Download CDM opportunities for the Philippines

CLEAN DEVELOPMENT
MECHANISM: OPPORTUNITIES
FOR THE PHILIPPINES
Climate Change Information Center
Manila Observatory
Ateneo de Manila University
OUTLINE
1. Introduction to Climate Change
2. The UNFCCC and the Kyoto
Protocol
3. The Clean Development
Mechanism
MODULE 1
Introduction to
Climate Change
Rising temperatures results in
changing weather patterns
• Melting polar caps, glaciers
• Shifts in weather patterns
• Increased occurrence of dramatic
weather such as hurricanes
Historic Temperature Data
Philippine Rice Production. Arrows indicate El Niño events.
(source: Food and Agricultural Organization)
Vulnerability
information
systems
El Niño - La Niña
Vulnerability Map
Support for Greenhouse Gas Inventory
Sea level rise
3D modeling and visualization tools are used for
vulnerability assessment, exact location and quantification of
areas which are susceptible to floods due to rise in sea level.
Study area: Northern part of Navotas, Metro Manila
Climate Change
• Climate change is caused by both natural events (like
volcanic eruptions) and human activities
Temperature change (oC)
Carbon dioxide (ppmv)
Atmospheric CO2 Concentration
and Temperature Change
150
100
50
Thousands of Years ago
0
Human Sources of GHGs
Carbon Dioxide (CO2) – Most prevalent GHG
Methane (CH4) – Second most common, 21x the potency of CO2
Nitrous Oxide (N2O) – 310x the potency of CO2
Other Gases – HFCs, PFCs, and SF6 = range 600 – 23900x potency of CO2
Transportation
Energy Generation
Industrial Processes
Land Use:
Agriculture & Forestry
GHG and Environmental Impacts
Changes in temperature, weather patterns and sea level rise
Coastal Areas:
Erosion and flooding
Inundation
Change in wetlands
Water Resources:
Changes in water supply
and water quality
Competition/Trans-border
Issues
Agriculture:
Changes in crop yields
Irrigation demands,
Productivity
Forests:
Change in Ecologies,
Geographic range of species,
and
Health and productivity
Human Health:
Weather related
mortality
Infectious disease
Air quality - respiratory
illness
Industry and
Energy:
Changes in Energy
demand
Product demand &
Supply
Philippine GHG Inventory
Waste
9%
Agriculture
32%
Energy
49%
Industry
10%
Philippine LUCF GHG Emissions
80,000
+68,195
60,000
Forest Conversion
40,000
20,000
0
-20,000
-40,000
-60,000
-80,000
- 68,323
Biomass Growth
- 127
TOTAL
S1
MODULE 2
THE UNFCCC and the
KYOTO PROTOCOL
United Nations Framework
Convention on Climate Change
Objective of the Convention
“Stabilization of greenhouse gas
concentrations in the atmosphere at a level
that would prevent dangerous anthropogenic
interference with the climate system. Such a
level should be achieved within a time frame
sufficient to allow ecosystems to adapt
naturally to climate change, to ensure that
food production is not threatened, and to
enable economic development to proceed in a
sustainable manner.”
Division of Parties by Annex
Annex II
Australia / Austria / Belgium /
Canada / Denmark / EC /
Finland / France / Germany /
Greece /Iceland / Ireland /
Italy / Japan / Luxembourg /
Netherlands / New Zealand /
Norway / Portugal / Spain /
Sweden / Switzerland / Turkey
/ United Kingdom / USA
Belarus / Bulgaria / Croatia /
Czech Republic / Estonia /
Hungary / Latvia / Liechtenstein
/ Lithuania / Monaco / Poland /
Romania / Russian Federation /
Slovakia / Slovenia / Ukraine
Non-Annex I Countries = All the Rest of Ratifying Countries
United Nations Framework
Convention on Climate Change
Commitments by the Parties to
the Convention
Parties have common but
differentiated responsibilities.
United Nations Framework
Convention on Climate Change
Commom Responsibilities to the Convention
All Parties will:
• Submit national communications that contain inventories of
GHG sources and sinks and a description of steps to implement
the Convention based upon differentiated commitments;
• Promote development and transfer of technologies and practices;
• Cooperate in sustainable management, conservation and
enhancement of GHG sinks and reservoirs (i.e., forests and
oceans);
• Take climate change consideration into account in social,
economic, and environmental policies;
United Nations Framework
Convention on Climate Change
Differentiated Commitments: Non-Annex I Parties
• Non-Annex I Parties to the Convention are primarily
developing countries.
• Need to submit national communications (agreed full
costs of preparation will be provided).
• On a voluntary basis, propose mitigation and
adaptation measures and projects. The incremental
costs of implementing these projects may also be
requested.
• Developing countries may also request technical and
financial assistance to strengthen their human and
institutional capacity to implement the Convention.
United Nations Framework
Convention on Climate Change
Differentiated Commitments
• Annex I Parties (OECD countries and countries that are
undergoing the process of transition to a market economy) are
committed to adopting policies and measures that will reduce
their GHG emissions to earlier levels.
• Annex II Parties (OECD countries) must provide new and
additional financial resources in order for developing countries to
implement the Convention.
• Annex II Parties will also promote and finance the transfer of
environmentally sound technologies, particularly for developing
countries.
Kyoto Protocol
• The overall emission reduction target for Annex I Parties
as a group is at least 5 percent below 1990 levels, to
be achieved by the commitment period 2008 to 2012 (an
average over the five years).
• The Protocol covers six greenhouse gases (Annex A) CO2, CH4, N2O, HFCs, PFCs, SF6
• The negotiated targets for individual Annex I Parties are
included in Annex B of the Protocol.
Selected Quantified Emission
Limitation (%)
Industrialized Countries
Economies in Transition
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Australia
Canada
EC bubble
(Germany
(Portugal
Japan
Norway
New Zealand
USA
108
94
92
75)
140)
94
101
100
93 ???
Bulgaria
Baltics
Croatia
Czech Republic
Hungary
Poland
Romania
Russia
Ukraine
92
92
95
92
94
94
92
100
100
Kyoto Protocol
• The Kyoto Protocol was adopted at COP-3 in
December, 1997, in accordance with “Berlin
Mandate” of COP-1.
• The Protocol will enter into force when not less
than 55 Parties to the Convention, accounting
for at least 55 percent of the 1990 total CO2
emissions of the Annex 1 Parties, have ratified
the Protocol.
– US: 34%; Russia: 16%; Japan: 8% ;EU:
23%;
– Other Annex 1 Parties 19%
Kyoto Protocol
• As of 24 February 2003, 179 Parties have
signed the Kyoto Protocol and 105 have
ratified (minimum required– 55 countries).
• Of the Annex I countries who have ratified,
43.9% of 1990 emissions are accounted for.
• To enter into force, the Protocol requires the
ratification by Russia with 16% of 1990
emissions to meet the required 55%.
• The Philippines has signed but not yet ratified
the Kyoto Protocol
http://unfccc.int/resource/kpthermo.html
Kyoto Protocol
Flexibility Mechanisms
• Joint Implementation (Article 6) - fulfillment of
emissions limitation and reduction commitments jointly
among Annex I Parties.
• Emissions Trading (Article 17) between Annex I
countries to fulfill their reduction commitments. Any
such trading shall be supplemental to domestic actions.
• Clean Development Mechanism (Article 12) - to
assist Parties not included in Annex I in achieving
sustainable development and to assist Annex I countries
in achieving compliance with their emission reduction
commitments.
Kyoto Protocol
ARGUMENTS FOR THE FLEXIBLE MECHANISMS
• Lower cost of compliance with targets (allows negotiation of
lower targets)
• Mobilize private capital for GHG mitigation (JI/CDM)
• Facilitate technology transfer and foreign investment
(JI/CDM)
• Possibility of involving non-Annex I countries on terms
acceptable to them (CDM)
• Echoes prevailing belief in benefits of free trade and trade
liberalization
•
Consistent with the prominent roles of transnational actors
Kyoto Protocol:
Mechanisms
Annex I
Emission
Emission Trading
Trading
Clean Development
Mechanism
1990 level
Joint Implementation
- 5%
DomesticActions
Actions
Domestic
Assigned Amounts
Present
day
2012
(BaU)
2012 with
KP
Price of a Unit of Emissions
Reductions:
A Competitive Market
Cost of
Reducing in
the Host
Country
(Developing)
<
Price of a
Unit of
Emissions
Reductions
by CDM
<
Cost of
Reducing in
the Investor
Country
(Annex I)
MODULE 3
THE CLEAN DEVELOPMENT
MECHANISM
Clean Development Mechanism
•
•
•
•
Enables developed countries (known as
Annex I countries) to meet their emission
reduction commitments in a flexible and costeffective 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): Microhydro
– 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
Baseline and CERs
Business as usual:
baseline
CO2
emission
Reduced emissions
Project
implemented
year
How CDM can matter
FIRR
Without CERs
implemented
With CERs
not
implemented
Without CERs not implemented;
with CERs implemented
CER income
No CDM
CDM
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 fasttrack 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 Philippine CO2 Emissions:
Potential of CDM Emissions
Reductions Supply
Projected CO2 Emissions 1999-2008
CO2 emissions (Gg)
150,000
natural gas
120,000
oil
coal
90,000
60,000
30,000
0
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Abatement Cost (US $/ton CO2)
5
0
-5
0
3
6
9
12
15
Philippine
GHG Abatement Cost
and Potential
-10
-15
-20
-25
-30
Annual CO2 Reduction Potential (mill t CO2)
Source: ALGAS
Abatement Option
CFL
Industrial Boilers
System Loss Reduction
Industrial Motors
Eff Air Conditioning
Eff Refrigerators
Heat Rate Improvement
Eff Transport
Wind Power
Biomass Power
Solar Power
CC Natural Gas
Abatement Potential
(mill t CO2/year)
Abatement Cost
(US $ / ton CO2)
1.10
0.37
2.32
0.24
1.47
0.37
5.26
1.34
0.24
0.12
0.12
1.83
-26.3
-26.0
-17.2
-13.7
-6.1
-5.4
-5.1
-2.9
-1.6
0.3
1.4
2.4
BATANES
1,100 KW
NORTHERN LUZON
120 MW
MARINDUQUE ISLAND
3,000 kW
LUBANG ISLAND
330 kW
MINDORO ISLAND-ORIENTAL
13,500 kW
BUSUANGA ISLAND
330 kW
CUYO ISLAND
330 kW
CASIGURAN
500 kW
POLILLO ISLAND
500 kW
CATANDUANES
2,250 kW
TABLAS ISLAND
1,500 kW
ROMBLON ISLAND
1,000 kW
MASBATE ISLAND
3,000 kW
DINAGAT ISLAND
3,000 kW
PALAWAN ISLAND
9,000 kW
SIQUIJOR ISLAND
1,000 kW
POTENTIAL
CAPACITY:
160,340 kW
SPECIFIC WIND POTENTIAL POWER SITES
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)
35
30.78
30
24.15
25
20.01
18.97
20
15.04
15
10
constant
generation
rates
5.86
7.33 7.33
5.45
9.19
12.11
12.12
9.87 10.49
16.86
14.23
5
0
1990
1995
2000
2005
2010
Year
2015
2020
2025
changing
generation
rates
PCF/CDM Project Cycle – The Manufacturing
Process for CDM Emissions Reductions
Project completion
Preparation and review of the Project
• Project Idea Note
• Project Concept Note
• Project Concept Document (or equivalent)
Baseline Study and Monitoring
Plan (MP)
Periodic verification &
certification
• Verification report
• Supervision report
• Project Design Document
• Baseline study and ER projections
• Monitoring Plan
Validation process
• Validation protocol and report
Construction and start up
• Initial verification report
Negotiation of Project Agreements
• Project Appraisal and related documentation
• Term sheet
• Emission Reduction Purchase Agreement
Carbon Asset Creation and Maintenance Costs
The PCF Experience
Project completion
Preparation and review of the Project
• Upstream Due Diligence, carbon risk
assessment and documentation: $ 50K
Baseline Study and Monitoring
Plan (MP)
Periodic verification &
certification
• Verification: $10-25 K
• Supervision: $10-20K
• Baseline: $30 K
• Monitoring Plan: $25K
Validation process
• External consultant: $25K
• Processing and documentation: $30k
Construction and start up
• Initial verification at start-up: $25K
Negotiation of Project Agreements
• Consultation and Appraisal: $75K
• Negotiations and Legal documentation: $30K
Total through Negotiations
• All expenses: $265 K
Demand for CDM Projects
Example:
• The Netherlands will reduce 100Mt CO2eq
through CDM/JI (tender, CDM facilities etc) at
average costs of ca 4 US$/ton CO2eq
• This means 400 M US$ for CERs/ERUs.
Contribution to the capital costs may by be 515% (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)
EU
Total GHG
Emissions
in 2010
(mtc)
Kyoto
Reduction
Commitment
s (mtc)
Excess
Emissions
(mtc)
Kyoto
Commitments
minus Excess
Emissions
Projected
Demand (at
$4 per tC) in
$M
12.7
27.9
111.60
1,159.50
1095.9
40.6
113.3
144.1
21.7
86.80
Canada
153
182.4
29.2
116.80
Iceland
0.8
1
0.1
0.40
337.2
388.2
71.2
284.80
19.8
22.9
3.1
12.40
15
17.3
2.1
8.40
14.6
14.5
1.1
4.40
1634.4
1943.9
423.9
1,695.60
368.4
358.3
26.7
11
15.7
62.80
1,113.50
1032.2
0.9
81.4
-80.5
(322.00)
Australia
Japan
New Zealand
Norway
Switzerland
United States
Eastern Europe
Former USSR
CDM Project Cycle
Design
Validation/
registration
Project
Participants
Designated Operational
Entity
CDM Executive Board
Monitoring
Verification/
certification
Project
Participants
Designated Operational
Entity
CDM Executive Board
Issuance
Certified Emission Reductions
Applicant Entity
Executive Board and
COP/MOP
Designated
Operational
Entity
Designated National
Authority (DNA) for CDM
Accreditation/
designation
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
[email protected]