CDM programs project pipeline and case studies

1. CDM programsproject pipeline and case studies Klaus Oppermann May 8, 2006 Annual Meeting of the Host Country Committee Cologne

2. Emerging CDM programs • Efficient lighting • Efficient appliances • Efficient industrial equipment • Building rehabilitation • Cooking stoves (shift to biogas or EE improvement) • Climate friendly construction material • Bio-fuels in transport sector → sectors: households, SME, transport → activities: energy efficiency, renewable energy → regions: in particular poorer countries

3. UNFCCC pipeline overview 1 Submission of new methodology: • NM82: Khon Kaen Fuel Ethanol, Thailand, (MethP 20: A) • NM100: Electric motor replacement program, Mexico (C) • NM108: Bio-diesel Andhra Pradesh, India (B) • NM120: EE in supermarkets & shopping centers, Brazil (C) • NM144: ESCO replacing inefficient boilers, Mongolia • NM150: Ghana efficient lighting retrofit • NM157: Green lighting in Shijazhuang City, China • NM159: Testing, labeling QA program for ACs, Ghana (projects based on an incentive/enforcement program executed over time)

4. UNFCCC pipeline overview 2 Registered (via SSC bundling) • Kuyasa Energy upgrade, building rehabilitation, South Africa • Moldova Energy Conservation, building rehab, RE • Nepal Biogas, renewable energy • Photovoltaic Kits in Rural Households, Morroco • Bagepalli CDM Biogas Program, India • CDM Solar Cooker Project Aceh 1, Indonesia (projects based on an incentive program executed over time)

5. Case Study 1: Ghana AC program 1 • Government of Ghana passed a minimum energy efficiency standard for room air conditioners, but the policy by law cannot become effective until the implementation infrastructure is created • CDM program is the implementation of an efficiency testing, consumer labeling and quality-assurance program for air conditioners in Ghana (countrywide) • Main project participant: Ghana Standards Board (public) invests in testing lab and has operating costs (total costs for the program about 2 Mio USD)

6. Case Study 1: Ghana AC program 2 • Currently more than 100.000 ACs p.a. are sold in Ghana (close to 100% imported), fast growing market: program ensures that more efficient ACs will be bought • Estimated ERs: more than 3 Mio t CO2e in 7 years • Beneficiary: consumers, more efficient ACs do not cost (significantly) more than BAU ACs, energy savings for consumers: more than 60 Mio USD p.a. • CER revenues for covering costs of the program enacting agent that has no share in the energy savings (Ghana Standards Board) • Status: recent submission of a new methodology

7. General interest of the Ghana program • Energy efficiency improvements often face 3 main barriers: • Technology not available (supply constraint) • Lack of finance for initial investment (here efficient ACs) • Beneficiaries (here: households) ≠ Facilitator (here GSB) • “Ghana solution”: • Focus on imports (substitute imports of inefficient ACs by imports of efficient ACs) • No advanced replacement but changing only the quality of what would be bought anyway at no/very low incremental cost • Use of the CDM to cover the cost of the facilitator

8. Case Study 2: Nepal Biogas program 1 • Installation of 200,000 mini biogas plants (2.3 kW) in rural Nepal for private households in 2004-2009 • Biogas plants use dung of cattle and substitute use of fuel wood and kerosene for cooking (baseline): ER 7 tCO2* annually per plant (97% from firewood displacement) • A public institution coordinates the program and sells biogas plants to private households • Private households receive grants from the public institution and agree by contract to transfer all rights to CERs to it • The program receives ODA funding (different donors) * - Revised SSC rules on non-renewable biomass would reduce ER by more than 70% - only 4.99t are claimed

9. Case Study 2: Nepal Biogas program 2 • Nepal biogas project: typical case of a program but when it was developed: no program option available therefore use of bundling rules for small-scale projects • Consequence: increase in transaction costs/loss of CERs: • Program will be presented in more than 30 PDDs for 6,500 units each to respect 15 MW threshold (first 2 registered) • Each participating household will be listed • Crediting periods start long after operations start, loss of CERs • Costs for validation, registration, verification for more than 30 PDDs: more than 4 Mio USD (estimation) • Costs for presenting the project as a program in one single PDD: 0.14 Mio USD (estimation, no loss of CERs)

10. General interest of the Nepal program • Sustainable/community development benefits • Relevance for LDC, rural areas, poor people • High Potential: several similar projects in UNFCCC pipeline and Bank pipeline including EE on stoves • ODA/other subsidy money as seed funding then self-financing vehicle out of CDM revenues • Carbon pricing can in theory be done more oriented on costs than on market prices • Use of SSC bundling rules (submission of a sequence of bundles) is inefficient temporary solution and unclear if backed by new bundling rules

11. First Experiences with CDM programs CDM Methodology • Incentive schemes with contractual relationships with owners of individual activities allows integration of monitoring schemes • Labeling/testing programs: Use of sales data and sampling • Additionality: EB tool on program level, ER-additionality on level of individual activities (project ≠ baseline) Finance • Self-financing vehicle out of CDM possible but often need for seed funding • Commercial funding often challenging (performance risk): need for subsidy money/ODA (allows for cost oriented carbon pricing)