Download Options for measuring the development dividend in CDM

Promoting the Sustainable
Development Contribution of CDM
Projects
-- Actions in China
Xianli Zhu
Mar. 27th, 2006,
Vancouver, Canada
Contents
1. China’s pursuit for sustainability development
and energy policies
2. China’s CDM Policies and the Sustainable
Development Criteria for CDM Project
3. Effects of China’s CDM Regulations and
Requirements
4. Options for measuring the development
dividend in CDM projects
China’s overall SD strategy
• Average annual GDP growth 1980-90: 10.3%; 1990-2003: 9.6%;
government target: quadrupling GDP by 2020 on 2000 basis,
meaning average annual GDP growth rate of 7.2% during the 20002020 period.
•
Population: 1300 million, still growing at around 7 to 8 million per
year.
•
Energy intensity: almost halved during the 1990-2002 period, 0.23
toe/ k 2000 US$ PPP in 2003, 21% higher than the 0.19 among
OECD countries.
• Fuel mix: 94% of the fossil fuel reserve is coal, share of coal in total
primary energy consumption fell to 67% in 2004 from 78% in 1978,
still much higher than 27% worldwide.
• Sustainable development has been fixed as national fundamental
strategy and increasingly integrated in China’s policy making
Energy Consumption and CO2 Emissions
Structure of Primary Energy Consumption - China,
2004
Hydro
5%
Nuclear
1%
Structure of Primary Energy Consumption - World,
2004
Hydro
6.2%
Oil
22%
Nuclear
6.1%
Oil
36.8%
Natural gas
3%
Coal
27.2%
Coal
69%
Natural gas
23.7%
Source: BP, 2005
Manufacturing Industries and Construction:
CO2 Emissions of Top-5 Emitting Countries
Economic Structure-2003
(Giga tons of CO2)
Share of Industry in GDP-2003
52%
60%
50%
40%
30%
36%
28%
27%
27%
20%
10%
0%
World
High
income
Low
income
Middle
income
Source: World Bank, 2005
China
Source: IEA, 2005
Energy Efficiency Improvement
TPES/GDP (toe per thousand 2000 US$ PPP)
toe/k 2000 US$ PPP
1
0.8
0.6
0.4
0.2
0
1971
1973
1980
1990
1995
2000
2001
2002
2003
Latin America
Asia (excl. China)
China
Non-OECD Europe
Former USSR
Middle East
OECD-total
World Average
Source: IEA, ENERGY BALANCES OF NON-OECD COUNTRIES, 2002-2003
Major SD Policies with direct
relevance to CC mitigation
Environmental/ecol
ogical policies
Energy Policies
Energy industry
institutional reform Climate Change
Air pollution
control
Forest
Optimizing
energy structure
Energy saving
Social policies
Family Planning
Poverty Alleviation
China’s CDM Policies and the Sustainable
Development Criteria for CDM Projects
China’s Attitude toward CDM
• From skeptic and wait-and-see to active support: Multiple government
agencies and industrial associations (like coal, cement, renewables etc.) are
actively boosting CDM implementation through soliciting project proposals,
organizing experts and consulting agencies participation, and looking for
buyers.
• Policy priorities in China: securing energy supply for its economic
growth and curbing environmental pollution, CDM offers a good
instrument for realizing the ambitious domestic energy and
environment goals;
• China embraces technology cooperation with different parties in the
field of climate change and clean energy;
• Although climate change is not a top policy priority in China, its
synergies with environmental protection and energy security
improvement make enables it to be integrated into China’s overall
development policy.
Domestic Authority and Regulations
Climate change authorities
• NCCCC (National Climate Change Coordinating Committee,
(inter-ministerial decision-making body, consisting of 15
ministries and commissions, with NDRC as the current chair,
making major decisions at annual meeting)
• CDM Executive Committee (CDM project approval,
representatives from 7 ministries, Co-chairs: NDRC and MOST
• Vice-chair: MFA)
• NDRC (DNA, the NCCCC Office)
Domestic Regulations
• Interim Measures on CDM Project Operation Management,
issued on June 30th, 2004
• Renewed on Oct. 12th, 2005; the government levies and
administration on unilateral projects specified.
Domestic Approval Process
Approval based on PIN
(letter of endorsement, or
no objection letter)
PDD and project
approval
National Approval - Regulations and
Requirements
• Priority areas: energy efficiency improvement, new and renewable
energy, recovery and utilization of methane and coal bed methane
• Government levies:
-priority areas, SSC, and forestation: 2%;
-N2O: 30%;
-HFCs and PFCs, 65%.
• Floor price: the price should not be “unreasonably low”.
• Eligibility – only Chinese and Chinese-holding enterprises are
eligible (at least 51% held by Chinese individuals or
enterprises); CER sales belong to the Chinese government and
the project developers, revenue sharing by other entities
forbidden.
Approach to Promote SD in CDM Projects
•
•
•
•
•
Gas-based approach- Among the 6 GHGs
2% government levy: renewables, energy efficiency, methane capture and
energy use, afforestation, and SSC
two kinds of gases: CO2 & CH4
30% for N2O
65% for HFCs, PFCs
SF6: to be fixed later.
The levies are to be pooled in a clean development fund and proposed uses
of the fund: CDM project activity administration, climate change capacity
building, and supporting projects of high development dividend
In China, all construction projects are required to go through environmental
impact assessment;
The CER sales price and technology involved are controlled through expert
review and international additionally requirements;
Identifying priority areas,
Effects of China’s CDM Regulations and
Requirements
Project Potential
Emission Reduction Potential of Different
Sectors
2.9%
Steel
Ammonia
Ethylene
10.7%
Fertilizer
4.4%
1.2%
1.0%
Cement
Brick
Sector potential at a
maximum incremental cost
of US$ 13.6US$/tCO2e
Glass
Aluminum
37.3%
10.4%
Copper
Source: World Bank, 2004
Paper
Commerce
Transport
6.8%
0.4%
0.6%
0.3%
0.4%
8.1%
3.3%
7.7%
4.4%
Urban
Rural
Power generation
Other
• Market Potential in 3 Priority Areas in China
Total mitigation
potential
Accumulated (2006-2010)
(MtCO2e)
Accumulated
(2011~2020) (MtCO2e)
RE
574
1,933
EE
312
1,450
MM
56
1,247
Total
942
4,630
Source: ERI
Renewable Energy Promotion
•
•
•
•
•
Renewable Energy Law entered into force on Jan. 1st, 2006;
Measures to promote renewable energy: 1) favorable tariffs for electricity
from renewable sources; 2) the extra costs of electricity from renewable
sources are shared nationwide.
2020 Renewable Energy Promotion Plan
Increase the share of Renewables in Total Primary Energy Supply from the
current 7% to around 15%;
Specific targets:
Enlarge the share of installed capacity of electricity generation from
renewable sources in total installed capacity to 30%;
Installed capacity of hydropower: 290 GW, and the exploration rate of
hydropower resources approximately 70%;
Total installed capacity of wind power: 30 GW;
Electricity generation of solar power generation: 2 GW;
Solar water heaters: total heat collection area: 300 million m2, annual fossil
fuel substitution (Xinhua News Agency, Nov. 11th,2005)
Government Plans
• The 11th Five-year Plan (2006-2010): reducing the
energy intensity of GDP by 20%;
• 2020 Energy Conservation Plan: China plans to double
its energy consumption as its economy quadruples by
2020 on the 2002 level.
• At an annual savings rate of 3 per cent, China's energy
consumption is expected to reach 2050 Mtoe in 2020.
• The Chinese government has unveiled a sweeping
policy statement in Feb. 2006 on its environmentalprotection goals for the next five years.
• .
China’s CDM Implementation Progress
CDM Implementation in China: starting later than some other
developing countries, project number increasing rapidly,
having some large projects, but the crediting period starting
later than world average level.
CDM Projects in the CD4CDM Pipeline
Item
CDM Projects
in the Pipeline
Annual CER
(kt CO2e)
2012 CERs (kt
CO2e)
9
1241
9,084
World Total
202
46,563
346,923
China’s Share
in World Total
4.4%
2.7%
2.6%
China
30
38,057
227,169
World Total
589
116,781
818,298
China’s Share
in World Total
5.1%
27.8%
32.6%
China
As of Aug.
15th, 2005
As of Jan.
16th, 2006
Source: www.cd4cdm.org
Project Composition
• Among the existing 30 Chinese CDM projects in the international pipeline, half are
wind power; other major categories include landfill gas, hydropower, and HFCs.
• Around 90% of the CERs to be generated come from the 4 HFCs projects.
Composition of the Chinese CDM projects in the
Pipeline – as of Jan. 16, 2006
Total
HFCs
Wind
Landfill
Gas
Hydro
Fuel switch
(chemicals)
Waste heat
recovery
(cement)
30
4
15
5
4
1
1
k CERs/yr.
38057
91.3%
3.6%
3.2%
1.5%
0.3%
0.04%
k CERs
2012
227170
89.6%
4.3%
4%
1.8%
0.3%
0.05%
Projects
Source: based on data from the cd4cdm pipeline
Options for measuring the development
dividend in CDM projects
The Gas-based Approach in China
• In view of the existence of large potential of chemical
GHGs, the gas-based approach can improve the
attractiveness and competitiveness of RE and EE
projects;
• The Clean Development Fund, is yet to be established;
the detailed rules about the management and use of the
fund is not yet formulated;
• If the fund is properly managed and used for sustainable
development purposes, the overall development
dividends of Chinese CDM project activities can be
improved
Options for SD Measurement
• Cost-benefit analysis( rank projects based
on unit mitigation costs)
• Cost-effective analysis(rank projects
based on IRR)
• The checklist appraoch
- the WWF gold standard
- the SSN matrix tool
• Multicriteria Analysis
• The Chinese gas-based approach
Requirements of SD Measurement Tool
•
•
•
•
•
•
Transparent and easy to operate
Universal applicability
Comparability and able to be aggregated
Minimum extra information cost
Low development dividend assessment,
monitoring, and verification costs
Comparison of Existing CDM Project
Dividend Assessment Approaches
Transparency
& operability
Universal
applicability
Comparabili
ty and able
to be
aggregated
Extra
information
requirement
Assessment,
monitoring,
and
verification
costs
CEA
High
Yes
Yes
Low
Medium
CBA
High
Yes
No
Low
Medium
Gasbased
High
Yes
Yes
Low
Low
Checklist
Low
Yes
No
High
High
MCA
Low
Yes
No
High
High
Xianli Zhu:
E-mail: [email protected]