of the
registered project.

Climate Change

3 – Clean Development Mechanism
CDM: how to develop a project (2)

5) The project is then validated by a third party agency, called a Designated
Operational Entity (DOE), to ensure the project results in real, measurable,
and long-term emission reductions.
6) The Executive Board (EB) then decides whether or not to register (approve)
the project.
7) If a project is registered and implemented, the EB issues credits, called
Certified Emission Reductions (CERs) to project participants based on the
monitored difference between the baseline and the actual emissions, verified
by the DOE.
8) During project operation, the DOE shall monitor the realized emissions
reductions.
Climate Change

3 – Clean Development Mechanism
CDM: how to develop a project (3)

3 – Clean Development Mechanism
CDM: career opportunities !

Career opportunities:
– Drafting baseline studies (engineers, chemists, biologist)
– Feasibility studies (engineers, economists)
– Stakeholders consultations (all)
– Community development (all)
– Forest management (biologists, forestry experts)
– Environmental impact assessment (environmentalists)
– Financing of projects (economists, financial specialists)
– Trading (economists, financial specialists)
– Management (managers, public & private)
– Municipal services (all)
– Policy development (managers, public & private)
– Investment advisors (economists, financial specialists)

3 – Clean Development Mechanism
CDM: business opportunities !

Business opportunities:
– Investments in renewable energy projects
– Equipment manufacturing & trading (solar, wind, biofuel, etc.)
– Engineering companies
– New waste management services
– Indonesian investment funds
– and many others!