Clean Development Mechanism & Agriculture Sector

1. Clean Development Mechanism & Agriculture Sector Shalin Shah – Sr. Manager (Environment) Mundra Port & SEZ, Adani Group Honorary Joint Secretary - NCCSD 1

2. Background for presentation • Climate Change, Global Warming are well known terms world over. • So I will not discuss anything on the basics of Climate Change.

5. Outline Mitigation of Global Warming Kyoto Gases & GWP The CDM – what & how? The CDM project Cycle India’s Position Types of CDM projects 5

6. Mitigation of Global Warming To tackle the challenges posed by global warming (climate change), United Nations made an agreement at the ‘ United Nations Conference on Environment and Development’ in 1992 in Rio De Janeiro, Brazil – a conference popularly known as the “Rio Earth Summit”. That agreement was “TheUnited Nations Framework Convention on Climate Change” (UNFCCC). 6

7. Rio Earth Summit & birth of UNFCCC 1992 1997 Kyoto Protocol adopted IPCC GHG inventory report 1990 IPCC constituted 1988 Kyoto Protocol comes into force 2005 2008 First commitment period starts 2012 First commitment period ends ……24 year story

8. UNFCCC • Signed by 154 states (plus the EU) in 1992 foundation of global efforts to combat global warming. • Objective: “ The stabilisation of greenhouse gas (GHGs) concentrations in the atmosphere at a level that would prevent dangerous man made interference with the natural climate system. ”

9. Mitigation of Global Warming • Kyoto Protocol • Amendment to the UNFCCC outlined in 1997 in Kyoto, Japan • Commitment for 38 developed countries to reduce GHG emissions by 5.2% relative to 1990 levels • It must be achieved by 2008 – 2012 – first commitment period • Developed countries – bound with targets – Annex I countries – Such as: UK, Europe, Australia etc. • Developing countries – no targets – non annex I countries – Such as: India; Pakistan; China; Thailand; Malaysia; Mexico; Brazil etc. 10

10. Outline Mitigation of Global Warming Kyoto Gases & GWP The CDM – what & how? The CDM project Cycle India’s position Types of CDM projects

11. Carbon Dioxide (CO2) • Methane (CH4) • Nitrous Oxide (N2O) Relevant to bio-carbon & industrial projects • Perfluorocarbons (CXFX) • Hydrofluorocarbons (CXHXFX) • Sulphur Hexaflouride (SF6) Relevant to industrial projects Kyoto Gases & GWP There are over 30 atmospheric greenhouse gases…But only 6 attract CC, so called ”Kyoto Gases” 12 Each of these gases has a different warming potential

12. Kyoto Gases & GWP Each of these gases has a different ‘radiative forcing’ capability and a different atmospheric residence time Need for a ‘common currency’, so that all such Kyoto gases are denominated in the same way 13 Solution: develop a relative scale, using CO2 as a reference gas

13. Kyoto Gases & GWP Relative scale – everything is measured relative to CO2 e.g. Methane is 21 times more potent as a Green House Gas than CO2 e.g. Sulphur Hexafluoride is 23,900 times more potent! 14

14. Outline Mitigation of Global Warming Kyoto Gases & GWP The CDM – what & how? The CDM project Cycle India’s Position Types of CDM projects

15. Clean Development Mechanism ‘Flexibility Mechanisms’ of Kyoto Protocol Clean Development Mechanism (Achieving part of reduction obligations of developed countries through projects in developing countries that reduce GHG emissions) It is defined under Article 12 of the Kyoto Protocol Emission Trading (Trading of emission allowances between developed countries) Joint implementation (Transferring emission allowances between developed nations, linked to specific emission reduction projects) 16

16. Developed countries can reduce emissions anywhere in the world They can count these reductions towards their own targets CDM allows developed countries to generate CC (Certified Emission Reductions, CERs) in developing countries Clean Development Mechanism Purposes of CDM – two primary goals Advantages for developed countries: relatively low-cost & politically acceptable Advantages for developing countries: inward investment, environmental & technology benefits 17

17. Carbon credits (CERs) Carbon credits (CERs) Carbon credits (CERs) Carbon credits (CERs) GHG emissions Project start Historical Trend Time Clean Development Mechanism Generation of CC • CERs from a CDM project are calculated as: • CER = BE – PE • The Baseline Emissions (BE) is the amount of GHG that would have been emitted to the atmosphere in the absence of the CDM project activity. • PE is the Project Emissions 18

18. What is Carbon Credit ? Carbon credits are reduction in emission of GHGs caused by a project 1 CER = 1 tonne of CO2 equivalent (e) reduction 1 CER = 1 Carbon Credit 1 VER = 1 Carbon Credit ( Earned Through Voluntary Route ) _____________________________ CER – Certified Emission Reduction VER – Voluntary Emission Reduction

19. Five major criteria a) GHG reduction - real and measurable b) Contribution to the sustainable development of the host country c) No “diversion” of official development assistance d) Demonstration of Additionality e) Project after 2 August 2008 – Inform UNFCCC within Six months Clean Development Mechanism Qualification for CDM Project 20

20. Clean Development Mechanism Demonstration of Additionality • Additional incentives provided by emission reduction credits, is a concept known as "additionality". It is the most significant requirement for a project to qualify for the CDM benefits. • Emission Additionality –Net decrease in GHG emission is called Emission Additionality. • Financial Additionality –Project funding should not be counted towards the financial obligations of the host country • Technological Additionality –CDM project activities should lead to transfer of environmentally safe & sound technologies. • If the industry is legally mandated (bound to do any of the above by law) to undertake the project activity (e.g. use of CNG for public transport in Delhi), such a project is generally not eligible for CDM benefits. 21

21. Carbon revenue makes the project attractive relative to investment alternatives Investmentthreshold Revenue / NPV / IRR Project without carbon revenue is profitable – but not sufficiently profitable compared with alternatives Project without carbon element Project with carbon element Additionality – benchmark analysis Choose an appropriate financial indicator and compare it with a relevant benchmark value: e.g. required return on capital or internal company benchmark

22. Some examples of additionality • Capturing methane from an urban landfill and flaring it • Carbon credits represent the only source of income for undertaking this activity  • Capturing methane from an urban landfill and utilizing it to generate electricity • Project developer would have to demonstrate that the electricity revenue alone would not make this project attractive ? • Building a large hydro project for the grid in Ethiopia • Questionable additionality: there is already plenty of hydro activity in Ethiopia 

23. CDM – Cancun outcome • Issue -Continuation of CDM Post 2012 • Progress / Decisions -Indications CDM will be part of new post-2012 scheme, despite on-going uncertainty over the future of the Kyoto Protocol • Remarks Cancun conference decided that next year (at the next Climate Change Conference in South Africa), one or more new market based mechanism will be established. Any such new mechanism will maintain and build upon existing mechanisms, including those established under the Kyoto Protocol (like CDM)

24. Outline Mitigation of Global Warming Kyoto Gases & GWP The CDM – what & how? The CDM project Cycle India’s position Types of CDM projects

25. CDM Project Cycle 26

26. CDM - Time Needed Vs. Time Taken

27. Three major credentials Project Idea Note (PIN):It includes the basic information and basic calculations to check the viability of the proposed project. It is not a mandatory document. Project Concept Note (PCN):It includes basic information about project and project developers, technology, finance, sustainable development criteria, project risks, baseline methodology etc. Mandatory document required for HCA Project Design Document (PDD):It is a project specific document which included expected emission reduction calculations and monitoring plan along with the elaborated information provided in the PCN. Mandatory document required by NCDMA; DOE and CDM EB CDM Project Cycle A) Project Design 36

28. B) Host Country Approval 37

29. B. Validation:Once the PDD has been completed and the HCA has been received, all documents along with HCA letter have to be submitted to DOE (Designated Operational Entity) for review and approval (Validation). C. Registration:The DOE submits the validation report, validation opinion and a request for registration to the CDM EB. Registration of project by the CDM EB is an act of formal acceptance of the validated project. D. Project Implementation & Monitoring:Once the project has been registered, it can be implemented. From the point of implementation on, the project developer needs to monitor the project performance, according to the procedures laid out in validated monitoring plan of PDD. D. Verification & certification:The DOE verifies the data collected by the project developers according to the monitoring plan and certifies the total emission reductions actually occurred during the specified time period. E. Issuance of CERs:Based on the DOE certification, CDM EB issues the CERs to the project proponent. CDM Project Cycle 38

30. Crediting period • CDM mitigation projects • Project developers have two crediting period options: • A maximum of 7 years, which can be renewed up to 2 times(i.e. a potential total crediting period of 21 years) • A maximum of 10 years, with no option for renewal • CDM sequestration projects (forestry) • Project developers have two crediting period options: • A maximum of 20 years, which can be renewed up to 2 times(i.e. a potential total crediting period of 60 years) • A maximum of 30 years, with no option for renewal

31. Crediting period A maximum of 10 years with no option of renewal Emissions under the baseline scenario Greenhouse gas emissions Emissions under the project scenario Starting date of the crediting period No renewal 10 years

32. Baseline must be reassessed by DOE at each renewal Why not maximise the crediting period? Greenhouse gas emissions 7 years

33. Why not maximise the crediting period? Baseline must be reassessed by DOE at each renewal The baseline scenario may become less favourable Emissions under thebaseline scenario Greenhouse gas emissions Emissions under theproject scenario 7 years 7 years 7 years

34. Outline Mitigation of Global Warming Kyoto Gases & GWP The CDM – what & how? The CDM project Cycle India’s position Types of CDM projects

35. Per Capita CO2 Emissions 25 19.18 19.18 20 15 10.06 10.06 10.06 10.06 9.54 9.54 9.54 10 4.91 4.91 4.91 4.91 4.91 5 1.31 1.31 1.31 1.31 1.31 0 India China Germany Japan U.S.A. Source: EIA 2008

36. TOP 20 Emitters of the World Source: EIA 2008

37. India’s Position First registration: 8th March, 2005 First CER issued: 21st August, 2005 Registered projects: 513 projects (as of July, 2010) HCA projects:1704 projects (as of July, 2010) Estimated CER volume: 441 million CERs (39690 Crore INR, till 2012) if they are successfully registered by CDM-EB CERs issued:~79.11 million CERs The majority of registered project in India are renewable energy project focusing on hydropower, and wind energy 46

38. The CDM project pipeline Other7% N2O2% Fossil fuel switch3% Hydro26% Energy efficiency(industry), 4% Agriculture, 6% Biogas, 7% Landfill gas, 8% Biomass energy16% Energy efficiency(own generation)9% Wind12%

39. India offers vast untapped market for Carbon Trading • India today manufactures >25 million tons of steel. • Installed capacity of electrical power generation of >110,000 MW • Produces over >200 million tons of food-grains • With GDP growth of 8.5% against the energy consumption growth rate of 7.5%

40. India offers…..cont. • Leading sectors, having GHG Mitigation potential include energy efficiency (45%), renewable energy (35%), methane emissions abatement (15%), and improvements in the thermal energy generation sector (5%). • In India, total C02-e emissions in 1990 were 10,01,352 Gg, which was approx. 3% of global emissions. The Power sector was the largest emitter of C02, contributing 55% of national emissions. • India would be requiring an additional 100,000 MW of power by 2012.

41. India’s Position 50

42. India’s Position CaseStudy Gujarat Fluoro Chemicals Limited: Registered on 8th March, 2005 Claims ~ 3 million CERs (270 Crore INR) every year for reducing GHG by thermal oxidation of HFC23 (GWP = 11700) Recent monitoring report (01/08/08 to 30/09/08) claimed ~ 1.4 million CERs (126 Crore INR) Tamilnadu Spinning Mills Association (TASMA): Registered on 10th June, 2007 Claims ~ 0.69 million CERs (62 Crore INR) every year for reducing GHG by bundled wind power project in Tamilnadu Recent monitoring report (01/01/08 to 31/08/08) claimed ~ 0.6 million CERs (48.6 Crore INR) 51

43. RE & EE Potential in India

44. Outline Mitigation of Global Warming Kyoto Gases & GWP The CDM – what & how? The CDM project Cycle India’s position Types of CDM projects

46. Types of CDM Projects Small Scale CDM Projects • Small-scale projects can use simplified procedures. • The following types of projects are considered small-scale. • Renewable energy projects: up to 15MW capacity • Energy efficiency projects: up to 60 GWh/yr reduction in energy consumption • Other projects: up to 60 KtCO2 equivalent (60,000 CER) emission reduction • CH4 recovery in wastewater treatment • Switching fossil fuels • Landfill CH4 recovery 57

47. Programmatic CDM offers new Opportunities • Regular CDM • Single site, stand-alone projects • ‘Carbon upgrades’ Size-Distribution of Potential CDM Project Sites • Bundled CDM • Bundling several projects under a single PDD • All projects must be identified ex ante, and must start at the same time • Programmatic CDM • Addresses the ‘long tail’ of small units • Permits sector-wide transition to low-carbon economy • Particular relevance to Africa Number of installations / units large medium small Installation / unit size

48. CDM Projects in Agriculture Sector

49. Global contribution of agriculture to greenhouse gas emissions. 1 Pg (Peta gram) = 1 Gt (Giga tonne) = 1000 million tonnes. Source: Cool Farming Climate Impacts of Agriculture & Mitigation potential GREENPEACE 2008

50. Mt CO2-eq CO2 CO2 CH4+ N2O CH4 CH4+ N2O N2O CH4 CH4+ N2O sources of agricultural greenhouse gases, excluding land use change