3 – Clean Development Mechanism Introduction to Climate Change Wim Maaskant BGP Engineers – The Netherlands

3 – Clean Development Mechanism The basics: the carbon cycle Fossil fuel (= carbon stored in the earth, not taking part in cycle

3 – Clean Development Mechanism Climate Change Why is global warming a problem? (1)Very substantial damage to agriculture (land + sea) causing: -high prices and therefore poverty -food shortage and therefore hunger (2) Flooding (Bangla Desh, Fiji Islands, Netherlands and many others) causing: -economic damage -migration (3) Very substantial damage to biodiversity causing: -diseases -loss of genetic resources -extinction of species Global warming (1)

3 – Clean Development Mechanism Climate Change Why should we do anything about global warming? (1)Economic interest (see next sheet) (2) Economic justice (richer & poorer nations) (3) Taking care of Creation (4) Business opportunity Global warming (2)

3 – Clean Development Mechanism Climate Change Global warming (3)

3 – Clean Development Mechanism Climate Change Global warming (4)

3 – Clean Development Mechanism Climate Change Global warming (5)

3 – Clean Development Mechanism Climate Change Global warming (6) (just for sceptics…)

3 – Clean Development Mechanism Climate Change Global warming (7)

3 – Clean Development Mechanism Climate Change Global warming (8) REDD

3 – Clean Development Mechanism Climate Change Global warming (9)

3 – Clean Development Mechanism Climate Change Kyoto Protocol (1) The Kyoto Protocol: is part of the United Nations Framework Convention on Climate Change (UNFCCC)is part of the United Nations Framework Convention on Climate Change (UNFCCC) Opened for signature December 11, 1997 in Kyoto, JapanOpened for signature December 11, 1997 in Kyoto, Japan Conditions for entry into force 55 parties and at least 55% CO emissions by UNFCCC Annex I parties. (NB condition met on 16 February 2007)Conditions for entry into force 55 parties and at least 55% CO emissions by UNFCCC Annex I parties. (NB condition met on 16 February 2007) Parties 175 countries and other governmental entities (as of November 2007)Parties 175 countries and other governmental entities (as of November 2007) 175 parties have ratified the protocol. Of these, 36 developed countries (plus the EU as a party in its own right) are required to reduce greenhouse gas emissions to the levels specified for each of them in the treaty (representing over 61.6% of emissions from Annex I countries)175 parties have ratified the protocol. Of these, 36 developed countries (plus the EU as a party in its own right) are required to reduce greenhouse gas emissions to the levels specified for each of them in the treaty (representing over 61.6% of emissions from Annex I countries) One hundred and thirty-seven (137) developing countries have ratified the protocol, including Brazil, China and India, but have no obligation beyond monitoring and reporting emissions.One hundred and thirty-seven (137) developing countries have ratified the protocol, including Brazil, China and India, but have no obligation beyond monitoring and reporting emissions.

3 – Clean Development Mechanism Climate Change Kyoto Protocol (2) The Kyoto Protocol establishes the following principles: (1)Kyoto is underwritten by governments and is governed by global legislation enacted under the UN (2)Governments are separated into two general categories: developed countries, referred to as Annex I countries (who have accepted greenhouse gas emission reduction obligations and must submit an annual greenhouse gas inventory); and developing countries, referred to as Non-Annex I countries (who have no greenhouse gas emission reduction obligations but may participate in the Clean Development Mechanism); (3)Any Annex I country that fails to meet its Kyoto obligation will be penalized by having to submit emission allowances in a second commitment period for every ton of greenhouse gas emissions they exceed their cap in the first commitment period (i.e., );

3 – Clean Development Mechanism Climate Change Kyoto Protocol (3) (4) As of January 2008, and running through 2012, Annex I countries have to reduce their greenhouse gas emissions by a collective average of 5% below their 1990 levels (for many countries, such as the EU member states, this corresponds to some 15% below their expected greenhouse gas emissions in 2008). (5) While the average emissions reduction is 5%, national limitations range from an 8% average reduction across the European Union to a 10% emissions increase for Iceland; but since the EU's member states each have individual obligations, much larger increases (up to 27%) are allowed for some of the less developed EU countries (see below increase in greenhouse gas emission since 1990). Reduction limitations expire in 2013;

3 – Clean Development Mechanism Climate Change Kyoto Protocol (4) Kyoto includes "flexible mechanisms" which allow Annex I economies to meet their greenhouse gas emission limitation by purchasing GHG emission reductions from elsewhere. These can be bought either from financial exchanges, from projects which reduce emissions in non-Annex I economies under the Clean Development Mechanism (CDM), from other Annex 1 countries under the JI, or from Annex I countries with excess allowances. Only CDM Executive Board-accredited Certified Emission Reductions (CER) can be bought and sold in this manner. Under the aegis of the UN, Kyoto established this Bonn-based Clean Development Mechanism Executive Board to assess and approve projects ("CDM Projects") in Non-Annex I economies prior to awarding CERs. (A similar scheme called "Joint Implementation" or "JI" applies in transitional economies mainly covering the former Soviet Union and Eastern Europe).

3 – Clean Development Mechanism Climate Change Kyoto Protocol (5)

3 – Clean Development Mechanism Climate Change Kyoto Protocol (6) In practice this means that Non-Annex I economies have no GHG emission restrictions, but when a greenhouse gas emission reduction project (a "Greenhouse Gas Project") is implemented in these countries the project will receive Carbon Credits, which can then be sold to Annex I buyers. Indonesia is a non-Annex-1 country under CDM

3 – Clean Development Mechanism Climate Change Kyoto Protocol (7) – Global Emissions Trading framework UNFCCC (1992) Kyoto Protocol (1997) ECCP: European Climate Change Program Project-based Cap and trade Clean Development Mechanism Art. 12 Kyoto Protocol CERsJointImplementation Art. 6 Kyoto Protocol ERUsInternational Emission Trading Art. 17 Kyoto Protocol AAUs Between industrial countries and developing countries and developing countries Between industrial countries (Annex I countries = countries with GHG emission reduction targets) Trade of allocated AAUs between industrial countries (annex I countries) Voluntary Market Climate-friendly & climate neutral products and services EU-ETS (also cap and trade) linking Trade in EUA

3 – Clean Development Mechanism Climate Change Flexible mechanisms, CDM (1) Industrialized Nations can submit their CERs to meet their target in > there is a worldwide demand for projects and activities for ‘carbon’ reduction or fixation -> many of these projects will be in Transition Countries. Purpose of CDM: -> to assist developing countries in achieving sustainable development -> to assist developed countries in achieving compliance with part of their quantified emission reduction commitments

3 – Clean Development Mechanism Climate Change Flexible mechanisms, CDM (2) Annex 1 Country Govt. and companies want to reduce GHG emissions Govt. and companies want to reduce GHG emissions Invest in their own country Invest in their own country Invest in a project in Transition Country Invest in a project in Transition Country Transition Country Many opportunities for projects that reduce emissions e.g. Many opportunities for projects that reduce emissions e.g. Forestry planting Forestry planting Renewable electricity Renewable electricity Energy efficiency Energy efficiency Clean transport Clean transport Biomass energy Biomass energy Project Produces CERs Project Produces CERs Investment CERs $

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change

3 – Clean Development Mechanism Climate Change CDM: how to develop a project (1) 1)An industrialized country invests into host country and receives credits from a CDM project 2)It must obtain the consent of the developing country hosting the project that it will contribute to sustainable development. 3)Methodologies approved by the CDM Executive Board (EB) must be used by the applicant and it must make the case that the carbon project would not have happened anyway (establishing additionality), and 4)It must establish a baseline estimating the future emissions in absence of the registered project.

3 – Clean Development Mechanism Climate Change CDM: how to develop a project (2) 5)The project 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. 6)The Executive Board (EB) then decides whether or not to register (approve) the project. 7)If a project is registered and implemented, the EB issues credits, called Certified Emission Reductions (CERs) to project participants based on the monitored difference between the baseline and the actual emissions, verified by the DOE. 8)During project operation, the DOE shall monitor the realized emissions reductions.

3 – Clean Development Mechanism CDM: how to develop a project (3)

3 – Clean Development Mechanism CDM: career opportunities ! Career opportunities: –Drafting baseline studies (engineers, chemists, biologist) –Feasibility studies (engineers, economists) –Stakeholders consultations (all) –Community development (all) –Forest management (biologists, forestry experts) –Environmental impact assessment (environmentalists) –Financing of projects (economists, financial specialists) –Trading (economists, financial specialists) –Management (managers, public & private) –Municipal services (all) –Policy development (managers, public & private) –Investment advisors (economists, financial specialists)

3 – Clean Development Mechanism CDM: business opportunities ! Business opportunities: –Investments in renewable energy projects –Equipment manufacturing & trading (solar, wind, biofuel, etc.) –Engineering companies –New waste management services –Indonesian investment funds –and many others!