Regional Cooperation in Promotion and Sustaining CDM Initiatives A Case of ASEAN

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Regional Cooperation in Promotion and Sustaining
CDM InitiativesA Case of ASEAN

• WEERAWAT CHANTANAKOME, Ph. D.
• Executive Director
• ASEAN Centre for Energy (ACE)
• Jakarta, Indonesia

A paper presented at the Asian Regional
Workshop on Capacity Development for the Clean
Development Mechanism (CD4CDM), October 19-21,
2005, AIT, Bangkok, Thailand--- Exploring
Cooperation in CDM Implementation in ASEAN
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OUTLINE OF PRESENTATION

• Introduction to ASEAN and ACE
• CO2 Emission Reduction ASEAN Profile
• Status of Climate Change Treaties and CDM
  PROJECTS in ASEAN countries
• CDM Investment Structures
• Forecast CO2 Emission and Reduction / Market
  Value and Investment Opportunities
• ASEAN CDM Host Country Institutional
  Arrangements
• CDM Institutional Capacity Building
• Way forwards for Cooperation

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The ASEAN
Geography
Myanmar
Vietnam
PACIFIC OCEAN
Lao PDR
South China Sea
Philippines
Thailand
Cambodia
Gulf of Thailand
Malaysia
Brunei Darussalam
Singapore
Indonesia
INDIAN OCEAN
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INTRODUCTION

• ASEAN, one of the most dynamic economic regions
  of the world,
• A heterogeneous mix of economies with greatly
  varying energy resource endowment and energy
  development situation.
• In spite of these differences, the ten (10) ASEAN
  countries have common aspirations in achieving
  the Goals of Sustainable Energy Development and
  Utilization.

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ABOUT ACE

• Established on January 1, 1999 as an
  inter-governmental organization that is guided by
  a Governing Council composed of the Senior
  Officials on Energy (SOE Leaders) of the ASEAN
  countries.
• Took over all the commitments, responsibilities,
  liabilities, and assets of the 10-year long
  ASEAN-EC Energy Management Training and Research
  Centre (AEEMTRC).
• Core funding is provided by an Energy Endowment
  Fund established from equal contributions of the
  ten Member Countries and managed by a fund
  manager of the ASEAN Secretariat.

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Charter of ACE

• ACE is envisioned to be a catalyst for the
  economic growth and development of the ASEAN
  region by initiating, coordinating and
  facilitating regional as well as joint and
  collective activities on energy.
• To realize this vision, the Centre will
  accelerate the integration of energy strategies
  within ASEAN by providing relevant information,
  state-of-the-art technology, and expertise to
  ensure that over the long-term, necessary energy
  development policies and programs are in harmony
  with the economic growth and the environmental
  sustainability of the region.

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Organizations in the ASEAN Energy Sector
ASEAN HEADS OF STATE/GOVERNMENT
OTHER MINISTERIAL MEETINGS
OTHER MINISTERIAL MEETINGS
AMMST
A M M
ASEAN S G
A E M
A M E M
COST
A S C
S O M
ASCOPE
S O M E
ASEAN CENTRE FOR ENERGY (ACE)
LEGEND AEBF ASEAN Energy Business Forum AEM
ASEAN Economic Ministers AFOC ASEAN Forum on
Coal AMEM ASEAN Ministers of Energy Meeting AMM
ASEAN Ministerial Meeting AMMST ASEAN
Ministerial Meeting on
Science Technology ASC ASEAN Standing
Committee ASCOPE ASEAN Council on
Petroleum COST Committee on Science
Technology EEC SSN Energy Efficiency and
Conservation Subsectoral
Network HAPUA Heads of ASEAN Power
Utilities/Authorities NRSE SSN New
Renewable Sources of Energy
Subsectoral Network SCNCER Sub-Committee on
Non-Conventional Energy
Research S G Secretary General SOM Senior
Officials Meeting SOME Senior Officials Meeting
on Energy REPP-SSN Regional Energy Policy and
Planning Sub Sector Network
NRSE SSN
EE C SSN
HAPUA
AEBF
AFOC
REPP-SSN
SCNCER
ASEAN SECRETARIAT
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ASEAN Vision 2020
."establish interconnecting arrangements in the
field of energy utilities for electricity,
natural gas and water within ASEAN through the
ASEAN Power Grid and Trans-ASEAN Gas Pipeline,
and promote cooperation in energy efficiency and
conservation, as well as the development of new
and renewable energy resources."
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Economic Profile
Source ASEAN3 Energy Security Forum, Fereidun
Fesharaki, FACTS Inc./EWCI Ltd., Cebu,
Philippines, February 11, 2004
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Economic Profile

• ASEAN registering a 6.2 per cent GDP growth rate
  in 2004.
• Projections for the 2005 year-end are also
  positive ADB forecasts a 5.7 per cent GDP growth
  for Southeast Asia and 6.6 per cent for Asia in
  2005-06 on the back of export growth and FDI
  expansion, including continued growth of China
  and India.

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Economic Profile

• An additional US 10 increase in oil prices would
  restrain GDP growth by 0.6 per cent on the
  average. In ASEAN, many countries recently
  trimmed their growth, citing rising fuel costs

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CO2 Emission Reduction ASEAN Profile
CO2 EMISSION FROM FUEL COMBUSTION 1990-2001
Country Total CO2 Emissions (1990) Total CO2 Emissions (1998) Total CO2 Emissions (2001)
Brunei 3.20 4.91 5.12
Cambodia n.d n.d. n.d.
Indonesia 141.55 226.46 283.50
Lao PDR n.d. n.d. n.d.
Malaysia 47.40 92.40 108.77
Myanmar 3.95 7.84 6.74
Philippines 36.03 61.99 67.62
Singapore 34.76 43.46 45.93
Thailand 80.20 148.10 156.40
Vietnam 17.96 32.87 45.75
ASEAN 365.05 618.03 719.56
Source IEA, 2000 IEA 2003 (IPCC)
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ENERGY POLICY ISSUES ENVIRONMENT
CO2 Emissions Based on Electricity Demand
Forecast 2020 (BAU) vs. Kyoto Protocol (KP)
2000 2005 2010 2015 2020
Business As Usual (BAU) in million tons CO21 96.66 141.00 200.00 280.00 358.00
Kyoto Protocol (KP) in million tons CO2 43.02 43.02 43.02 43.02 43.02
Emission Reduction from BAU to KP in million tons CO22 53.64 98.06 157.37 236.89 308.95
Value of Emission Reduction from BAU to KP in million US Dollars3 295.04 539.31 865.53 1302.87 1,699.24
Year
Conditions
1 Business As Usual (BAU) is CO2 Emission based
on electricity demand forecast 2020. 2 Agreed
worldwide CO2 reductions under Kyoto Protocol is
5.2 of 1990 CO2 emission levels. 3 Dollar value
of CO2 emission reduction is 5.5 USD/MT CO2 as in
recent transactions.
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Graph Showing CO2 Emission Based on Electricity
Demand Forecast 2020 (BAU vs. Kyoto Protocol)
ENERGY POLICY ISSUES ENVIRONMENT
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Total CO2 Reduction from RE and EEC Plans in
2020 in Mil. T CO2
ENERGY POLICY ISSUES ENVIRONMENT
Energy Efficiency Conservation Renewable Energy Total
Brunei 0.09 0.22 0.31
Cambodia 0.09 1.94 2.03
Indonesia 4.36 12.59 16.95
Lao P.D.R 0.06 1.29 1.35
Malaysia 2.73 9.03 11.76
Myanmar 0.06 1.47 1.53
Philippines 3.53 5.80 9.33
Singapore 0.15 0.11 0.26
Thailand 3.93 14.34 18.27
Vietnam 4.24 20.72 24.96
Total 19.26 67.54 86.80
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CO2 Reduction from RE and EEC Plans in 2020 of
ASEAN Countries vs. KP with BAU as Baseline in
Million Tons CO2
ENERGY POLICY ISSUES ENVIRONMENT
Country Total CO2 Reduction from EEC and RE Plans (a) Kyoto Protocol with BAU as baseline (b) Difference (b-a)
Brunei 0.31 1.00 0.69
Cambodia 2.03 0.42 -1.61
Indonesia 16.95 77.39 60.44
Lao P.D.R 1.35 -0.12 -1.47
Malaysia 11.76 60.87 49.11
Myanmar 1.53 -0.28 -1.81
Philippines 9.33 54.99 45.66
Singapore 0.26 14.70 14.44
Thailand 18.27 60.50 42.23
Vietnam 24.96 39.50 14.54
Total 86.80 308.95 222.22
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Comparison of CO2 Emission on Three Scenarios
BAU, RE EEC Plans and KP
ENERGY POLICY ISSUES ENVIRONMENT
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Status of Climate Change Treaties in the ASEAN
Country UNFCC Status of Ratification As of 17 February 2003 UNFCC Status of Ratification As of 17 February 2003 UNFCC Status of Ratification As of 17 February 2003 Kyoto Protocol Status of Ratification As of 14 August 2003 Kyoto Protocol Status of Ratification As of 14 August 2003
Country Signature Ratification Accession Entry into force Signature Ratification Accession
Brunei - - - - -
Cambodia - 18/12/95 (Ac) 17/03/96 - 22/08/02 (Ac)
Indonesia 05/06/92 23/08/94 (R) 21/11/94 13/07/98 (OK) -
Lao PDR - 04/01/95 (Ac) 04/04/95 - 06/02/03 (Ac)
Malaysia 09/06/93 13/07/94 (R) 11/10/94 12/03/99 04/09/02 (R)
Myanmar 11/06/92 25/11/94 (R) 23/02/95 12/08/03 -
Philippines 12/06/92 02/08/94 (R) 31/10/94 15/04/98 /10/03 (R)
Singapore 13/06/92 29/05/97 (R) 27/08/97 - -
Thailand 12/06/92 28/12/94 (R) 28/03/95 02/02/99 28/08/02 (R)
Vietnam 11/06/92 16/11/94 (R) 14/02/95 02/12/98 25/09/02 (R)
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CDM PROJECTS IN ASEAN COUNTRIESSource
www.cdmwatch.org
Country CDM Project
Brunei Not signatory to UNFCC and Kyoto Protocol
Cambodia Studies by PREGA, UNEP and NEDO
Indonesia Micro-hydro project Unocals Sarulla geothermal project Unocals Wayan Windu geothermal project Palm oil west power plant Utilization of plantation waste and forest segmentation for fuel switching project Indocement energy efficiency project Kansai wood waste recycling plant Yogyakarta urban bus project East Kalimantan plantation project
Lao PDR -
Malaysia Biomass power generation project Bumibiopower biomass power plant Air Hitam landfill gas capture project Palm oil plant gas capture project Felda Lepar Hilir Palm Oil Mill biogas project
Myanmar Studies by NEDO
Philippine PV/LPG and biomass project
Thailand Rice husk power plant project AT Biopower rice husk power project Yala rubber wood waste plant project Mitr Phols Dan Chang Cogeneration project Bangkok Landfill gas project
Singapore Not signatory to Kyoto Protocol
Vietnam Thongly landfill gas project Rang Dong gas planning project Tree planting
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CDM Investment Structures

• Unilateral model
• developing country would itself undertake actions
  to reduce emissions and then subsequently trade
  the CERs (certificate of emissions reductions)
  produced through such action on the international
  market .
• Bilateral model
• countries or private entities would negotiate
  agreements among themselves. Together, they
  would set criteria and rules for crediting.
• Multilateral model
• countries would offer projects for emission
  reductions to the CDM, to be picked up by the
  highest bidder in Annex 1 countries. Interested
  developing countries could each present a
  portfolio of projects and seek financial and
  technical support for their implementation.
• Hybrid model
• Combines features of unilateral and multilateral
  models.

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Unilateral CDM
1. Project Development, Design and Financing
Ideas Capacity Financing
Host
2. Validation of Project Design
3. Monitoring by Project Operators
CERs
4. Verification and Certification
Operational Entities/ Executive Board
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Unilateral CDM

• Attractive to countries with sufficient capacity
  and resources to select, develop, finance, and
  operate sustainable development
• Ensures that projects are closely knit with
  national sustainable development plans
• Can promote wider international CDM participation

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Bilateral CDM
1. Project Development, Design and Financing
ANNEX 1 Investors
Ideas Capacity Financing
Host
2. Validation of Project Design
3. Monitoring by Project Operators
CERs
4. Verification and Certification
Operational Entities/ Executive Board
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Bilateral CDM

• Consistent with conventional modes of foreign
  direct investment (FDI)
• Provides most flexibility to project developers
• Consistent with the existing development
  assistance practices
• Concerns
• Large majority of FDI is concentrated in a small
  set of countries (China, Mexico, Brazil 50 )
  will not deliver a geographic distribution of
  project
• Bilateral approach favors large capital intensive
  infrastructure project small renewable and
  energy efficiency projects may be rendered non
  competitive.

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Multilateral CDM
ANNEX 1 Investors
CERs

1. Project Development, Design and Financing
CDM Fund
Ideas Capacity Financing
Host
2. Validation of Project Design
3. Monitoring by Project Operators
CERs
4. Verification and Certification
Operational Entities/ Executive Board
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Multilateral CDM

• May increase bargaining power to developing
  countries dealing with fund managers whose
  mandate is compatible with their interests
• Help shelve investors for the risks of individual
  project failures
• Possible arrangements
• Single supplier give the greatest control over
  CDM investment flows but could slow the market
  development and create large inefficiencies
• Multiple fund variety of institutions operate,
  competing and co-existing CDM funds

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Hybrid CDM
Annex 1 Private Investors
Other Multilateral CDM Funds
Domestic Investment
CERs


CERs

CERs
1. Project Development, Design and Financing
Ideas Capacity Financing
National CDM Fund
2. Validation of Project Design
3. Monitoring by Project Operators
CERs
4. Verification and Certification
Operational Entities/ Executive Board
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Forecast CO2 Emission and Emission Reduction
from Energy Sector for the ASEAN Countries
(2001-2010)
Scenario Emission (in million tons CO2 ) Emission Reduction (in million tons CO2 )
Business-as-usual 7,610 -
Emission reduction on fossil fuels - 879
Emission reduction on RE EE programs - 512
Emission reduction by Kyoto Protocol (5.2 of 1990) 2,519 5,091
Using business-as-usual (BAU) as baseline
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Market Value of Emission Reductions 2001-2010
in ASEAN Investment Opportunities
Scenario Value in Mill. US Dollar
Emission Reduction from fossil fuels 4,836
Emission Reduction from RE and EE Programs 2,815
Emission Reduction by Kyoto Protocol Standard 28,000
- Using business-as-usual as baseline -
Assuming USD 5.5 per ton CO2
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Summary of Markets/ Investment Opportunities from
Clean Energy Initiatives in ASEAN(in million US
Dollars)
MARKET INVESTMENT OPPORTUNITIES 2001-2010 INVESTMENT OPPORTUNITIES 2001-2010
MARKET Low High
Renewable Energy 19,476 27,467
Energy Efficiency and Conservation 17,054 29,672
Clean Development Mechanism (CDM) 7,651 28,000
Total 44,181 85,139
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Conclusion

• The Clean Energy Development Market and
  Business Opportunities in the ASEAN Region during
  2001-2010 range between 44 Billion USD and 85
  Billion USD
• Taking the proper gears for the RESCOs, the
  ESCOS and the CDM Promotion Companies should be a
  way to prosper in this market.

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ASEAN CDM Host Country

• The large ASEAN countries have a varied and
  considerable CDM potential, particularly
  regarding bio-energy and geothermal.
• The most attractive ASEAN CDM host country at the
  moment is likely to be Indonesia. Vietnam and
  Malaysia have institutions in place and thus
  fulfill the necessary conditions.
• Thailand and the Philippines still have to
  clarify their approval procedures, but already
  have a considerable project pipeline.

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Institutional Arrangements for CDM in ASEAN
countries

• Cambodia, Laos, Malaysia, Thailand and Vietnam
  have notified their DNA
• Indonesia is likely to notify its DNA after the
  recent ratification of the Kyoto Protocol.
• The Philippines are in the process of setting up
  the DNA. (?)
• Brunei, Myanmar and Singapore have not yet
  started preparations. (?)

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CDM Institutional Capacity Building in ASEAN

• ASEAN have experience in developing CDM policies,
  setting up institutional arrangements and
  implementing CDM procedures.
• Local capacity and experience is still limited in
  some countries. Within the region, therefore, the
  exchange of experience and co-ordination can
  support the implementation of CDM.
• Needs for capacity building in ASEAN are
• - Operational skills of DNA
• - Technical CDM project assessment
• - Establishment local Operational Entities
• - Awareness raising in longer term
• - Project development
• CDM life cycle or preparing proposals
• Financing or transactions

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Ongoing Capacity Building Projects in the ASEAN
region

• CDM-ASEAN (ASEAN region)
• - Energy sector, institutional
• Japan IGES-MOE (Indonesia, Cambodia, Thailand,
  Vietnam, Philippines)
• - all levels of capacity building
• WB/ESCAP (Northeast, Southeast and South Asia)
• - all levels of capacity building
• CD4CDM/UNEP (Vietnam, Cambodia, Philippines)
• - Awareness building, project development,
  institutional
• GTZ project on CDM institution building
  (Indonesia / Cambodia - Vietnam)
• - Procedures, DNA, project clearing house
• Danish CDM capacity building (Thailand /
  Malaysia)
• - DNA, procedures, project development,
  awareness
• UNDP (Philippines)
• - Institutional, project development, awareness
• SouthSouthNorth (Indonesia)
• - Project development, sustainability criteria
• Asia Pro-Eco (Cambodia, Laos, Vietnam)

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Problems Recommendations

• Most projects are successful. Some problems,
  however,
• have been identified which limit the
  effectiveness of the projects
• Some overlap exist in scope and content
• Projects do not sufficiently build on results
  of previous projects
• The target group is sometimes not specific
  enough
• Capacity building should start by raising
  awareness on the
• general issue on climate change since most
  people have very
• limited knowledge on the issue, then relate it
  to the more specific
• CDM issues.
• The project activities are often limited to
  workshops and do not
• involve (on-the-job) training.
• The role of local government in CDM is not
  clear and not
• adequately targeted in the capacity building
  projects
• Ref Pelangi, 2004, Jakarta, Indonesia

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Recommendations

• Several recommendations have been made to
  increase the effectiveness of capacity building
• Improved evaluation of past projects
• Stricter assessment of proposals by the
  recipient country and organisations beforehand
• Capacity building should not be limited to
  transfer of knowledge but also include transfer
  of skills (on-the-job training)
• Improved coordination of activities. This is
  mainly the
• responsibility of the recipient (host) country.
• Better exchange of information or results
  between projects

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ASEAN Existing Body for Cooperation Way
Forwards

• Roles of ASEAN Secretariat, ASEAN Centre for
  Energy (ACE), ASEAN CCI, complementary to the
  activities on the national level.
• A future ASEAN Climate Change Initiative could
  facilitate the transfer of best practice and the
  exchange experiences within ASEAN.
• The ongoing CDM-ASEAN Project (ACE/EAEF) can be
  seen as a first step (or pilot) towards
  establishing a regional framework for exchange of
  experience.
• The possibility of the establishment of an ASEAN
  CDM Fund to fund CDM projects
• ASEAN Senior Official Meeting on Energy (SOME)
• ASEAN MINISTERS ON ENERGY MEETING (AMEM)

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A Commitment.

• However, the ASEAN people are becoming aware
  that the climate is actually changing
• and their awareness may be the key to future
  change

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THANK YOUwww.aseanenergy.org