South Africa’s Designated National Authority for Clean Development Mechanism

1. South Africa’s Designated National Authority for Clean Development Mechanism Designated National Authority for Clean Development Mechanism +27 12 317 8309

2. Overview • History of global efforts & response to CC • CDM basics • SA response to CC • Functions & institutional arrangement - DNA • DNA evaluation & approval procedure • Projects profile • Key role players in CDM • Conclusion

3. History of international efforts and response to climate change • UNFCCC adopted in 1992 (Rio Conference/UNCED) • Provide framework for mitigation & adaptation • Stabilization of GHG concentrations • Parties meet annually - COPs • Kyoto Protocol (1997) – Update to UNFCCC & primary international agreement on combating climate change • Negotiated in Kyoto, in Dec.1997, opened for signature in Mar 16 1998, and closed in Mar 15 1999. • Came into force Feb 16, 2005 following ratification by Russia on Nov 18, 2004. • 168 countries ratified the Protocol - to date • Commitments by Parties to reduce GHG’s (Annex 1) by 5.2% below 1990 levels and Non-Annex 1 to sustainable development (SD) goals. • Mechanisms – Carbon Trading, Joint Implementation (JI) & CDM • Allow Annex 1 entities to meet their GHG targets by purchasing GHG emission reductions and/or investing in projects elsewhere

4. The CDM Basics • CDM – Annex1 countries with GHG reduction commitment to invest in emission reducing projects in developing countries as an alternative to what is generally considered more costly emission reductions in their own countries • Support sustainable development • Project-based; incentive-based & market-driven • Goals: • Contribute to the Convention • Assist Annex1 achieve ER targets • Assist Non-Annex1 achieve sustainable development • Characteristics: • Activities must lead to measurable reductions – tradable • Reductions must be additional (would not have occurred in absence of the project activity) • Participation is project activity voluntary

5. CDM Operational Structure

6. CDM – the baseline concept CO2 Baseline CERs Project Emissions Time (yrs) A project’s GHG emission reductions need to be judged against some baseline The baseline is “what would have happened in the absence of the CDM” Additionality

7. SA response to climate change • SA acceded to UNFCCC in 29 August 1997 • Ratified the Kyoto Protocol in 31 July 2002 • Dept of Environmental Affairs & Tourism (DEAT) – national focal point for climate change • Coordinates CC activities – NCCC, COPs, CSDs etc • National Communications to UNFCCC • Development of environment legislation and regulatory frameworks - National Climate Change Response Strategy; Air Quality Act • Other instruments – DME’s policies and targets on energy renewable and energy efficiency

8. CDM project cycle CDM Market DNA Mandatory Responsibility Project Idea Note (PIN) Screening Letter of No Objection Project Development Document (PDD) National Review Validation (OE) Letter of Approval Project Registration Project Monitoring Verification, Certification

9. Preparation and review of the Project Project completion 3 moths Baseline Study and Monitoring and Verification Plan (MVP) Up to 21 years Periodic monitoring, verification & certification 2 months Validation process 1-3 years 2 months 3 months Negotiation of Project Agreements Construction and start up CDM project cycle…cont

10. Functions of DNA • DNA establishment within DME approved by Cabinet in 2003 • Regulations establishing DNA gazzetted in July 2005 under Section 25 of the NEMA Act of 1998 • DNA established in December 2004 • DNA functions: • Regulation function: • Project evaluation and approval in accordance with section 40(a) of the Marakech Accords. • Promotion function: • To promote and facilitate the development of CDM projects in South Africa • Secure an adequate share of CDM investment in South Africa • To promote CDM projects of a developmental nature • Ensure that the mechanism is in the national interest (Gov. objectives)

11. Institutional Arrangement to handle CDM in SA • DTI • DME • DEAT • DST • DoT • NT • DoA • DWAF • DoH • DFA “Oversight” • DTI • DME • Parastatals • Private Sector • NGOs Steering Committee Promotions Sub-Committee Designated National Authority (Director General of DME)

12. CDM Evaluation & Approval Procedure • Evaluation & approval of submitted PDD should be read in conjunction with: • Project approval procedure of the DNA (DME, 20th November 2004); • SD criteria for approval of CDM projects by the DNA (DME, 14th October 2004); and, • Any regulations promulgated with regard to the DNA (Regulation Gazette No 8275)

13. DNA project approval process

14. SD Criteria for CDM project approval • National Environmental Management Act (NEMA) definition of sustainable development • the integration of social, economic and environmental factors into planning, implementation and decision making so as to ensure that development serves present and future generations • This definition of sustainable development will inform the decisions of the DNA • SD Criteria • Economic: Does the project contribute to national economic development? • Social: Does the project contribute to social development in South Africa? • Environmental: Does the project conform to the National Environmental Management Act principles of sustainable development?

15. SD Criteria…cont. Social Environment Economic • RE helps reduce GHG emissions (climate change mitigation), • Helps reduce environmental pollution and associated adverse health effects, • Provides diversity of supply and thus energy security • Job creation, • Community & industrial economic dev. • Off-sets energy imports (BOP), • Contribute to new generation capacity, • Helps with DSM • Opportunities to facilitate gender equality, • Stimulate Socio-economic development, job creation and poverty alleviation, • Offers BEE investment opportunities, • Improved health for all.

16. Key Role Players in CDM • Project Developers • Development of PIN or PDD; Request for Host Country approval; • Project registration as CDM • Designated Operational Entities - Validation; Verification; Certification • CDM Executive Board - Project registration; Approval of methodologies; Issuance of CERs; Accreditation of entities

17. Key Role Players in CDM….cont.. • Host Country (DNA) - Establishment of institutional & legal frameworks; Ensures Projects contribute to SD; Promotion of CDM • Project Owners (e.g. municipality) - Project identification, funding & implementation • Businesses - Investment • NGOs & General Public - Projects contribute to SD; Promotion of CDM; Watch Dogs!!!

18. SA emissions in international comparison Waste Total: 380 Mt CO2- equivalent 4% Agriculture Non-energy emissions 9% Industry Energy industries 8% Fugitive emissions 45% 2% Other energy 7% Transport 11% Industrial energy 14% Share of national emissions, CO2, CH4 and N20, 1994 GHG inventory

19. Sectors for potential projects • Energy supply and demand – Energy efficiency (EE), renewable electricity & energy, cogeneration, cleaner coal for generation; fuel switch from coal to gas • Waste sector – composting; energy (electricity) generation • Mining – CH4 reduction from coal mines; EE • Agriculture – afforestation & reforestation; fire controls; improved management of woodlands; biofuel production • Transport and automotive sectors – Improved public transport, urban planning & traffic management; vehicle fuel switch; vehicle efficiency, road to rail transport • Manufacturing – industrial EE; structural changes to less energy & emissions-intensive; boiler conversion to gas • Residential, public & commercial buildings – fuel switch, solar heating, energy management, EE building design (thermal-efficiency), EE appliances

20. Overview of projects submitted for approval • 54 projects (19 PDDs and 35 PINs) received to date • 10 PDDs registered with EB • Kuyasa Low-Cost Housing Energy Efficient Project (Cape Town) – 27/08/2005; Gold Standard Award; reduces 6,500 t eCO2 per annum • Lawley Fuel Switch Project (Lenasia) – 06/03/2006; 19,000 t eCO2/yr • PetroSA Biogas to Energy Project (Mossel Bay) – 29/09/2006; 29,000 t eCO2/yr • Rosslyn Fuel Switch Project (North Pretoria) – 29/11/2006; 107,000 t eCO2/yr • Durban Landfill Gas to Energy Project (Durban) – 15/12/2006; 60,000 t eCO2/yr • Tugela CFB10 Conversion from Coal to Bark Fired (Tugela) – 12/02/2007; 70,000 t eCO2/yr

21. Overview of projects submitted …cont • Mondi Biomass Project (Richards Bay) – 20/05/2007; 222,474 t eCO2/yr • Omnia N2O Destruction Project (Sasolburg) – 03/05/2007; 576,000 t eCO2/yr • EnviroServ Chloorkop Landfill Gas Project (East Rand) – 27/04/2007; 188,000 t eCO2/yr • Sasol Nitrous Oxide Abatement Project (Witbank) – 25/05/2007; 610,000 t eCO2/yr • Projects cover the following types: • Fuel switch; Cogeneration; Energy efficiency; Hydro power, Energy generation from renewables

22. Barriers to CDM development Lack of project development capacity Lack of financing - project development & implementation High transaction costs - CERs Municipal Finance Management Act (MFMA)/Public Finance Management Act (PFMA) Lack of capacity to develop methodologies/technologies Uncertainties around post 2012 regime Tax implications of CERs Low electricity cost vs clean/renewable energies

23. Conclusion • DNA has commissioned three studies: • CERs taxation implications (completion - September 2007) • Review of SD criteria (completion - August 2007) • DNA rolling out CDM awareness raising & capacity building initiatives • DNA supports establishment of functional DNAs in other African countries

24. Useful Links www.dme.gov.za/cdm www.info.gov.za/gazette/regulation/2005/27788a.pdf http://cdm.unfccc.int www.pointcarbon.com www.ipcc.ch www.un.org/esa/sustdev/csd/policy.htm www.ieta.org