OECD Annex I Expert Group CDM Portfolio update Jane Ellis (OECD) AIXG seminar, 21 March 2005

OECD Annex I Expert Group Outline Institutional developments Update on proposed CDM project activities Status of proposed CDM project activities Funding for CDM/JI Common sticking points

OECD Annex I Expert Group Institutional developments Growth in Designated National Authorities continuing –75 DNAs established to date (59 in Non-Annex I Parties, 16 in Annex I Parties/EC) More baseline/monitoring methodologies approved: –21 EB-approved methodologies in highly diverse areas –2 “consolidated” methods: renewable electricity, landfills –14 small-scale methodologies … and lots more in the pipeline: –19 new submissions, 9 submissions not yet examined, 5 in “feedback loop”, a few awaiting input from MP or others “Unilateral” projects eligible to generate CERs

OECD Annex I Expert Group Proposed CDM project activities - Data based on 284 proposed projects in 51 countries (up from 201 in Nov 04) -Expected mitigation 69.7 Mt CO 2 -eq/y in and 119Mt pre Does not include projects withdrawn

OECD Annex I Expert Group Rapidly changing portfolio… Feb 04, 27 Mt/y Mar 05, 70 Mt/y Portfolio (incl. proposed projects) dominated by projects reducing high-GWP waste gases Some of these projects are very large (1-10 million credits/year) Declining importance of renewables (21%) Energy eff. small Sinks 4% Small CCS project

OECD Annex I Expert Group Geographical spread uneven Early dominance by L. America, then Asia Africa (7%) and AOSIS (3%) small Handful of countries dominate proposed CDM portfolio: –Korea, 17% of credits (2 projects) –India, 16% of credits (43 projects) –Brazil, 12% of credits (38 projects) –Mexico, 12% of credits (21 projects) –China, 7% of credits (13 projects) –Indonesia, 5% of credits (12 projects) These countries also received half of FDI flows in 2002

OECD Annex I Expert Group Status of proposed CDM projects 4 CDM projects registered –(1 landfill gas, 1 small hydro, 2 HFC23 reduction) 3 further requests for registration under review 91 projects requesting validation could generate 13.5 Mt CO 2 -eq/y in more projects have submitted their baseline methodology to CDM EB Approved methods could generate a further 13.5 Mt CO 2 - eq/y in (when applied to projects that have not yet requested validation)

OECD Annex I Expert Group Funding available for CDM/JI US$1.7bn available from several different sources, e.g.: –private, national and international carbon funds, –national JI/CDM programmes, –other government programmes …mainly public sector, focused on buying credits (rather than funding projects), not all disbursed yet Does not include investment needed to implement actual projects Total investment much larger …. but difficult to quantify World Bank largest player in credit market: >$850m

OECD Annex I Expert Group Common sticking points Low C price => limited push for CO 2 reducing projects Transaction costs: very variable, but significant, and reduce interest in “smaller” (<50,000 CER/year) projects No market signal post-2012 Lead-time for project development much lower for “brownfield projects” Additionality: difficult to put into practice Methodology approval can be time-consuming (3 months at best, but can be 6-9 months or longer)