The CDM and perspectives for Africas participation Daniele Violetti Team Leader Registration and Issuance Unit Sustainable Development Mechanisms Programme UNFCCC West Africa Carbon Finance Investment Forum for Financial Institutions February 2008 Dakar, Senegal

Progress of the CDM | Contents 1.Background to the CDM 2.The work so far 3.What Bali meant for the CDM in Africa 4.From now on…

Progress of the CDM | 1. Background to the CDM

Progress of the CDM | 1. Background to the CDM 1.Institutional base 2.Late comer, early starter… 3.Quick tour through the CDM project cycle 4.Selling CERs: the basics

The Kyoto Protocol establishes mandatory targets on greenhouse-gas emissions for developed economies (Annex B) which have accepted it. The overall target of reducing greenhouse-gas emissions from Annex B countries is 5% below existing 1990 levels, which ranges from -8 per cent to +10 per cent of individual emissions levels on a country specific basis. This mandatory emissions limit is to be initially applied during the first commitment period (2008 to 2012). Annex B countries can meet their targets by: –Domestic abatement policies and measures –Participating in the three flexibility mechanisms: Clean Development Mechanism (CDM) Joint Implementation (JI) International Emissions Trading (IET) Progress of the CDM | 1. Background to the CDM Institutional Base: The Kyoto Protocol (i)

Progress of the CDM | 1. Background to the CDM Institutional Base: Associated Bodies (i) COP/MOP Conference of the Parties serving as Meeting of the Parties to the Kyoto Protocol: -Overall authority over and provides guidance to the CDM -Decides on recommendations made by the CDM Executive Board -Decides on the designation of Operational Entities accredited by the EB -Other related duties/authority DNA Designated National Authority: -Formally represents the party (country) participating in the CDM -Approves the participation of interested entities in a CDM project -Procedural details of approval are sovereign to each party EB CDM Executive Board: -Supervises the CDM under the authority and guidance of the COP/MOP -Main duties (inter alia): -Approves new methodologies -Accreditation of operational entities -Supervises the CDM Registry -Accepts validated projects as CDM activities -Instructs the issuance of CERs

Panels and Working Groups: EB Methodologies panel Working group for small-scale CDM project activities Working group on afforestation and reforestation project activities Registration and Issuance Team CDM Accreditation Panel CDM Accreditation Assessment Team Progress of the CDM | 1. Background to the CDM Institutional Base: Associated Bodies (ii)

DOEs Designated Operational Entities Organisation accredited by the EB for: Validating and requesting registration of CDM projects Verifying emissions reductions and requesting issuance of CERs to the EB Progress of the CDM | 1. Background to the CDM Institutional Base: Associated Bodies (iii) PPs Project Participants: Private or public entities authorised by a party involved in a CDM project activity

Progress of the CDM | 1. Background to the CDM Late comer, early starter… The Clean Development Mechanism (CDM) is considered to be a late invention in the negotiation of the Kyoto Protocol (Lecocq and Ambrosi, 2007). Proposed in November 1997 by Brazilian and US negotiators as a means for Non-Annex B parties to promote sustainable development in their countries, while at the same time helping Annex B countries meet their emissions reduction commitments. Finally included in the Kyoto Protocol under Article 12. Operational through the Marrakesh Accords (November 2001). First meeting of the CDM Executive Board during the same event (November 2001). First CDM project activity to be registered: 18/November/2004. First CDM project activity to have CERs issued: 20/October/2005. CDM Registry was operational since November 2004 (as a stand alone system). By the time the ITL was up and running and ready to go live: nearly 86 million CERs had been issued and 995 CDM project activities had requested registration.

Progress of the CDM | 1. Background to the CDM Quick tour through the CDM project cycle Project Idea Project Design Document (PDD) Country Approval Validation RegistrationMonitoring Verification Certification Issuance of CERs Distribution of CERs Through DOEs Through Focal Point

Progress of the CDM | 1. Background to the CDM CERs: The basics Selling CERs: The basics The CDM was not specifically designed as another emissions trading mechanism. It allows Non-Annex B entities/parties to help Annex B entities/parties meet their reduction commitments by investing in CDM projects in exchange of CERs. This investment can take the shape of a buying-and-selling transaction over the CER units on either a spot or forward basis. There are different structures that can be adopted by project owners and investors, depending on financing requirements, the nature of the underlying CDM project and other inherent factors. After issuance(primary market): distribution/allocation of CERs can only be performed among participants in the same CDM project (PPs). –Buyers must be registered as PPs –Focal point has to submit required documents

Progress of the CDM | 1. Background to the CDM CERs: The basics Selling CERs: The basics Pending Account Of the CDM Registry EB Instructs CDM Registry Administrator to issue CERs SOP Adaptation 2% Temporary holding account (Annex B) Permanent holding account (Non Annex B) Upon instruction from the nominated Focal Point (FP) in accordance with MoC (Upon acc. holder instruction) Upon instruction of the CDM Registry Administrator ITL Holding account National registry (Annex B) Holding account National registry (Annex B) Holding account National registry (Annex B) IET

Progress of the CDM | 1. Background to the CDM CERs: The basics Selling CERs: The basics The CDM Registry: Limited range of functions compared to national registries: oIssuance Pending account oTransfers (Internal and External): restricted to holding accounts of PPs only oCancellation oSOP Adaptation (2% of each issuance) CDM registry is not used for compliance

Progress of the CDM | 1. Background to the CDM CERs: The basics Selling CERs: The basics Forwarding of CERs from the Pending Account: Share of Proceeds to cover administrative expenses (SOP Admin) has to be paid: USD 0.10 per certified emission reduction issued for the first 15,000 tonnes of CO2 equivalent for which issuance is requested in a given calendar year; USD 0.20 per certified emission reduction issued for any amount in excess of 15,000 tonnes of CO2 equivalent for which issuance is requested in a given calendar year. SOP Admin applies to the expected average annual emission reduction for the project activity over its crediting period. Registration fee counts towards SOP Admin and is automatically deducted. Security code sent to FP once SOP Admin payment is cleared. FP uploads forwarding request using security code, prints out the form and submits it duly signed to Registration and Issuance Unit. Request for forwarding has to be in accordance with MoC.

Progress of the CDM | 1. Background to the CDM CERs: The basics Selling CERs: The basics Forwarding of CERs from a Permanent Holding Account: Account holder (account representative) submits forwarding request form duly signed to Registration and Issuance Unit. CDM Registry team clears and executes the transaction. Opening and maintaining a holding account in the CDM Registry (temporary or permanent) does not have any associated fee. Information on how to apply for a holding account in the CDM Registry can be found on:

Progress of the CDM | 2. The work so far

Progress of the CDM | 2. The work so far 1.Registered CDM projects 2.Issuance of CERs 3.Regional distribution

918 registered CDM projects 1.16 billion CERs expected to the end of 2012 (assumption: no extension of crediting periods) STATUS OF THE CDM | MEASURING SUCCESS Map and statistics accessible from Status: 7 February 2008 To date: > 2,900 projects > 2.6 billion CERs expected to the end of 2012 In pipeline:

Progress of the CDM | 2. The work so far Registered CDM projects (i) * Assumption: All activities deliver simultaneously their expected annual average emission reductions ** Assumption: No renewal of crediting periods

Progress of the CDM | 2. The work so far Registered CDM projects (ii)

Progress of the CDM | 2. The work so far Registered CDM projects (iii)

Progress of the CDM | 2. The work so far Issuance of CERs

Progress of the CDM | 2. The work so far Regional Distribution (i) Despite encouraging progress under the Nairobi Framework, Africa still underrepresented in the CDM.

Progress of the CDM | 2. The work so far Regional Distribution (ii) Total number Number in African region Percentage Registered CDM projects At COP/MOP 2, Nairobi % To date % CDM projects in the pipeline At COP/MOP 2, Nairobi % To date % Designated National Authorities At COP/MOP 2, Nairobi % To date % Designated Operational Entities At COP/MOP 2, Nairobi % To date %

Progress of the CDM | 2. The work so far Regional Distribution (iii)

Announced at COP/MOP2 by the UN SG Partners: UNFCCC, UNDP, UNEP, AfDB and WB New: UN ECA Web page CDM DNA Forum Africa – Addis Ababa in October New joint project proposal launched in Bali (Activity can start when funding is available) New all- Africa carbon forum to be held in Senegal in September 2008 Focus of the Framework : - Build capacity in developing CDM project activities - Build and enhance capacity of CDM DNAs to become fully - Promote investment opportunities for projects - Improve information sharing / outreach / education and training - Inter-agency coordination Nairobi Framework | To catalyze CDM in Africa

Progress of the CDM | 2. The work so far The CDM bazaar

Progress of the CDM | 3. What Bali meant for the CDM in Africa

Progress of the CDM | 3. What Bali meant for the CDM in Africa (highlights) Decision CMP.3: –abolishes the payment of the registration fee and share of proceeds at issuance for clean development mechanism project activities hosted in least developed countries (LCDs); –encourages Parties included in Annex I to the Convention (Annex I Parties), that are willing to do so, to support initiatives, such as the Nairobi Framework, that address barriers to regional distribution, and also to consider further financial support; –encourages project participants, stakeholders and experts to make use of the CDM Bazaar and provide feedback to improve it;

Progress of the CDM | 4. From now on…

Progress of the CDM | 4. From now on… The Secretariat observes a strong confidence on the CDM across the carbon market. CERs have consolidated as reliable carbon asset class. Despite an impressive growth in the number of CDM projects and issuance of CERs, Africa still lags behind. Interested parties are encouraged to take advantage of the CDM Bazaar and the information contained on the Secretariats web site. We look forward to your visit (cdm.unfccc.int).

Progress of the CDM | THANK YOU!!! Registration and Issuance Unit Sustainable Development Mechanisms UNFCCC CDM Bazaar Catalogue of decisions: Information cdm.unfccc.int