The CDM Solution for Municipal Solid Waste Management

1. The CDM Solution for Municipal Solid Waste Management Kenneth Butler VIKEN and Associates / Kotamadya Bekasi The World Bank - Executive Workshop / Training on the CDM, Jakarta, January 24 – 26 2006

2. Konsep pengelolaan sumberdaya lahan TPA Siklus Sampah Perkotaan Negara Maju Skema ini menjelaskan siklus sampah kota di negara-negara berkembang yang dimulai dari penghasil hingga pembuangan dan pemanfaatan sampah. Dana pengelolaan sampah dan penyediaan pelayanan yang diharapkan masyarakat diperoleh dari “profit center”. Kemampuan pendanaan ini didasarkan pada prinsip “user pays atau pembayaran distribusi” yang dibebankan pada penghasil sampah.

3. Konsep pengelolaan sumberdaya lahan TPA Siklus Sampah Perkotaan Negara Transisi Sebaliknya, masyarakat (penghasil sampah) di negara-negara yang sedang dalam proses transisi ekonomi tidak memiliki dana untuk membiayai Pengelolaan Sampah, sehingga ‘Tingkatan Pelayanan’ yang disiapkan oleh pemerintahan jauh dibawah Negara-negara yang sudah berkembang. Konsep Pengelolaan Sumberdaya Lahan TPA pada akhirnya dikonsentrasikan pada perolehan segi pendanaan melalui cara pengelolaan dan pemanfaatan sumberdaya yang diperoleh dari lahan TPA. Pemasukan yang diperoleh melalui pendekatan cara ini akan dapat mengurangi keterbatasan keuangan dan/ atau mengalir kembali ke sistem Pengelolaan Sampah.

4. Presentation Outline • Case study:- Kota Bekasi CDM project proposal • Process of CDM Project Development

5. Bekasi Methane Gas Destruction and Landfill Organic Recovery Proposed CDM Project Location: TPA Sumur Batu, Kota Bekasi, Jawa Barat

6. Current Project Status • PIN submitted to The World Bank’s Carbon Finance Unit – October 2005 • Notification of the World Bank acceptance and support of the project – December 2005 • Current discussion on Letter of Intent and MOU between the World Bank and Kota Bekasi – January 2006

7. ProjectObjectives • Avoidance of present and future methane emission from the City of Bekasi landfill, TPA Sumur Batu, through; • 1. Methane gas flaring and small scale electricity generation, and • 2. Removal of decomposing organics from the landfill for sales as compost avoiding future methane gas production. • Recycling the existing landfill to provide sustainable solid waste disposal, protecting the local environment and health impacts on the local community and improved collection services in the city.

8. Additional Objectives • Provision of an appropriate and sustainable solution to MSWM problems through the implementation a new landfill management system, • Improved solid waste collection service and disposal, • Reduction of environmental, social and health impacts of solid waste disposal, • Improvement in conditions for the non organic recycling community,

9. Project Location TPA Sumur Batu Kotamadya Bekasi DKI Jakarta LPA Bantargebang Desa Sumur Batu

10. Baseline data • Population 1.9 million • MSW generated approx 1,360 tonne / day • Collection and disposal approx. 30% of MSW generated. • Target of improving collection service to 80% within 5 years • TPA Sumur Batu: • Area 10 hectares • Opened mid 2002 • Capacity approx. 2 million m3 • Approx 200,000 tonnes in place to December 2005 • Potential methane generation from 2002 – 2019 waste disposal = 522,000 tonne • C02equivalent during project years 2006 – 2019 = 11 million tonne

11. Project Components • Methane generation in landfills generally follows two phases, initial rapid degradation with a peak of methane production within approximately 4 to 5 years and a slower or decelerated rate of methane production that can last many decades. • This project will deal with both stage of methane generation via; • Methane capture and destruction, dealing with methane production as it occurs, and • Organic recovery, avoiding future methane production during the slower stage through the removal of all organic carbon sources from the anaerobic environment of the landfill. • Methane Gas flaring component will be implemented first.

12. Forecast Abatement from CDM Project • Total emission abatement over 2006 – 2019 = 5.7 million tonne CO2equivalent

13. Estimated Initial Flaring Investment

14. Return on Investment • Estimated Initial Flaring Capital Investment Cost $US 371,000 • This investment, in CER’s terms, equates to; • 123,775 tonne CO2e @ $US3.00/tonne • 74,265 tonne CO2e @ $US5.00/tonne • Modeling estimates that during the first two years of operation 152,000 tonne CO2e will be flared. • Estimated CER’s income after two years of operations are; • $US 456,000 @ $US 3.00/tonne CO2e • $US 760,000 @ $US 5.00/tonne CO2e

15. Process of CDM Project Development for Local Governments

16. Relevant issues of CDM • The CDM mechanism of Kyoto Protocol is a COMMERCIAL approach to combat global Climate Change and assist in improving local environmental impacts. • CDM projects generate a tradable commodity, Certified Emissions Reductions (CER’s). • Without strict monitoring and verification CDM projects will not produce CER’s

17. PIN Typical CDM Project Cycle • Preparation and Review of the Project • Submission of the Project Information Note (PIN) Project completion 3 month • Carbon Asset Due Diligence • Development of the Project Design Document (PDD) up to 21 years 2 month ? • Validation process • Acceptance and Registration of the project Periodic verification & certification 1 – 3 years 2 month • Project Appraisal and Negotiation • Signing of Emissions Reductions • Purchase Agreement (ERPA) 3 month Construction and Start up Source: adapted from Carbon Finance Branch, World Bank 2005

18. PIN Development • The aim of this stage of the cycle is the development of project PIN(s) which have the potential to be accepted by a Carbon Financing Institution (CFI). • A Letter of Intent to further develop the project PDD would be expected from the CFI on the acceptance of the PIN. • At this stage the project is “Bankable” • Preparation and Review of the Project • Submission of the Project Information Note (PIN) • Carbon Asset Due Diligence • Development of the Project Design Document (PDD) 3 month up to 21 years 2 month • Validation process • Acceptance and Registration of the project 1 – 3 years 2 month • Project Appraisal and Negotiation • Signing of Emissions Reductions • Purchase Agreement (ERPA) 3 month Source: adapted from Carbon Finance Branch, World Bank 2005

19. PIN Development The PINconsist of approx. 5 pages providing indicative information on: • The type, size and location of the project, • Anticipated total amount of Greenhouse Gas (GHG) reduction compared to the “business-as-usual” scenario • Suggested crediting life time, • Suggested Certified Emission Reductions (CER)/ Emission Reduction Units (ERU) or verified Emission Reduction (vER)price in US$ or € /ton CO2e reduced, • Financial structuring, • Socio-economic or environmental effects/benefits. Source: The World Bank – PINTemplate.doc

20. Guides to CDM PIN Development • Establish inter Dinas working group to gain knowledge of CDM and the management of CDM projects development, • Evaluate CDM project opportunities within the municipality boundary: Government and Private sectors, • Identify / shortlist suitable project/s for Project Information Note (PIN) development, • PIN’s can be developed by staff but would benefit from assistance of suitable CDM project development consultants. • Coordinate PIN(s) development with potential CFI. • Develop estimated budgets and resource requirements for the development of Project Description Documents (PDD’s), advise DPRD of projects submitted. • Determine the capital investment required for implementing the projects and whether self financing, joint venture, or private investment.

21. Government Budget Preparation • Budget process and timetables are important for all stages of CDM development, • Key timing; • November - the following years budgets must be finalized, • July - Revision of budget for the second half of the financial year are finalized.

22. The Next Step

23. PDD Typical CDM Project Cycle • Preparation and Review of the Project • Submission of the Project Information Note (PIN) Project completion 3 month • Carbon Asset Due Diligence • Development of the Project Design Document (PDD) up to 21 years 2 month ? • Validation process • Acceptance and Registration of the project Periodic verification & certification 1 – 3 years 2 month • Project Appraisal and Negotiation • Signing of Emissions Reductions • Purchase Agreement (ERPA) 3 month Construction and Start up Source: adapted from Carbon Finance Branch, World Bank 2005

24. PDD Development PDD contents are an elaboration of the PIN document consisting of; • Technical & Financial Development • Feasibility Study • Baseline and Additionality • Financial Assessment • Monitoring Quality Assurance Plan • Environmental and Social Impact Assessment • Community Consultation • Preparation and Review of the Project • Submission of the Project Information Note (PIN) 3 month • Carbon Asset Due Diligence • Development of the Project Design Document (PDD) up to 21 years 2 month • Validation process • Acceptance and Registration of the project 1 – 3 years 2 month • Project Appraisal and Negotiation • Signing of Emissions Reductions • Purchase Agreement (ERPA) 3 month Source: adapted from Carbon Finance Branch, World Bank 2005

25. Activities and Responsibilities of PDD Development Stage Financing the PDD • Financial and resources requirements would be determined prior to signing LOI and MOU between all parties. This would normally be determine based upon future ownership of the CER’s generated. • In some instances the CFI would bear the initial costs of the PDD development. These cost recovered once the project is generating CER’s. • Normally the CFI takes responsibility due diligence, coordination with DNA and potential CER’s buyers. • Cost estimates for PDD; $US180,000 - $250,000 which would include all associated CDM registration fees

26. Activities and Responsibilities of PDD Development Stage Community Consultation • This is an important component of CDM and the PDD and should commence once the project has reached the LOI point, • All stakeholders must be made aware of the project and provided a forum in which to comment and input into the project design, • This is especially important during the earlier stages of CDM development in Indonesia, • Local government has the prime responsibility to ensure the quality and openness of this process. Even when the project is wholly undertaken by the private sector, • Poorly communicated projects are unlikely to be certified or have major delays to reach certification.

27. Typical CDM Project Cycle • Preparation and Review of the Project • Submission of the Project Information Note (PIN) Project completion 3 month • Carbon Asset Due Diligence • Development of the Project Design Document (PDD) up to 21 years 2 month PDD • Validation process • Acceptance and Registration of the project Periodic verification & certification 1 – 3 years 2 month • Project Appraisal and Negotiation • Signing of Emissions Reductions • Purchase Agreement (ERPA) 3 month Construction and Start up Source: adapted from Carbon Finance Branch, World Bank 2005

28. Typical CDM Project Cycle Finalisation of PDD development is the signing of Emission Reductions Purchase Agreement (ERPA) • The price per tonne CO2e is normally determined based on the IRR of the project. • The ERPA is a long term purchase and delivery commitment. • Monitoring project CER’s must have a “quality process” • Preparation and Review of the Project • Submission of the Project Information Note (PIN) 3 month • Carbon Asset Due Diligence • Development of the Project Design Document (PDD) up to 21 years 2 month PDD • Validation process • Acceptance and Registration of the project 1 – 3 years 2 month • Project Appraisal and Negotiation • Signing of Emissions Reductions • Purchase Agreement (ERPA) 3 month Source: adapted from Carbon Finance Branch, World Bank 2005

29. The Next Step

30. Project Implementation • An important component of implementation is the monitoring and validation of ER’s generated. • Selling of ER’s relies on the ability of the project to demonstrate to independent validators that the ER’s are “real”. • Failure to properly monitor the emission reductions may default the ERPA or reduce the amount of ER’s claimed.