Kyoto Protokol 6k268

Kyoto Protocol and the CDM

Kyoto Protocol and the CDM A.K. ASTHANA DIRECTOR 1

Session Agenda:

Kyoto Protocol and the CDM

1. Introduction to Climate Change 2. UNFCCC and the Kyoto protocol 3. Flexible Mechanisms: CDM, JI and ET 4. CDM and 5. Exercise: Can you do CDM? 2

CLIMATE CHANGE Introduction to Climate Change

A few basic facts Human activities are releasing greenhouse gases (GHG) into the atmosphere. Climate change is a global issue: 1 tCO2 emitted in India = 1 tCO2 emitted in USA. Rising levels of greenhouse gases are already changing the climate. Climate models predict the global temperature will rise by about 1,4 to 5,8 degrees by 2100. Climate change is likely to have a significant impact on the global environment, economy and society. 3

CLIMATE CHANGE The greenhouse gas effect 1) Solar radiation

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2) Reflected back to space 3) Absorbed by atmosphere

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4) Infra-red radiations emitted from Earth 5) Some of the IR es through the atmosphere 6) Some is absorbed and re-emitted by greenhouse gas molecules

The effect is increasing temperatures on Earth

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The Greenhouse gases Greenhouse gases and GWP

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CLIMATE CHANGE Greenhouse gases are increasing…

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CLIMATE CHANGE …and so is the temperature

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CLIMATE CHANGE Climate change impact by 2100

TEMPERATURE

PRECIPITATIONS

5 degrees = What separates us from the last glacial era (-15 000 BC) Models’ forecasts : +1,4 to +5,8 degrees by 2100. 8

UNFCCC Time taken to reach equilibrium

CO2 concentration, temperature, and sea level continue to rise long after emissions are reduced !

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CLIMATE CHANGE Some early visual impact

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CLIMATE CHANGE Less visual but with major impact

Consequences of climate change:

Agriculture and food security Crop yields, irrigation demands... Forest Composition, health and productivity... Water resources Water supply, water quality... Coastal areas Erosion, inundation, cost of prevention...

> Temperature increase > Sea level rise > More rain

Species and natural areas Biodiversity, modification of ecosystems... Human health Infectious diseases, human settlements... 11

UNFCCC Overview of UNFCCC

United Nations Framework Convention on Climate Change A global legal instrument (international agreement) on the control and management of greenhouse gases (GHG). Adopted in 1992, entered into force in 1994. Status of participation: 189 Parties. Contains 2 annexes:

Annex 1: countries with obligations to take measures to mitigate the effects of climate change Annex 2: countries with obligations to provide financing to developing countries for their obligations under UNFCC

d instruments: Kyoto Protocol.

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KYOTO PROTOCOL Bringing UNFCCC into action

The Kyoto Protocol

An addition to UNFCCC that requires developed countries to limit their GHG emissions in 2012, as compared to their emissions in 1990. Provides detailed methods and mechanisms for how the emission reductions can be achieved, measured and verified. All in UNFCCC have not agreed to sign the Kyoto Protocol! Adopted in 1997, but required the ratification of more than 55 countries representing more than 55% of GHG emissions.

Entered into force on February 16th, 2005 after ratification of the Russian Federation (now 163 countries covering 61.6% of global emissions have ratified the protocol).

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KYOTO PROTOCOL A market-based instrument

Kyoto Protocol Characteristics

Commits Annex B countries to reduce GHG emissions by 5.2% by 2012 compared to 1990. Actual commitment period: 2008 - 2012 Individual goals for each country (-8 to +10 %)

Three mechanisms to help countries to reach their national commitments 1. Emissions Trading System (ETS) 2. t Implementation (JI) 3. Clean Development Mechanism (CDM)

6 greenhouse gases:

CO2, CH4, N2O, PFCs, HFCs, SF6.

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KYOTO PROTOCOL Annex B countries

Australia Austria Belarus Belgium Bulgaria Canada Croatia Czech Rep Denmark EC

Estonia Finland Greece Hungary Iceland Ireland Italy Japan

Latvia Liechtenstein Lithuania Luxembourg Netherlands New Zealand Norway Poland Portugal Romania

Russia Slovakia Slovenia Spain Sweden Switzerland Turkey Ukraine UK USA

* Countries with economies in transition to a market economy. * Countries which did not ratify Kyoto protocol.

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KYOTO PROTOCOL “Flexible mechanisms” CDM - Clean Development Mechanism

Allows public or private entities to invest in greenhouse gas (GHG) mitigating activities in developing countries. CERs (Certified Emission Reductions) can be used by the project investor to meet its own commitments, or sold on the open market.

JI - t Implementation

Emission reduction projects implemented tly between Annex I countries (developed countries and transition economies). ERUs (Emission Reduction Units) can be used by the project investor to meet its own commitments, or sold on the open market.

ET - Emissions Trading

Can be used as supplementary to actions to meet reduction commitments. One AAU (Assigned Amount Units) represents the tradable right to emit one t CO2eq.

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KYOTO PROTOCOL CO2 market mechanisms

Limitations of CO2 emissions in developed countries (Annex I) 4 options for companies 1/ Pay expensive fines.

2/ Carry out carbon reduction through processes improvement.

3/ Buy emissions 4/ Carry out carbon credits on the reduction through CO2 market (ETS). technology transfers in CDM or JI project.

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Clean Development Mechanism The idea

The Clean Development Mechanism (CDM) is: A mechanism that allows Annex B Countries to undertake GHG emission reduction projects in non-annex B countries, and to use the achieved emission reductions to meet their own emission goal. CDM works because emission reductions are many times more expensive to achieve in Annex B countries than in non-Annex B countries (the opportunities for emission reduction are bigger there).

Twin objectives of CDM: Help Annex 1 countries meet their objectives in a cost-effective way; 18 Contribute to sustainable development of the host country.

CDM Core features: Additionality and baselines “A project is eligible for CDM if greenhouse gas emissions are reduced below those that would have occurred in the absence of the CDM project.” GHG emissions (tCO2eq)

1. Validation of project design, baseline and monitoring plan

2. Verification / Certification of emission reductions

Emissions baseline

ADDITIONAL EMISSION REDUCTIONS Emissions after the project Years

Project implementation

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CDM Basic requirements

Emissions Lower emissions, no leakage, no double counting. Financial No ODA, no GEF funds, should lead to additional money inflow. Regulatory The project should exceed regulatory standards. Technological CDM should promote appropriate new technologies. Investment CDM should make the IRR of the project an acceptable one. The project should not have happened without the CDM revenue. 20

CDM Where is CDM applicable ? Renewable energy > Wind power > Solar > Biomass power > Hydro power

Energy efficiency measures

> Boiler and steam efficiency > Pumps and pumping systems > Efficient cooling systems > Back pressure turbines > etc…

Cogeneration in industries having both

steam and power requirements

Power sector

> Induction of new technologies which are efficient (thermal) > Reduction in technical T&D losses

Fuel switching

> From fossil fuel to green fuel like biomass…

Waste management > Capturing of landfill methane emissions to generate power > Utilisation of waste and waste water emissions for generation of energy

Electrical energy saving 1 kWh = 0.8 ~ 0.9 kg CO2 Power generation (waste heat / renewable) 1 MW = 4.000 ~ 5.000 t CO2 Coal saving 1 kg = 1.3 ~ 1.6 kg CO2 Fuel oil saving 1 litre oil = 3 ~ 3.5 kg CO2 NG based power generation 1 kWh generation = 0.35 ~ 0.45 kg CO2 1 kg NG burning/saving = 2.4 ~ 2.5 kg CO2

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CDM Crediting period

Carbon credit (CER) can be generated as from now: > Banking by buyer for use towards compliance in 2008-2012. > Banking by project proponent for sale in later years.

Crediting period: Usually starting the later of CDM registration, and start of project operation. Fixed crediting period of up to 10 years. OR Renewable crediting periods of up to 7 years (maximum 3 x 7 years). 22

STATISTICS ed CDM projects Statistics on July 1st 2006 from http://cdm.unfccc.int/Statistics/

ed project by host countries*

Expected average annual CERs from ed projects by host countries*

* List of host countries: Argentina, Armenia, Bangladesh, Bhutan, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Ecuador, El Salvador, Fiji, Guatemala, Honduras, India, Indonesia, Israel, Jamaica, Malaysia, Mexico, Morocco, Nepal, Nicaragua, Panama, Papua New Guinea, Peru, Republic of Korea, Republic of Moldova, South Africa, Sri Lanka and Viet Nam.

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CDM ET: How are CERs sold ? Carbon funds available through

Prices of CERs What determines prices of CERs ?

> International tenders for CDM projects > Voluntary corporate initiatives > Multilateral Funds > EU commitments for carbon purchase > Bilateral negotiations with the consortium of buyers > Average price of 7,5 US$ / tCO2eq in 2005 (3 to 14 US$). > Likelihood Seller will deliver verifiable reduction on schedule. > Creditworthiness and experience of the project developer. > Technical and technological viability of the project. > Liabilities the Seller is willing to take in the event the project fails to deliver including penalties for non-delivery and willful default / gross negligence. > Vintages: in some markets, early vintages (until 2012) are priced higher because the Buyer’s willingness to pay in order to meet compliance. 24 > Likelihood of host country approval. > Environmental and social compliance and additional benefits.

OPPORTUNITIES ET: Future demand for CERs

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Kyoto Protocol and the CDM

Kyoto Protocol and the CDM Thank you for your attention!

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