Overview of CDM, EB Meetings (11&12) & COP9 First Extended Regional Workshop CD4CDM Project Siem Reap, Cambo

1. Overview of CDM, EB Meetings (11&12) & COP9 First Extended Regional Workshop CD4CDM Project Siem Reap, Cambodia 24- 26 March 2004 Sami Kamel, PhD UNEP RISOE Center, Denmark

2. Kyoto Protocol:Background • Commitments: • Binding GHG emission reduction targets for Annex I countries. • 5% below 1990 levels by 2008-2012. • Targets based on net changes in emissions of 6 greenhouse gases • CO2, CH4, Nitrous Oxide (N2O), Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulphur Hexafluoride (SF6). • Implementation: • Domestic emission reduction through policies and measures. • Flexibility mechanisms: • Emissions Trading • Clean Development Mechanism • Joint Implementation

3. Net GHG Reductions in First Commitment Period (2008-2012) 8% average reduction by EU Achieved through domestic mitigation measures (e.g. RET, EE, Fuel Switching, etc.), JI, and Emissions Trading (2008-2012), and CDM (from year 2000). 1990 Emissions for EU 2008-2012 GHG Emissions 2008-2012 Emissions in Business As Usual Scenario

4. Kyoto Protocol: Ratification & Entry-into-force • Entry into force requires 55 Parties to the Convention + Annex I Parties accounting for 55% of 1990 CO2 emissions from that group to ratify. • Possible combinations for entry into force: • US + EU-15 • US + Russian Federation + one other major emitter • EU + Russian Federation + Japan + Canada + Poland or Australia • Already Ratified: European Union, Japan, & Canada (total less than 55%). • Already Rejected: United States (36% of Annex I emissions) & Australia (2.2 % of Annex I emissions). • Undecided: Russia (17.4% of Annex I emissions). • Non-Annex I countries (Developing countries): • Many already ratified although GHG reduction is voluntary.

5. CDM Concept • CDM is to allow Annex I countries meet part of their emission reduction requirements for first commitment period 2008-2012 at lower costs in non-Annex I countries than could be done domestically. • Annex I countries are allowed to acquire Certified Emission Reductions (CERs) by implementing GHG mitigating CDM projects in non-Annex I countries. • ODA (Official Development Assistance) funds can not be used in CDM investments.

6. CDM Participation Requirements • Participation in CDM is voluntary. • Parties (Annex-I and non-Annex-I) participating in the CDM shall designate a national authority for CDM (DNA). • For host country to participate in a CDM project, it has to ratify the Kyoto Protocol.

7. Kyoto Protocol specifies that GHG emission reduction in the form of CDM projects can include the following examples:  • End-use energy efficiency improvement. • Supply-side energy efficiency improvement. • Renewable energy. • Fuel switching. • Agriculture. • Industrial processes. • Solvent and other product use. • Waste management. Negative List:   • Sinks (only afforestation and reforestation). • No nuclear projects.

8. Key CDM Project Eligibility Criteria • Additionality • Must prove that emission reductions are ADDITIONAL to those that would have occurred in absence of CDM. Estimated emissions from new project should be LESS than emissions of the business-as-usual, non-CDM scenario. • Sustainable Development • How project contributes to job creation, poverty alleviation, environment, etc., in host country.

9. Benefits from CDM • Can contribute to host country’s job creation, poverty alleviation, and sustainable development. • Technology transfer and in-flow of financial resources into host country. • Add sustainable ways for energy production and increase energy efficiency. • Contribute to attracting FDI to the host country.

10. Modalities & Procedures (M&P) for the CDM • COP7 in Marrakech has outlined the modalities & procedures for CDM projects (general rules). • A special modalities & procedures were set for small-scale CDM in COP8. • In their first 10 meetings, Executive Board developed more detailed rules for CDM project cycle and for small-scale CDM projects. • Modalities & procedures for LULUCF (afforestation & reforestation) projects were finalized at COP9 in Milano. • A special PDD is currently being developed by EB for LULUCF projects.

11. Responsibilities of the Conference of Parties (COP) • Make decisions on the recommendations made by the Executive Board on its rules of procedure. • Review annual reports of the Executive Board. • Review the regional and sub-regional distribution of DOEs and CDM project activities. • Assist in arranging funding of CDM project activities.

12. Key Issues Adopted by COP 9 • Approved the modalities & procedures for Afforestation & Reforestation CDM projects. • A simplified set of rules & procedures for small-scale LULUCF CDM projects also adopted. • Rules & procedures for LULUCF available at UNFCCC’s CDM web site. • Requested Annex-I countries to provide increased capacity building support to non-Annex-I countries in the area of CDM project preparation and implementation.

13. Provided guidance on the establishment of a Special Climate Change Fund. • Fund to receive support from bilateral and multi-lateral donor agencies. • Will assist in implementation of CC adaptation projects in developing countries. • Will support capacity building & institutional support for planning and management of disasters relating to CC (droughts, floods) in areas prone to extreme weather events.

14. EB 11th Meeting • The Board agreed to approve the proposed new baseline and monitoring methodologies contained in Annexes 3 & 4 of the PDDs of the following projects: • NovaGerar Landfill Gas-to-Energy Project. • Durban Landfill Gas-to-Electricity project. • Graneros Plant Fuel Switching Project. • A.T.Biopower Rice Husk Power Project. • The Board decided to monitor the cost of the process (accreditation of DOEs, CDM project validation, registration and verification).

15. EB 12th Meeting • CDM Accreditation Panel announced decision to issue “Indicative Letters” to four Applicant Entities (DOEs): • Japan Quality Assurance Organization. • Det Norske Veritas Certification. • TUV. • Tohmastsu Evaluation and Certification Organization. • Approved new baseline and monitoring methodologies: • Vale do Rosario Bagasse Cogeneration Project. • A Landfill Gas Recovery Project. • El Gallo Hydro-Electric Project. • EB decided to continue evaluating various possible arrangements for the CDM Registry, especially the MIS/IT system to be selected for the registry.

16. Update on DOEs • 21 entities have applied for accreditation (Applicant Entities – AE): 19 from Annex I parties, 2 from non-Annex I countries, and none from Africa or South Africa. • EB7 approved “Procedures for Accreditation of Operational Entities for CDM.” Procedure consists of: • Desk review by an Accreditation Team (AT) (completed for 13 AEs). • On-site assessment by AT (completed for 6 AEs). • Witnessing activity by AT (completed for 4 AEs). • No AE accredited by EB yet but four Applicant Entities received “Indicative Letter” and expected to become Designated Operational Entities this year.

17. Applicant Entities

18. PDD Content’s Update Note 1: PDD for Small scale CDM contains same sections but only annexes 1 and 2 are required. Note 2: Annexes 3 & 4 have been removed and will be done separately by project developer only in case of a new methodology is being proposed. EB has just released new guidelines on how to propose a new methodology.

19. PDD Update • EB will soon adopt a decision regarding Annex 3 (New Baseline Methodology) and Annex 4 (New Monitoring Methodology). • Both annexes will be submitted separately under a new format to be provided by EB when proposing new methodologies.

20. DNA Updates • To date, 53 countries have informed the UNFCCC of their establishment of DNAs (10 of which are Annex I countries).

21. CDM Status Summary • Approved baseline methodologies: 9 (could be used by other projects). • Pending baseline methodologies: 21. • Baseline methodologies recommended for approval: 3. • Project Registry will be ready this year. • Projects waiting for registration: 5. • At EB12 it was decided to develop a Frequently Asked Question section on the UNFCCC CDM web site.

22. Continue: CDM Status Summary • Accredited DOEs: None. • Registered Projects: None. • Host countries: None. • Buyer countries: None. • Issued CERs: None. • CER price range 3-12 Euro/t CO2.

23. Market Outlook • Market outlook for 2004 (based on Point Carbon’s recent study): • Estimated transactions volume in the carbon market will be around 100 million tonnes CO2-equivalents. • Estimated carbon market value Euro 400 million year 2004. • Above estimates based on observed market trends, numerous interviews with market actors, and Point Carbon's assessments of policy developments and their market impacts.