The Clean Development Mechanism (CDM): Transportation Sector Opportunities John Drexhage Director, Climate Change and Energy International Institute for Sustainable Development January 15, 2003 Center for Clean Air Policy In partnership with the Center for Clean Air Policy

2 Introduction to the CDM One of 3 flexibility mechanisms of the Kyoto Protocol Current status of CDM : –Trades can happen now (after 2000) –Marrakech Accords set rules for verification, certification, baselines* Incentives for participation: Certified Emission Credits (CERs)

3 Introduction to the CDM Project Cycle: 1.Preparation of the project design document (PDD)  Key Aspects: baseline, project emission reduction estimates, monitoring plan 2.Approval by designated national authorities 3.Validation 4.Registration 5.Monitoring and Verification 6.Certification and Issuance of CERs (*CERs are calculated based on the difference between project and baseline emissions)

4 Introduction to the CDM Baseline: Is the scenario that reasonably represents GHG emissions by sources that would occur in the absence of the proposed project activity. It includes all BAU activities and are calculated based on 1 of 3 approaches Additionality: A CDM project is additional if anthropogenic emissions of GHGs by sources are reduced below those that would have occurred in the absence of the registered project activity

5 The CDM and Transportation Potential Projects: Technology & Travel Demand/Behavioral Change No explicit rule preventing new government policies (e.g., tax credits, subsidies) from qualifying as CDM projects. Be careful of strong policy “on paper” with limited implementation potential Fixed technologies (e.g., hybrid buses) or infrastructure (e.g., metro expansion, segregated busways, land use, pedestrian or bicycle) may be higher “carbon” quality than policies and incentives that could change over time Scale of Project Practicality of aggregating many small emitters

6 The CDM and Transportation Implementation issues Costs –No transportation project is done for GHG reductions alone…without accounting for full project benefits incremental costs may appear high –Incremental Costs and Full Benefits Assessment  How to allocate costs across project benefits? (GHG, air quality, economic development, etc.)

7 The CDM and Transportation Continued… Project Timeframe –For how long should the baseline be valid? –CDM offers a choice between 7 yr crediting period with potential for renewal, OR, 10 yr period without renewal Project Boundaries –Which gases? (e.g. CO 2, N 2 O, CH 4, CFCs) –Lifecycle versus direct emissions? (e.g. methane leaks upstream, biofuel carbon sequestration upstream) –Leakage?

8 The CDM and Transportation Monitoring Technology projects: –Track fuel sales/use, OR Calculate fuel use from VMT & efficiency Travel demand/behavioral policies: –Track VMT, mode split  Frequency & geographic scope of data collection may be limited –Is it appropriate to use modeling results for current or projected data?

9 The CDM and Transportation Developing Quantification Methodologies: Baseline & Additionality Issues Technology projects –Set baseline as current technology –Set baseline as marginal, if different For travel demand/behavioral policies –Compare to current mode split and VMT –Compare to projected mode split and VMT

10 Investor Issues Unilateral CDM Demand Side Measures –What would investors fund? Incentives for transit-oriented development? Potential roles for Official Development Assistance?  Capacity building  Project scoping and pre-feasibility The CDM and Transportation

11 CDM/Transportation Project Examples Of the  80 projects currently in the CDM pipeline only 5 are transportation…of those, none address travel demand Projects: 1) Natural Gas Conversion Project, Bangladesh  Convert 17,000 gasoline vehicles gasoline to CNG  0.13 MTCO2e (10 years)  Sponsor: Asian Development Bank ’ s (ADB) ALGAS program 2) Dhaka City Electric Vehicle Project, Bangladesh  3,000 electric vehicles in Dhaka City  MTCO2e (10 years)  Sponsor: Bangladesh Center for Advanced Studies under the South South North project

12 CDM/Transportation Project Examples Continued… 3) Yogyakarta Urban Bus Project, Indonesia  Retrofitting of 200 buses with cleaner engines  MTCO2e (10 years)  Sponsor: the South South North project 4) Ethanol fuel project, Brazil  $43 million over 10 years to fund the production of 100,000 non- polluting ethanol-fueled vehicles  Sponsor: via a greement between Germany and Brazil 5) Gasohol project, India Use of gasoline mixed with Gasohol produced from ethanol that is produced through biotechnology from sugar cane processing waste Sponsor: Japanese Ministry for Environment Source: CDM Watch

13 Project Partners: IISD, CCAP, CC&D, CGTS, CIDA Explore the potential to reduce GHGs and promote transportation CDM projects in Chile Use of ODA for capacity building and project scoping Prepare pre-feasibility studies on technology and travel demand reduction projects Advance local government sustainability agenda Attract foreign investment in sustainable development Potential for replication: help establish precedent for assessing transportation CDM projects CDM and Transportation in Chile

14 Potential Pre-Feasibility Studies Technical –e.g. electric trolleys, improved vehicle fuel efficiency Travel Demand –e.g. increase bus ridership, transit- oriented development CDM & Transportation: Chile

15 Outlook Issues for further consideration Technology and fuel related projects are going to be first out of the block…but given the rapid growth in VMT in developing countries it will be vital to address travel demand reduction –The Chile project and the GEF project are two initiatives providing leadership in this area Overall impact of the CDM will depend in large part on the value of the CERs

16 FOR MORE INFORMATION... John Drexhage Director, Climate Change and Energy, IISD Tel: +1 (613) Ned Helme Executive Director, CCAP Tel: +1 (202) Eduardo Sanhueza Director, CC&D Tel: +56 (2) Made possible with support from: Canadian International Development Agency (CIDA)