Institutional Structure, Procedures and Sustainable Development Criteria of CDM in China

1. Institutional Structure, Procedures and Sustainable Development Criteria of CDM in China Asian Region Workshop on “Capacity Development for the Clean Development Mechanism” 19-21 October, 2005, AIT, Thailand YU Shengmin Energy Research Institute, NDRC, P.R.China Yushengmin@eri.org.cn

2. Contents of the Presentation • Institutional Arrangements for CDM In China; • Procedures for CDM Project Development in China; • Sustainable Development Criteria and Priorities Areas for CDM Projects • Current Project Development Status • Lessons and Experiences

3. Institutional ArrangementsFor CDM In China • According to Interim Measures for Operation and Management of Clean Development Mechanism Projects in China issued on May 31, 2004, three levels of authorities are involved in the management of CDM in China. • National Coordination Committee for Climate Change (“the Committee”) • National CDM Project Board (“the Board”) • Designated National Authority for the CDM (DNA)

4. National Climate Change Coordination Committee • An inter-ministerial body established in 1998 responsible for the formulation and coordination of China’s important climate change-related policies and measures at the strategic level. • With respect to CDM, the committee is responsible for the review and coordination of important CDM policies and measures, including: • Review of China’s national policies, criteria, and standards on CDM project activity • Approval of members of the National CDM Project Board (see below) • Review of other issues, when necessary

5. National CDM Board • Board Members:   •  National Development and Reform Commission (NDRC, Co-Chair)  • Ministry of Science and Technology (MOST, Co-Chair) • Ministry of Foreign Affairs (MOFA, Vice Chair) • State Environmental Protection Administration (SEPA) • China Meteorological Administration (CMA) • Ministry of Finance (MOF) • Ministry of Agriculture (MOA) • Under the authority of the Committee, the Board has the following main responsibilities:   • Review CDM project proposals and approve CDM projects • To report to the Committee on the overall progress of CDM project activities, issues emerged and further recommendations; • To make recommendations on the amendments to the CDM interim measures

6. Designated National Authority (DNA) for CDM in China • Focal Point: National Development and Reform Commission (NDRC), a macroeconomic management agency under the State Council • Responsibilities in CDM: • To accept CDM project application; • To approve CDM project activities jointly with MOST and MFA, on the basis of the review conclusion made by the Board; • To issue written approval letter on behalf of the Government of China; • To supervise the implementation of CDM project activities; • Addressing other related foreign affairs.

7. Procedures for Application and Approval of CDM Projects • Step 1. Project owner, or together with its foreign partner, submits application for approval of proposed CDM project activity to NDRC, directly or through related agencies and local governments, with CDM PDD and other required materials. • Step 2. NDRC entrusts independent organizations for expert review of the applied project, which shall be concluded within 30 days; • Step 3. NDRC submits project proposals and expert review comments to the Board for approval; • Step 4. The National CDM Board reviews CDM project proposals and informs NDRC of eligible projects. • Step 5. NDRC, jointly with MOST and MOFA, approves or rejects project proposals in accordance with the decision made by the National CDM Board, and issues approval letters accordingly on behalf of the Chinese Government; • Step 6. The project developer proceeds with the COP validation and registration procedures • Step 7.  Within 10 days as of the date of receiving the registration notice from the Executive Board, the project owner shall notify NDRC for record-keeping purpose.

8. Project development Submission of CDM application to NDRC May be reconsidered subject to further improvement Preliminary evaluation by NDRC National CDM Board Meeting Letter of Rejection Letter issued by NDRC Letter of No-objection Letter of Approval National Approval Cycle

9. General Requirements for CDM Projects in China • They shall conform to China’s sustainable development strategy and policies, as well as the general requirements of economic and social development programs; • They shall conform to the requirements of the Climate Change Convention, the Kyoto Protocol and relevant decisions by the Conference of the Parties; • The implementation of CDM project activities in China shall result in no new obligations for China other than those under the Convention and the Protocol; • Funds used in CDM project activities from developed country Parties shall be additional to the current ODA and other financial obligations under the Convention; • They shall promote the transfer of environmentally friendly technology to China; • Implementation shall ensure transparency, efficiency, and traceable responsibilities.

10. Sustainable Development Criteria of CDM • Complement national economic and environmental strategy; • Transfer of technology and financial resources; • Sustainable ways of energy production; • Increasing energy efficiency and conservation; • Poverty alleviation through income and employment generation; • Local environmental co-benefits

11. Priority Areas for CDM Projects • Energy efficiency improvement • Development and utilization of new and renewable energy, and • Methane recovery and utilization

12. CDM Capacity Building Activities in China • MOST/WB/GTZ(Germany): Country Study on CDM Methodology and its Application; • NDRC/CIDA(Canada): China-Canada Co-operation Project on Climate Change • ERI/NIRA: Feasibility study of the CDM in China’s electricity sector • NDRC/UNDP/UNF: Capacity Building of China on CDM Management • MOST/ADB: Opportunities for Chinese Energy Sector to Implement CDM • EU/China: EU-China Partnership in CDM Implementation

13. Current Project Development Status (As of August 31, 2005) • Projects registered with UNFCCC: 1; • Projects approved in China : 6; • Projects issued Letter of No-objection: 8; • Projects under consideration: 2; • Projects under development: 100+

14. Barriers • Institutional Capacity and Awareness: involving many players, stakeholders knowledge and understanding of the institutional, financial, technical and legislative aspects of CDM; • Information: lack of capability to collect, analyze and disseminate CDM information • Buyer’s market: difficult for developers to find proper buyers because of unsymmetrical information; • COP rules and procedures of CDM: The COP CDM procedure and methodology are complicated and time consuming process

15. Lessons and Experiences • Eligibility requirement for CDM project developer; • Requirement for funding from developed Countries; • Possible methodological requirements; • CERs purchase agreement; • Revenue sharing between the government and project developers.

16. Capacity Building Needs for CDM in China • Capacity building for different stakeholders • Policy makers and government officials • Industrialists • Financial sector • Consultancy • Capacity needs in various sectors and industries • Capacity needs for Operational Entity

17. Thank You!YU Shengminyushengmin@eri.org.cn