CLEAN DEVELOPMENT MECHANISM: OVERVIEW DENR Training Course November 4-6, 2003 Climate Change Information Center Manila O

1. CLEAN DEVELOPMENT MECHANISM:OVERVIEWDENR Training CourseNovember 4-6, 2003Climate Change Information CenterManila ObservatoryAteneo de Manila University

2. Contents • Problem of Climate Change • UNFCCC & Kyoto Protocol • Clean Development Mechanism • CDM Eligible Projects • Environmental Benefits of CDM • Mechanics of CDM • Basics of CDM Financing • Philippine Participation in CDM

3. 1. Problem of Climate Change

4. Rising temperatures results in changing weather patterns • Melting polar caps, glaciers • Shifts in weather patterns • Increased occurrence of dramatic weather such as hurricanes Historic Temperature Data

6. Carbon dioxide (ppmv) Temperature change (oC) 150 100 50 0 Thousands of Years ago Atmospheric CO2 Concentration and Temperature Change

7. Climate Change • Climate change is caused by both natural events (like volcanic eruptions) and human activities

8. Transportation Land Use: Agriculture & Forestry Energy Generation Industrial Processes Human Sources of GHGs Carbon Dioxide (CO2) – Most prevalent GHG Methane (CH4) – Second most common, 21x the potency of CO2 Nitrous Oxide (N2O) – 310x the potency of CO2 Other Gases – HFCs, PFCs, and SF6 = range 600 – 23900x potency of CO2 Transport

9. GHG and Environmental Impacts Changes in temperature, weather patterns and sea level rise Human Health: Weather related mortality Infectious disease Air quality - respiratory illness Coastal Areas: Erosion and flooding Inundation Change in wetlands Water Resources: Changes in water supply and water quality Competition/Trans-border Issues Agriculture: Changes in crop yields Irrigation demands, Productivity Forests: Change in Ecologies, Geographic range of species, and Health and productivity Industry and Energy: Changes in Energy demand Product demand & Supply

10. Philippine Rice Production.Arrows indicate El Niño events.(source: Food and Agricultural Organization)

11. Vulnerability information systems El Niño - La Niña Vulnerability Map Support for Greenhouse Gas Inventory

12. Sea level rise 3D modeling and visualization tools are used for vulnerability assessment, exact location and quantification of areas which are susceptible to floods due to rise in sea level. Study area: Northern part of Navotas, Metro Manila

13. 2. UNFCCC and KYOTO PROTOCOL

14. United Nations Framework Convention on Climate Change Objective of the Convention “Stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. Such a level should be achieved within a time frame sufficient to allow ecosystems to adapt naturally to climate change, to ensure that food production is not threatened, and to enable economic development to proceed in a sustainable manner.”

16. United Nations Framework Convention on Climate Change Commitments by the Parties to the Convention • Parties have common but differentiated responsibilities.

18. Division of Parties by Annex Annex I Annex II Australia / Austria / Belgium / Canada / Denmark / EC / Finland / France / Germany / Greece /Iceland / Ireland / Italy / Japan / Luxembourg / Netherlands / New Zealand / Norway / Portugal / Spain / Sweden / Switzerland / Turkey / United Kingdom / USA Belarus / Bulgaria / Croatia / Czech Republic / Estonia / Hungary / Latvia / Liechtenstein / Lithuania / Monaco / Poland / Romania / Russian Federation / Slovakia / Slovenia / Ukraine Non-Annex I Countries = All the Rest of Ratifying Countries

19. Kyoto Protocol • The overall emission reduction target for Annex I Parties as a group is at least 5 percent below 1990 levels, to be achieved by the commitment period 2008 to 2012 (an average over the five years). • The Protocol covers six greenhouse gases (Annex A) - CO2, CH4, N2O, HFCs, PFCs, SF6 • The negotiated targets for individual Annex I Parties are included in Annex B of the Protocol.

20. Industrialized Countries Australia 108 Canada 94 EC bubble 92 (Germany 75) (Portugal 140) Japan 94 Norway 101 New Zealand 100 USA 93 ??? Economies in Transition Bulgaria 92 Baltics 92 Croatia 95 Czech Republic 92 Hungary 94 Poland 94 Romania 92 Russia 100 Ukraine 100 Selected Quantified Emission Limitation (%)

21. Kyoto Protocol • The Kyoto Protocol was adopted at COP-3 in December, 1997, in accordance with “Berlin Mandate” of COP-1. • The Protocol will enter into force when not less than 55 Parties to the Convention, accounting for at least 55 percent of the 1990 total CO2 emissions of the Annex 1 Parties, have ratified the Protocol. • US: 34%; Russia: 16%; Japan: 8% ;EU: 23%; • Other Annex 1 Parties 19%

22. Kyoto Protocol:Flexibility Mechanisms Annex IGHG Emissions Clean Development Mechanism Emission Trading 1990 level Joint Implementation - 5% Domestic Actions Assigned Amounts Present day 2012 (BaU) 2012 with KP

23. 3. Clean Development Mechanism

24. Clean Development Mechanism • Enables developed countries (known as Annex B countries) to meet their emission reduction commitments in a flexible and cost-effective manner • Assists developing countries (non-Annex B 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

25. What can the CDM do for developing countries • Attract foreign investment to countries engaged in the trading of CERs • Increase the profitability of cleaner more efficient technology in energy, industry, and transport sectors • Clean up waste management operations • Improve land-use strategies and practice • Contribute to sustainable development of the host country

26. What are the Criteria for CDMProjects? • Sustainable development • Host country criteria • Environmental Impact Assessment • Stakeholder consultations • Greenhouse Gas (GHG) emission reductions • Environmental additionality • Project additionality • Project viability • Technologically proven • Financially sound • Host country approval • Project validation and registration

27. 4. CDM Eligible Projects

28. CDM Eligible Projects • Renewable energy • Fuel switching • End-use energy efficiency improvements • Supply-side energy efficiency improvements • Agriculture (reduction of CH4 & N2O emissions) • Industrial processes (CO2 from cement, HFCs, etc) • Sink projects (only afforestation & reforestation)

29. Renewable energy • Solar power • Hydro power • Wind power • Geothermal • Biomass • Tidal / Wave power

30. Renewable energy • Renewable energy for the grid • For electricity generation by households or commercial users • E.g., Solar home systems, solar water pumps, photovoltaics, wind battery chargers • For mechanical energy by households or commercial users • E.g. wind-powered pumps, solar water pumps, water mills, wind mills

31. Renewable energy • Thermal energy for households or commercial users • E.g., solar thermal water heaters and dryers, solar cookers, energy derived from biomass for water heating, space heating or drying • Biomass combined heat and power (co-generation) systems

32. Fuel switching • For industrial facilities • From steam or compressed air to electricity • For buildings • From oil to gas • For vehicles • From diesel to LPG or to CNG

33. End-use energy efficiency improvements • Energy efficiency equipment • Motors • Lamps • Ballasts • Refrigerators • Fans • Air conditioners • Appliances • Etc …

34. Supply-side energy efficiency improvements • Generation • Efficiency improvements at power stations and district heating plants and co-generation • Transmission and Distribution • Examples: • Upgrading voltage on a transmission line • Replacing a transformer • Increased insulation of pipes

35. Agriculture • Reducing emissions from agricultural soils • Use of ammonium sulfate instead of urea • Use of phosphogypsum in combination with urea instead of urea • Reducing methane emissions from livestock • Conservation agricultural tillage • Agricultural land management practices • Use of composted rice straw instead of fresh rice straw

36. Industrial processes • Methane (CH4) recovery and avoidance from landfills, coal mines, agro-industries, waste water treatment facilities • CH4 has global warming intensity 21-times that of CO2 • Cement production (CO2) • Electric equipment manufacturing (SF6) • PFC emissions from aluminum production • PCF gases have global warming intensity over 6000-times that of CO2 • PFC and SF6 emissions from semiconductor manufacturing • Nitrous Oxide (N2O) emissions from adipic acid and nitric acid manufacturing • N2O has global warming intensity of 310-times that of CO2

37. Sink projects • Afforestation • Planting trees on agricultural land • Reforestation • Planting trees on denuded forest land

38. Clean Development Mechanism Types ofsmall-scaleprojects that could qualify for fast-track approval procedures • Renewable energyprojects up to15megawatts (MW) of output capacity • Energy efficiencyimprovements that reduce energy consumption on the supply and/or demand side by up to15gigawatt-hours (GWh)/year • Other project activities that both reduce emissions at source and directly emit less than15kilotons (kt) of CO2 equivalent annually

39. 5. Environmental Benefits of CDM

40. CDM Project • Achieves Sustainable Development objectives for the host developing country • Reduces GHG Emissions

41. 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

42. 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

43. 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

44. Additionality • Additionality is the key eligibility criterion in CDM projects • You must do something that you would not have done without the CDM • Two types of additionality • Project Additionality • Environmental Additionality

45. Project Additionality • Without the ability to register under the CDM, the proposed project would be, or would have been, unlikely to occur

46. Project Additionality • Baseline methodology evaluates whether or not the proposed CDM project activity would have gone ahead anyway. • Baseline methodology assesses why the proposed CDM project activity is less likely to occur than one or more of the other possible scenarios.

47. Environmental Additionality • If the proposed CDM project activity is not implemented, a less greenhouse gas friendly activity would have been initiated or continued instead.

48. Environmental Additionality • A CDM project activity is additional if anthropogenic emissions of GHGs by sources are reduced below those that would have occurred in the absence of the registered CDM project activity. -CDM M&P para. 43 Emission Reductions=hypothetical baseline emissions – effective (project) emissions

49. CO2 Emissions Baseline scenarioCO2 emissions (that would occur) Real, measurable and long-term Additional CO2 emissions reduction CDM project CO2 emissions (observable) Years Environmental additionality and baseline

50. 6. Mechanics of CDM