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5.4. The Clean Development Mechanism: Overview

5.4. The Clean Development Mechanism: Overview. Rodel D. Lasco, ICRAF. Outline. CDM basics Project development cycle Forestry projects in CDM. 1. CDM Basics. Article 12 of the Kyoto Protocol under the UNFCCC

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5.4. The Clean Development Mechanism: Overview

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  1. 5.4. The Clean Development Mechanism: Overview Rodel D. Lasco, ICRAF

  2. Outline • CDM basics • Project development cycle • Forestry projects in CDM

  3. 1. CDM Basics • Article 12 of the Kyoto Protocol under the UNFCCC • The purpose of the CDM shall be to assist non-Annex I Parties in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Annex I Parties in achieving compliance with their commitments. • It is the host Party’s prerogative to confirm whether a CDM project activity assists it in achieving sustainable development. • A CDM project activity is additional if GHG emissions are reduced below those that would have occurred in the absence of the registered CDM project activity

  4. Rules for the CDM • Annex I Parties are to refrain from using CERs generated from nuclear facilities to meet their quantified GHG emissions reduction targets • The eligibility of land use, land-use change and forestry project activities under the CDM is limited to afforestation and reforestation (A/R) • Public funding for CDM projects from Annex I Parties is not to result in the diversion of official development assistance (ODA) and is to be separate from and not counted towards the financial obligations of Annex I Parties • ODA can be, and is being, used to help prepare CDM projects • For example, the Danish government has used its ODA in select countries to help develop CDM projects. Then other non-ODA funds have been used by Danish government and private sector to actually buy the carbon credits generated by the CDM project

  5. The CDM Market UNEP/EcoSecurities, 2007

  6. Source: UNEP/EcoSecurities 2007

  7. 2. The CDM Project Cycle (1/2)

  8. 2. The CDM Project Cycle (2/2)

  9. 3. CDM Forestry Projects

  10. Marrakech Accord • CDM Forestry is limited to: • Afforestation – land unforested 50 years ago • Reforestation – land unforested before 1990 • First commitment period (2008-2012) • Allowed at a maximum level of 1% from the assigned amount (cap) – 140 Mt CO2

  11. Afforestation • Direct human-induced conversion of land that has not been forested for a period of at least 50 years to forested land through planting, seeding and/or the human-induced promotion of natural seed sources 50 years

  12. 1990 Reforestation • Direct human-induced conversion of non-forested land to forested land through planting, seeding and/or the human-induced promotion of natural seed sources, on land that was forested but that has been converted to non-forested land • For the first commitment period, reforestation activities will be limited to reforestation occurring on those lands that did not contain forest on 31 December 1989

  13. 0 10 Canopy Cover 30 100 What is a forest? • Host country must define a forest within the following guidelines: • Minimum tree crown cover between 10 and 30% • Minimum tree height between 2 and 5 m • Minimum land area between 0.05 and 1.0 hectare • Values once chosen must remain fixed

  14. How long can a CDM project last? (crediting period) • Two options: • Fixed –30 years with no renewal • Renewable—may be a maximum of 20 years and may be renewed twice for a total maximum of 60 years • Need to determine if baseline is same or will be updated

  15. Non-permanence • Land-based systems subject to reversal by human and natural disturbances • Addressed by concept of “rental” of the service • Includes two options—temporary and long-term certified emission reduction units (tCER and lCER)

  16. Forest carbon is “rental” service • tCER expiring at the end of the commitment period following the one in which it was issued • In practice means lasts for 5 years at most • lCER expiring at the end of the crediting period following the one for which it was issued • In practice means it can last for 20-30 years and used in one commitment period in which they were issued • Annex 1 countries using the tCER or lCER must replace or retire them before they expire

  17. Additionality C c AB = Baseline AC = Additionality AD = Leakage d Carbon stocks B b a abcd = gain abef = loss abcd-abef = net gain A D f e t1 t2 Time • Fixed – 30 years with no renewal • Renewable - may be a maximum of 20 years and may be • renewed twice for a total maximum of 60 years

  18. Transaction costs for forestry projects • Project preparation (usually by a consultancy company): USD 60,000-180,000. • Validation (by a Designated Operational Entity or DOE): estimated at USD 15,000-25,000. • Registration fee (by the Executive Board or EB): For the first 15,000 CERs projects are charged US$0.10/CER, for anything above 15,000 they are charged US$0.20/CER. • Monitoring costs: depending on project size and sample size needed, as well as on monitoring methods and intensity. • On-going verification (by DOE): USD 15-25,000 per audit. • Issuance fee (by the EB): The issuance fee is as above US$0.10/CER for the first 15,000 CERs, it is US$0.20/CER for anything above 15,000 CERs. • Adaptation levy (by the EB): 2% of the CERs generated • Taxes (by the host country): Some countries claim a share of a project’s CERs in exchange for issuing a Letter of Approval that is prerequisite to registration

  19. Tropical forests and the carbon market • There are still very few takers of forestry carbon projects under the so-called Kyoto market. • It has been estimate that up to 13.6 million carbon credits may be available by 2012 based on projects on the pipeline

  20. CDM Projects by scope as of 31 March 2009 0.16% from A/R

  21. World Bank carbon funds • Prototype Carbon Fund (PCF) • all sectors • with loan component • Community Development Carbon Fund • for small scale projects • sector: energy, urban, waste, agroforestry • prioritizes the LDC • Contract price US$ 26-28/tC • BioCarbon Fund (BCF) • LULUCF sector • to improve people livelihoods • to avoid erosion and desertification • Contract price US$ 12-16/tC

  22. Sustainable development objectives • Enhanced environmental services • Improved soil fertility • Biodiversity conservation • Maintained hydrological/watershed functions • Improved livelihoods • Create job opportunities • Increased income and financial benefits • Secured social capital • Ascertained land titles and tenure systems • Reduced conflicts over property • Strengthened institution

  23. Barriers to CDM projects • Base financing for tree planting lacking • High transaction cost (> US$ 200,000) • Carbon credits not sufficient to cover total cost of project

  24. Thank you for your attention

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