CLEAN DEVELOPMENT MECHANISM: OPPORTUNITIES FOR THE PHILIPPINES Climate Change Information Center Manila Observatory Ateneo de Manila University

1
CLEAN DEVELOPMENT MECHANISM OPPORTUNITIES FOR
THE PHILIPPINESClimate Change Information
CenterManila ObservatoryAteneo de Manila
University
2
Clean Development Mechanism

• Enables developed countries (known as Annex I
  countries) to meet their emission reduction
  commitments in a flexible and cost-effective
  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

3
Value Benefits of CDMFrom 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

4
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

5
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) Micro-hydro
• Cost of project 13
• Zero Emissions

6
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

7
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

8
CDM Project

• Achieves Sustainable Development objectives for
  the host developing country
• Reduces GHG Emissions

9
Baseline and CERs
10
CDM A special product

• CER is a payment for the Project Developer not to
  produce
• To reduce GHG emissions
• Thus, the importance of special requirements
• Definition of baselines
• Calculation of GHG emission reductions

11
How CDM can matter
FIRR
CER income
12
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)

13
Clean Development Mechanism

• Types of small-scale projects that could qualify
  for fast-track 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

14
Projected Philippine CO2 Emissions Potential of
CDM Emissions Reductions Supply
15
Projected Philippine CO2 Emissions Potential of
CDM Emissions Reductions Supply
16
Philippine GHG Abatement Cost and Potential
Source ALGAS
17
BATANES 1,100 KW
CASIGURAN 500 kW
NORTHERN LUZON 120 MW
POLILLO ISLAND 500 kW
MARINDUQUE ISLAND 3,000 kW
CATANDUANES 2,250 kW
LUBANG ISLAND 330 kW
TABLAS ISLAND 1,500 kW
MINDORO ISLAND-ORIENTAL 13,500 kW
ROMBLON ISLAND 1,000 kW
BUSUANGA ISLAND 330 kW
MASBATE ISLAND 3,000 kW
CUYO ISLAND 330 kW
DINAGAT ISLAND 3,000 kW
PALAWAN ISLAND 9,000 kW
POTENTIAL CAPACITY 160,340 kW
SIQUIJOR ISLAND 1,000 kW
SPECIFIC WIND POTENTIAL POWER SITES
18
Solar Energy Resource Potential

• Average insolation of 5- 6 kWh/sq. m/day all
  throughout the country

19
(No Transcript)
20
Requirements for the Philippines to Participate
in CDM

• Ratify the Kyoto Protocol
• Designate the CDM National Authority

21
Requirements for the Philippines to Participate
in CDM

• Status of Philippine ratification of the Kyoto
  Protocol
• Senate Committee on Foreign Affairs has sponsored
  the ratification on the floor of the Senate, 2nd
  June 2003
• Interpellation and voting during the next session
  of the Senate, August 2003
• Need 2/3 majority of the Senate to concur in the
  ratification of the Kyoto Protocol

22
Requirements for the Philippines to Participate
in CDM

• Status of efforts to establish CDM Designated
  National Authority (DNA)
• Proposal to make the Inter-Agency Committee on
  Climate Change (IACCC) as the DNA
• IACCC is composed of DENR, DOST, DOE, DFA,
  DTI-BOI, DOTC, NEDA, DPWH, PAGASA, FMB, EMB,
  Philippine Network on Climate Change (NGO)

23
PCF/CDM Project Cycle The Manufacturing Process
for CDM Emissions Reductions
Preparation and review of the Project
Project completion

• Project Idea Note
• Project Concept Note
• Project Concept Document (or equivalent)

3 months
Baseline Study and Monitoring Plan (MP)
Up to 21 years

• Project Design Document
• Baseline study and ER projections
• Monitoring Plan

Periodic verification certification
2 months

• Verification report
• Supervision report

Validation process
1-3 years
2 months

• Validation protocol and report

3 months
Negotiation of Project Agreements
Construction and start up

• Initial verification report

• Project Appraisal and related documentation
• Term sheet
• Emission Reduction Purchase Agreement

24
Carbon Asset Creation and Maintenance Costs The
PCF Experience
Preparation and review of the Project
Project completion

• Upstream Due Diligence, carbon risk assessment
  and documentation 50K

3 months
Baseline Study and Monitoring Plan (MP)
Up to 21 years

• Baseline 30 K
• Monitoring Plan 25K

Periodic verification certification
2 months

• Verification 10-25 K
• Supervision 10-20K

Validation process
1-3 years
2 months

• External consultant 25K
• Processing and documentation 30k

3 months
Negotiation of Project Agreements
Construction and start up

• Initial verification at start-up 25K

• Consultation and Appraisal 75K
• Negotiations and Legal documentation 30K

Total through Negotiations

• All expenses 265 K

25
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 5-15 (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

26
Total GHG emissions in 1990 and 2010, and reduction commitments according to Total GHG emissions in 1990 and 2010, and reduction commitments according to Total GHG emissions in 1990 and 2010, and reduction commitments according to Total GHG emissions in 1990 and 2010, and reduction commitments according to Total GHG emissions in 1990 and 2010, and reduction commitments according to Total GHG emissions in 1990 and 2010, and reduction commitments according to Total GHG emissions in 1990 and 2010, and reduction commitments according to
the Kyoto Protocol based on national communications the Kyoto Protocol based on national communications the Kyoto Protocol based on national communications the Kyoto Protocol based on national communications the Kyoto Protocol based on national communications the Kyoto Protocol based on national communications the Kyoto Protocol based on national communications

Demand Scenario Demand Scenario
  TotalGHG Emissions in 1990 (mtc) Total GHG Emissions in 2010 (mtc) Kyoto Reduction Commitments (mtc) Excess Emissions (mtc) Kyoto Commitments minus Excess Emissions Projected Demand (at 4 per tC) in M
EU 1,159.50 1095.9 40.6 12.7 27.9 111.60
Australia 113.3 144.1 21.7     86.80
Canada 153 182.4 29.2     116.80
Iceland 0.8 1 0.1     0.40
Japan 337.2 388.2 71.2     284.80
New Zealand 19.8 22.9 3.1     12.40
Norway 15 17.3 2.1     8.40
Switzerland 14.6 14.5 1.1     4.40
United States 1634.4 1943.9 423.9     1,695.60
Eastern Europe 368.4 358.3 26.7 11 15.7 62.80
Former USSR 1,113.50 1032.2 0.9 81.4 -80.5 (322.00)
27
CDM Funding as Additional

• Public funding for CDM Projects be additional to
  Official Development Assistance (ODA), Global
  Environment Facility (GEF) provided by Annex I
  Parties
• Public funding for CDM projects must not result
  in the diversion of ODA
• Funding may involve private and/or public entities

28
Current State of Play

• Although numerically dominant, renewables account
  for only 9.4 million tons of the 42 MT of CO2
  equivalent being claimed (just over 20)
• Single greatest source of carbon credits being
  claimed is hydroelectric projects

29
Hydro projects lt10 MW are counted as renewable.
30
CDM Project Cycle
Applicant Entity
Executive Board and COP/MOP
Accreditation/ designation
Project Participants
Design
Designated Operational Entity
Designated Operational Entity
Validation/ registration
Designated National Authority (DNA) for CDM
CDM Executive Board
Monitoring
Project Participants
Designated Operational Entity
Verification/ certification
CDM Executive Board
Issuance
Certified Emission Reductions
31
Contents of CDM-PDD
A. General description of project
activity   B. Baseline methodology   C.
Duration of the project activity/ Crediting
period   D. Monitoring methodology and plan   E.
Calculations of GHG emissions by sources   F.
Environmental impacts   G. Stakeholders comments
32

• Thank you

Roberto C. Yap, S.J., Ph.D. Environmental
Economist Climate Change Information
Center Manila Observatory Ateneo de Manila
University Tel [phone] Fax 63 2
426-6070 rcyapsj_at_observatory.ph