Download International CIM Expert The Administrative Centre for China`s

Promoting investments for energy
efficiency and renewable energy
through carbon financing in China
“International Conference on Climate Change 2007”
Hong Kong 29 -31 May 2007
Heinz-Peter Mang – Senior Adviser for Bioenergy and Climate Change
Chinese Academy of Agricultural Engineering (CAAE) / Ministry of Agriculture (MOA)
and
Markus Schwegler - Senior Advisor Climate Protection
The Administrative Centre for China's Agenda 21 (ACCA21) / Ministry of Science and
Technology (MOST)
Table of Content
1. Is Climate Change real?
2. Climate Policy - Major milestones
3. Climate Change Mitigation - the Cleaner Development
Mechanism
4. Chinas CDM Potential and Opportunities
5. Climate Change Adaptation
Is Climate Change real?
The Climate Challenge - Impacts and Vulnerability
Some quotes from latest press release
China warns of disasters from warming Tibet plateau (Reuters, 01.02.2007):
...Chinese scientists have warned that rising temperatures on the QinghaiTibet plateau will melt glaciers, dry up major Chinese rivers and trigger more
droughts, sandstorms and desertification...
Food security at risk (China Daily, 04.01.2007):
...Global warming will negatively impact China's ecological, social and
economic systems, especially farming, animal husbandry and the country's
water supply…
China report warns of agriculture problems from climate change
(International Herald Tribune, 03.01.2007):
...Typhoons, floods and droughts killed 2,704 people and caused economic
losses of 212 billion yuan (€20.65 billion) in 2006...
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 3
The Fourth Assessment Report - Summary
 With "90 percent" certainty the increase of average global temperatures
since the mid-20th century is linked to the increase of manmade GHG in the
atmosphere.
 It is "likely" - in some cases "more likely " -- that manmade greenhouse
gases have contributed to hotter days and nights, more heat waves, heavier
rainfall, major droughts in more regions, stronger and more frequent
cyclones…
 11 of the last 12 years are among the 12 warmest years on record.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 4
Stern Review on the Economics of Climate Change
One percent of global GDP must be invested to mitigate the effects of
climate change; failure could risk a recession worth up to twenty
percent of global GDP.
... "our actions over the coming few decades could create risks of major
disruption to economic and social activity... on a scale similar to those
associated with the great wars and the economic depression of the first
half of the 20th century...”
(compiled by economist Sir Nicholas Stern for the government of the United Kingdom, released on October 30, 2006)
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 5
First National Climate Change Assessment Report
 The Assessment started in 2002 under the guidance of the National
Climate Change Coordinating Committee and 12 Chinese ministries
and organisations.
 The report is the result of a 4-year government study carried out
by over 80 leading Chinese experts.
 The Assessment was released on October 26th 2006 by the
Ministry of Science and Technology (MOST), China Meteorology
Administration (CMA), and the Chinese Academy of Sciences (CAS).
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 6
Climate Changes in China
(over the last 100 Years)
 Average temperature increased by 0.5-0.8°C (global average 0.6°C).
 Temperature rise most significant in winter and spring (global trend).
 Temperature rise is most obvious in North China and Tibet.
 The growing season has prolonged (Tibetan Plateau, North China)
 Average precipitation is increasing (year-to-year fluctuations).
 Precipitation trends show major regional differences.
 In most parts of West China, the annual average precipitation
increased.
 in North China and Northwest precipitation declined.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 7
Extreme weather events
 Average days of hot weather increased.
 Average number of frost days dropped (±10 days since 1950).
 Frequency of cold waves declined in the last 50 years.
 Draughts are more severe (North and Northeast China).
 Floods are more frequent and severe (middle and lower reaches of
the Yangtze River and Southeast China).
 The frequency of strong precipitation events increased in Northwest.
 Storm days in summer increased (middle and lower reaches of the
Yangtze River and in southeast China).
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 8
Future Climate Change Predictions for China
 Surface temperatures will rise and precipitation will increase
over the next 20 to 100 years (similar to the global trend).
 Temperature rise will be higher in the north than in the south
and bigger in winter and spring than in summer and autumn.
 The days of precipitation will increase in the north and changes
in the south will be less.
 The daily maximum and minimum temperature will increase,
but the rise of minimum temperature will be more significant.
 The south will see more days of heavy rain and storms.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 9
Major Impacts of Climate Change in China
 Coastal areas are affected by extreme weather events
 Decreasing glaciers in Northwest (-21%) and permafrost in Tibet.
 Enlargement of draught-stricken areas in the north.
 More instable agricultural production (draughts and high temp.).
 Major river flows will decline (in the north seasonal drying up).
 More frequent flood disasters
 Forest areas are decreasing and forest belts are moving upwards.
 Spreading of diseases with major impact to human health.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 10
Climate Policy - Major milestones
Adaptation to and Mitigation of Climate Change
The path to the convention
 1989 IPCC First Assessment Report - Threat of Climate Change
 1992 UNFCCC opened for signature (Rio Earth Summit)
 1994 UNFCCC entered into force with 166 signatures
 1995 Second Assessment Report (SAR) of the IPCC
 1997 December, adoption of the Kyoto Protocol
 2001 Third Assessment Report (TAR)
 2005 Kyoto Protocol came into force (16.02.2005)
 2005 EU Emission trading scheme (01.01.05)
 2007 Fourth Assessment Report (AR4) of the IPCC
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 12
The UN Framework Convention on Climate Change
... stabilization of greenhouse gas concentrations in the
atmosphere at a level that would prevent dangerous
anthropogenic interference with the climate system...(Article 2)
 Set Goals, not targets
 Annex I countries (industrial countries) were to adopt policies
to “aim” to reduce their emissions
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 13
The Kyoto Protocol
Defines quantified greenhouse gas (GHG) emissions reduction
targets for developed countries (Annex I Parties).
Longer-term challenge: Meet the objectives of Article 2 of UNFCCC
 Countries have different targets for the 5-year period of 2008-
2012).
 Total emission reductions for the Annex I countries amounts to
5.2 % from 1990 year's levels.
 EU countries commit to reduce their emissions by 8%, Japan by
6% and Germany by 21%, from their base-year emissions.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 14
The Protocols flexible mechanisms

Clean Development Mechanism (CDM), Article 12 of the Protocol



Emission reductions must be real and measurable (verified by third
party or Operational Entities)
Joint Implementation (JI), Article 6 of the Protocol


Credit for emission reduction investments in developing countries
Credit for emission reduction investments in projects in EIT countries
International Emissions Trading (IET), Article 17 of the Protocol

Trading of emission reduction credits among developed countries
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 15
The Chinese Climate Policy
 1992 China approved and ratified the UNFCCC
 1998 China signed the Kyoto Protocol
 2002 China approved the Kyoto Protocol
 2004 DNA was founded with the Interim Measures
 2005 On 12 October 2005, Measures for Operation and
Management of Clean Development Mechanism Projects (“CDM
Measures”)
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 16
Relevant Institutions in China
National Climate Change Coordination Committee (NC4):
Inter-ministerial committee established in 1990 to
coordinate national activities related to climate change,
CDM policy formulation, rules and standards...
National CDM Board:
Main responsibilities are review and approval of CDM
application submitted by the project owners.
Chinese National Authority (DNA):
Focal Point is National Development and Reform
Commission (NDRC)
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 17
The priority areas for CDM projects in China



Energy efficiency improvement
Development and utilization of new and renewable energy and
Methane recovery and utilization
(Measures for Operation and Management of Clean Development
Mechanism Projects in China)
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 18
Points to Note under CDM Measures
 Resource of emission reductions owned by the PRC government
 Outputs of CDM Projects are owned by PRC project owner
 Proceeds from sale of outputs jointly owned by PRC
government and PRC project owner

PRC government entitled to:

65% from HFC and PFC projects

30% from N2O projects

2% from energy efficiency and renewable energy projects
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 19
The Cleaner Development Mechanism (CDM)
Incentives for project developers
The CDM - a win-win mechanism
The CDM’s aims are twofold:
 It supports the developed countries in reaching their
emissions targets set by the Kyoto Protocol,
 and the developing countries in achieving a higher level
of sustainable development through technology transfer
and financial assistance.
For a project to be approved as a CDM project it has to meet
various obligations an go through a defined project cycle.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 21
The Economics of a Hydro Power and a Methane Project
Hydro power project:
Ag. Waste to energy biogas project:
7.5 MW installed capacity
2 MW installed capacity
28,448 t CO2 ER’s p.a.(10 years)
>50,000 t CO2 ER’s p.a.(10 years)
Project costs: US$ 4.5m
Project costs: US$3.5m
Carbon value:
Carbon value:
$5/ t CO2
= $1.42m
$5 /t CO2
= $2.5m
$8/ t CO2
= $2.27m
$8 /t CO2
= $4.0m
Proportion of project costs:
Proportion of project costs:
$5/ t CO2
=
31.5%
$5/ t CO2
= 71.4%
$8/ t CO2
=
50.5%
$8/ t CO2
= 114%
Reason: Methane is 21 times more potent than CO2 on ton-to-ton basis >> Opportunity for many agricultural projects
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 22
What Kinds of Projects/Sectors?
1. Renewable Energy Projects:
 Biomass Energy incl. for Energy
Farming
2. Waste-to-energy projects:
 Municipal Solid Waste clean up
transforming poorly managed dumps
to sanitary landfills, recycling, and
landfill biogas capture and power
generation
 Agribusiness Waste to Energy: Rice
3. Community and agro forestry
 Biomass Energy
4. Large Scale Energy Efficiency
5. Coal Mine & Bed Methane
6. Transport
 Bio fuel
7. Industrial Gas Incineration
N20, HFC23
Husk Power Plants (1-10MW); Palm
Oil waste to energy projects, Farm
Biogas project, Straw-to-Energy
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 23
Chinas CDM Potential and Opportunities
Chinas CDM Potential and Opportunities
Potential
 Energy demand and consumption in
China ranks second in the world
following the USA
 Coal baseline
 In 2000, China’s energy consumption
per unit of eight major products was
20-40% higher compared to
international level
 Estimated CDM Potential: 50% of the
global CDM Market (World Bank /GTZ
Study)
Opportunities
 Energy Efficiency
 Renewable Energy
 CBM/CMM
 Fuel conversions and new
technology for power generation
 Large energy losses with much
potential in re-utilization of
waste heat and waste energy
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 25
Status of CDM Projects -
Expected CER´s until end of 2012
*1
Number of Project
CDM project pipeline:
> 1600
Registered:
655
Requesting registration:
69
CER´s issued
Expected CER´s until 2012:
>1900 Million CERs
Total based on registered projects (665):
> 900,000,000
Total based on projects requesting registration (69):
> 700,000,000
*1) as of 8th May 2007
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 26
Registered project activities by host party
China has 76 projects up to date (09.05.2007)
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 27
Expected average annual CER´s
Average Annual Reductions in China:
61,717,664CER´s as of 09.05.2007
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 28
number of registered
projects per
per sector
Chinese registered
projects
sector
Coal bed/mine methane
4%
EE
industry
Reforestation
1%
N2O
1%
Landfill
gas
Biomass energy
7%
Wind
49%
HFCs
10%
Hydro
18%
As of 1 May 2007, data source http://www.cd4cdm.org/
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 29
Top sectors by issued CERs (globally)
Top sectors issued CERs (globally)
Landfill gas
4%
Agriculture
4%
Wind
3%
EE industry
2%
Cement
1%
Hydro
4%
Biomass energy
13%
HFCs
55%
N2O
14%
As of 1 May 2007, data source http://www.cd4cdm.org/
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 30
Sector results and distribution for China
Type
Biogas
Biomass energy
Coal bed/mine methane
EE industry
EE Service
Fossil fuel switch
HFCs
Hydro
Landfill gas
N2O
Reforestation
Wind
Total result
no of projects
(registered)
number of projects
(status all)
0
5; 7% (4)
3
3
0
0
7; 9,9% (3)
13; 18,3% (2)
4
1
1
34; 47,9% (1)
71
4
19
27; 6% (4)
59; 13% (3)
1
18
11
191; 43% (1)
24
12
2
86; 19% (2)
454
amount of expected amount of expected
CER«s until 2012
CER«s until 2012
(registered) total
(status all) total
ktCO2
ktCO2
2,5% (4)
4% (3)
10,1 % (4)
82% (1)
41,6 % (1)
11,0 % (2)
CERs issued so far
(kCERs)
2 projects; 4823,067
1 project; 42,444
10,2 % (3)
6,5% (2)
357812,1226
942238,1217
7 projects; 433,146
10
As of 1 May 2007, data source http://www.cd4cdm.org/
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 31
Top Countries by Buyers
Top countries by Buyer (No. of CDM projects)
Spain
5%
Denmark
Germany 3%
4%
Canada Austria
2%
3%
Sweden
5%
United K.
38%
Italy
6%
Switzerland
6%
Japan
14%
Netherlands
14%
As of 1 May 2007, data source http://www.cd4cdm.org/
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 32
Barriers for CDM in China
 Lack of knowledge and skills to
 The currently low CER price in
 Lack of experience to assess
 Availability of data
identify CDM opportunities
risks and develop projects
 CDM not fully accepted and
understood as financial tool
 Complexity of the CDM Cycle
 Legal framework
the buyer driven market
 Confidentiality & Transparency
 Transactions costs
 Large number of different players
 Language Barrier
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 33
Experiences with CDM in China
Foreign CDM Participants & stakeholders
Chinese CDM Participants & stakeholders:

CER buyers dominate

Limited knowledge of CDM

Low interest in project development and
investment

Misunderstanding of the financial
mechanism

Lack of understanding of the Chinese
framework and market conditions

Up front payment

Transaction costs

Project Complexity

Don't fully understand the risks and don't
want to deal with it (51/49 rule)

Looking for help to find projects

Language problem

Looking for help to deal with contractual
and risks issues

Limited understanding of the operational
aspects of CDM (PIN, PDD)

Language problem

Difficulties to access foreign project
partners and buyers
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 34
Climate Change Adaption
Adaptation versus Mitigation
Adaptation and mitigation are two options to respond to climate
change.
Mitigation
Refers to an anthropogenic intervention to reduce the sources or
enhance the sinks of GHGs.
Adaptation
Refers to adjustments in natural or human systems in response to
actual or expected climatic stimuli or their effects, which moderate
harm or exploit beneficial opportunities (IPCC, 2001a).
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 36
Linkages between Mitigation and Adaptation
 Mitigation policies can complement adaptation and
development.
 Planting forests to sequester carbon can also stabilise soils
and avoid floods,
 rural electrification can support sustainable development.
 Planting trees can reduce urban heat-island effects.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 37
Adaptation in the Chinese Assessment Report
Area
Strategy
Agriculture and Food Security Changing crop/livestock mix
Water resources and Quality Improvement of water conservation
measures
Forestry
Afforestation and reforestation,
Management of natural resources
Livestock
Adoption of new livestock more
suited to anticipated climatic
conditions
Costal defence
Improved flood management
systems
Human health
Establishment of forecast,
monitoring, and surveillance
networks
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 38
Existing Local and Sectoral Coping Strategies
Limited experiences available on adaptation to climate change.
Asian experience at local level on coping with climatic variability
and extreme weather events:
 Large scale irrigation for agriculture,
 intercropping, mixed cropping, agro-forestry and animal
husbandry.
 Coastal defence and flood protection and cyclone warning
systems.
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 39
Climate Change Mitigation
 China has a huge energy demand due to the high economic
growth
 High demand for renewable energy and energy efficiency
 High demand for advanced technology
 CDM Projects can deliver significant local economic and
sustainable development co-benefits
 China needs technology transfer and financial support
2007 Mang & Schwegler, Chinese Academy of Agricultural Engineering (CAAE) & The Administrative Centre for China's Agenda 21 (ACCA21) 40
Thank you for your attention
There is now time
for discussion…