Clean Development Mechanism

1. Clean Development Mechanism GROUP-7 Manmeet Singh Simranjeet Singh Suryapreet Singh Nidhi Singla Parul Lalit

2. CLEAN DEVELOPMENT MECHANISM Introduction The Clean Development Mechanism (CDM) is an arrangement under the Kyoto Protocol allowing industrialized countries with a greenhouse gas reduction commitment (called Annex 1countries) to invest in ventures that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries.

3. What is Clean Development Mechanism? Designed to provide developed countries with flexibility to meet GNG emission reduction targets that they agreed to achieve under the protocol. Developed countries may finance GHG emission reducing projects undertaken in developing countries and receive credits to help them to meet their mandatory limits. Assist developing countries who host CDM project to achieve sustainable development.

4.  Kyoto Protocol The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change (UNFCCC or FCCC), aimed at fighting global warming. The UNFCCC is an international environmental treaty with the goal of achieving "stabilization of greenhouse gas concentrations in the atmosphere at a level that would minimize danger to the climate system.“ The Protocol was initially adopted on 11 December 1997 in Kyoto, Japan and entered into force on 16 February 2005. As of November 2009, 187 states have signed and ratified the protocol.

5.  Kyoto Protocol, contd….. • Under the Protocol, 37 industrialized countries (called "Annex I countries") commit themselves to a reduction of four greenhouse gases (GHG) (carbon dioxide, methane, nitrous oxide, sulphur hexafluoride) produced by them. • Annex I countries agreed to reduce their collective greenhouse gas emissions by 5.2% from the 1990 level.

6. Cont…… Annex I 41 Countries Annex II 24 Countries Non-Annex I 145 Countries Kyoto Protocol Industrialized countries Financial aids Tech. Transfer Developing countries Total 186 nations

7. Objective of Clean Development Mechanism Assist Parties not included in Annex I to the Convention in achieving sustainable development and in contributing to the ultimate objective of the Convention; Assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments under Article 3 of the Kyoto Protocol

8. Outline of the project process An industrialized country that wishes to get credits from a CDM project must obtain the consent of the developing country hosting the project that the project will contribute to sustainable development. Then, using methodologies approved by the CDM Executive Board (EB), the applicant (the industrialized country) must make the case that the carbon project would not have happened anyway (establishing additionality), and must establish a baseline estimating the future emissions in absence of the registered project. The case is then validated by a third party agency, called a Designated Operational Entity (DOE), to ensure the project results in real, measurable, and long-term emission reductions. The EB then decides whether or not to register (approve) the project. If a project is registered and implemented, the EB issues credits, called Certified Emission Reductions (CERs, commonly known as carbon credits, where each unit is equivalent to the reduction of one metric tone of CO2e, e.g. CO2 or its equivalent), to project participants based on the monitored difference between the baseline and the actual emissions, verified by the DOE.

9. Clean Development Mechanism (CDM)

10. The CDM Dual Products: CERs and Sustainable Development

11. CATEGORIES

12. GOVERNANCE • Executive Board supervises the CDM, under the authority and guidance of the COP/MOP, and is fully accountable to the COP/MOP; • Ten members and Ten alternates: one member/alternate from each of the five United Nations regional groups; • Two members/alternates from the Parties included in Annex I; • Two members/alternates from the Parties not included in Annex I; and • One member/alternate from SIDS.

13. GOVERNANCE • Elects its own chair and vice-chair, with one being a member from a Party included in Annex I and the other being from a Party not included in Annex I. The positions of chair and vice-chair alternate annually between members from Parties included in Annex I and Parties not included in Annex I, respectively. • Should meet at least three times a year.

16. MEMBERSHIP CRITERIA • Be nominated by one of the relevant constituencies identified above and elected by the COP/MOP. • Be elected for a period of two years and be eligible to serve a maximum of two consecutive terms. Members, and alternate members, shall remain in office until their successors are elected. • Possess appropriate technical and/or policy expertise and shall act in their personal capacity.

17. MEMBERSHIP CRITERIA • Be bound by the rules of procedure of the executive board. • Take a written oath of service witnessed by the Secretary-General of the United Nations or his/her authorized representative before assuming his or her duties. • Have no pecuniary or financial interest in any aspect of a CDM project activity or any designated operational entity.

18. MEMBERSHIP CRITERIA • Not disclose any confidential or proprietary information coming to their knowledge by reason of their duties for the executive board. • Shall remain an obligation after the expiration or termination of that member’s function for the executive board.

19. FUNCTIONS • Make recommendations to the COP/MOP on further modalities and procedures for the CDM, as appropriate. • Make recommendations to the COP/MOP on any amendments or additions to rules of procedure for the executive board. • Report on its activities to each session of the COP/MOP.

20. FUNCTIONS • Approve new methodologies related to, inter alia, baselines, monitoring plans and project boundaries. • Review provisions with regard to simplified modalities, procedures and the definitions of small scale project activities and make recommendations to the COP/MOP.

21. FUNCTIONS • Be responsible for the accreditation of operational entities, in accordance with accreditation standards and make recommendations to the COP/MOP for the designation of operational entities. • Review the accreditation standards in Appendix Abelow and make recommendations to COP/MOP for consideration;

22. FUNCTIONS • Report to the COP/MOP on the regional/ sub regional distribution of project activities with a view to identifying systematic or systemic barriers to their equitable distribution; and • Make publicly available relevant information, submitted to it for this purpose, on proposed project activities in need of funding and on investors seeking opportunities, in order to assist in arranging funding of CDM project activities.

23. Aim of CDM • The dual aim of CDM is to • achieve sustainable development • in developing countries • cost effective reduction of green house • gases in developed countries • “can be seen both as • a source of synergy and conflict”

24. Type of projects, which are being applied for CDM and which can be of valuable potential, are: • Energy efficiency projects – Increasing building efficiency (Concept of Green Building/LEED Rating), eg. Techno polis Building Kolkata – Increasing commercial/industrial energy efficiency (Renovation & Modernization of old power plants) – Fuel switching from more carbon intensive fuels to less carbon intensive fuels; and • Transport – Improvements in vehicle fuel efficiency by the introduction of new technologies – Changes in vehicles and/or fuel type, for example, switch to electric cars or fuel cell vehicles (CNG/Bio fuels) – Switch of transport mode, e.g. changing to less carbon intensive means of transport like trains (Metro in Delhi); and

25. • Methane recovery – Animal waste methane recovery & utilization • Installing an anaerobic digester & utilizing methane to produce energy – Coal mine methane recovery • Landfill methane recovery and utilization – Capture & utilization of fugitive gas from gas pipelines; – Methane collection and utilization from sewage/industrial waste treatment facilities • Cogeneration • Use of waste heat from electric generation, such as exhaust from gas turbines, • for industrial purposes or heating (e.g. Distillery-Molasses/ bagasse) • • Agricultural sector • – Energy efficiency improvements or switching to less carbon intensive energy sources • for water pumps (irrigation) • – Methane reductions in rice cultivation • – Reducing animal waste or using produced animal waste for energy • generation (see also under methane recovery) and

26. How it works • CDM is such an offset mechanism and is theonly mechanism in the Kyoto Protocol involving developingcountries • Developed countries can emit more thantheir GHG emissions caps if they can offset those extraemissions by achieving emissions reductions in developingcountries. • Admissible emissions reductions in thedeveloping countries are granted Certified Emissions Reductions(CERs) by the CDM Executive Board, a UnitedNations body. • Once granted, CERs achieve status as alegal tender, quite similar to the legal guaranteeenjoyedby international currencies “A bridge between north and south.”

27. A CER is a CER." If developed countries emit more than their caps allow, they can meet their obligations through the purchase of CERs in international carbon markets. • Just as the price of a commodity depends on the balance of supply and demand, the price of CERs depends on their supply from developing countries and their demand by developed countries. • Likewise, just as the least-cost producer of a commodity is the most profitable, the least-cost supplier of a CER has the highest incentive to supply the CERs. Thus, in theory, the it incentivizes the least cost GHG reductions in developing countries. • CDMs have other positive spin-offs. They promote transfers of technology to poorer countries, and also focus minds on how to tackle climate change in a cost-effective manner,

28. CLEAN DEVELOPMENT MECHANISM

29. CLEAN DEVELOPMENT MECHANISM A small case study On China

30. HOW it builds a Sustainable Environment? A small case study of China. • China ranks second in energy consumption in the world. In 2001 its total energy consumption was 1.35 billion tonnes of coal equivalent (tce), accounting for about 13 percent of the world’s total. • Although substantial progress has been made over the last twenty years in controlling its growth in energy consumption, which has risen at about half the rate of economic growth, demand for energy will continue to grow in order to power economic growth in the twenty-first century. • Increased GHG emissions associated with fossil fuel production and use are expected. It is estimated that in a well-off society scenario, China’s CO2 emissions related to fossil fuel combustion will reach about 1,700 to 1,800 million tonnes of carbon (MtC) in 2020

31. Improving the low level of energy efficiency and the irrational energy structure in China represents great potential for GHG emission reduction. • The low efficiency of Chinese energy use is especially significant. The average energy intensity per unit of gross domestic product lies eight times above the Japanese average, representing significant reduction opportunities in the industrial, residential, and transportation sectors. In China, common industrial equipment, such as boilers, motors, water pumps, and fans, are designed and produced at low efficiency levels and poorly operated. • The average efficiency of industrial boilers in China is more than 10 percent lower than that at the international advanced level, • as is also the case for water pumps and fans. These • equipment are also the major energy consumers: • the coal consumption of industrial boilers accounts • for one-third of total coal use. • Industrial motors use more than 60 percent of • total industrial electricity. Replacing outdated • equipment will lead to increased energy efficiency, • consumption reduction, and GHG mitigation.

32. Continued….. The average per capita energy consumption in China is much lower than that of developed countries. In the long run, however, domestic energy use and GHG emissions will inevitably increase. In this growth, if advanced technologies are adopted—such as energy-efficient lighting, high-efficiency refrigerators and air conditioners—and direct coal burning is replaced with gas, then the energy consumption growth rate will be slowed and therefore GHG emissions will be reduced. In China, coal accounts for about 70 percent of primary energy production and consumption. If the use of low carbon fuels such as coal bed methane, renewable energy, and natural gas is increased, then GHG emissions will be reduced and environmental, economic, and social benefits will be increased.

33. Coal bed methane is an untraditional natural gas of high-heat value stored in coal reserves and released in mining activities. It is an energy source that can be comprehensively utilized in order to increase clean energy supply, improve mine safety, and protect the global environment. • In China, renewable energy—especially biomass, small hydropower, and solar heating—is already in significant use, providing nearly 300 Mtce of energy supply annually. Development and rapid commercialization of renewable energy technology is the most important measure to employ in order to realize emissions reductions. • Energy efficiency improvement and optimization of energy structure, including developing renewable energy and utilizing coal bed methane, are measures that will not only contribute to reducing global GHG emissions but they are also consistent with China’s national interests. • “The CDM has the potential to attract additional private and government funding from developed countries, attract domestic investment in the energy and environment fields, introduce highly-efficient technology, and reduce environmental pollution from fossil fuel combustion.”

34. Other side of the coin.. • CARBON CREDITS -The primary purpose of the Protocol was to make developed countries pay for their ways with emissions while at the same time monetarily rewarding countries with good behavior in this regard. • Since developing countries can start with clean technologies, they will be rewarded by those stuck with “dirty‟ ones. This system poises to become a big machine for partially transferring wealth from wealthy, industrialized countries to poor, undeveloped countries. • Incentive structure. • Developed not only sell their technology to developing ones • But also meet Kyoto commitments without lifting finger to reduce domestic emissions. • China is a majoremitter, but investment is needed to promotesustainable development elsewhere too

35. Does the market work? The answer is a"yes” “but". Though set up in 2005, atlatest count for 2007, before the UNClimate Change Conference in Bali inDecember, over 850 CDMs had beenregistered, 1,700 in the pipeline. This is a positive sign,but there are question marks, not leastabout the quality of some of the projectsand whether they deliver real cuts inemissions. “the CDM market has the potential to deliver more real emissions cuts , but it has to work in tandem with regulatoryapproaches”

36. CDM Challenges andOpportunities: in General Challenges include - • Lowering transaction costs • Limit on use of credits by industrialized countries • Promoting CDM investments • Ensuring that additional revenue promotes sustainable development Opportunities include – • Additional revenue stream • More energy-efficient technologies • Better practices • Greater environmental awareness

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