The Danish CDM Project Development Facility Financing CDM in Indonesia Erik Dugstad, Sr. Economist, ECON Analysis Agus Sari, Climate change specialist, Pelangi Contact: – Phone:

2 Danish Climate Strategy Published by Danish Government in February 2003 Key issue: Introducing Kyoto Mechanisms to achieve cost efficiency Balance between domestic action and buying of credits defined in economic terms.  Maximum cost of domestic measures set at 120 DKK or approximately 20 USD pr ton of CO2-eq

3 Uncoupling of economic growth and CO2-emissions '89'90'91'92'93'94'95'96'97'98'99'00'01 GDPCO 2 -emission Primary Energy Supply

4 Share of Renewable Energy in Denmark Red: Share of electricity Blue: Share of total energy

5 Danish demand for Carbon Credits Danish EU-burden sharing target is reduction of 21% in compared to 1990-level Three sources of ”deficit” compared to target:  10 mill. Tons CO2/year from lack of success in achieving reductions i.e. in the transport sector  10 mill. Tons CO2/year from expected electricity export  5 mill. Tons CO2/year from (lack of) base year adjustment Projected total demand 25 mill tons CO2/year for 5 years or a total of 125 mill tons Government expected to buy 20% - The rest by private sector (mainly electricity sector)

6 Bilateral collaboration in focus Government purchases through pipelines of  Ministry of Foreign Affairs: Bilateral collaboration on CDM in Malaysia, Thailand, Indonesia, China and South Africa  Environmental Protection Agency: JI-projects in Eastern Europe  Multilateral Carbon Funds – A Danish Fund in the World Bank Incentives for private sector  EU Emissions trading scheme started 1. January 2005  Directive implemented that links emission trading and JI/CDM A Memorandum of Understanding between Denmark and Indonesia has been signed between Ambassador Andersen and Minister Witoelar on July 27, 2005

7 Huge CDM potential in Indonesia million ton CERs in the period Could create a value of million USD via sales + large local benefits for sustainable development Opportunities in many sectors  Cement  Oil and gas  Landfill and waste  Pulp and paper  Steel  Palm Oil  Electricity  Energy saving  Etc

8 Impact of CDM for landfill to energy projects Threshold for producing power from landfill gas is 150 tonnes of waste per day Emission reductions generated by avoiding methane emissions from deposited waste and displacement of grid connected fossil fuel plants Contribution from CDM is more than half of the electricity tariff The table below indicates impact CDM on IRR for different sizes of landfills

9 Impact of CDM for Palm Oil Mill Effluent Mill with capacity of 40 ton of Fresh Fruit Bunches per hour Power generated will be connected to the grid Contribution from CDM is more than half of the electricity tariff Impact of CDM is different per technology used

10 How to develop a CDM project? Projecttimeline CERs issued Pre-feasibility PDD Development ImplementationRegistration Final Host Country Approval Project Validation PIN Feasibility study Conditional Host Country Approval Financial closure Operation Monitoring Danida Project Development Facility Danida buys CERs

11 Transaction costs of CDM Project Feasibility and Due Diligence$5,000 - $10,000 Documentation (PDD)US$ 20,000 – $50,000, up to $100,000 with new methodology Public ConsultationAbout $2,000 – 10,000 Validation$8,000 - $15,000 Approval by the National Authority Currently free Registration to the Executive Board $5,000 - $30,000 (according to the project) Implementation of the CDM Project According to the project Underlying investmentAccording to the project MonitoringAccording to the project Verification$5,000 – $10,000

12 Benefits of participating You get a new income stream for your project – with no risk for you Danida takes all the CDM related risk Danida takes all the trouble getting the paper work done  Preparing a Project Design Document  Getting the PDD validated  Getting an Indonesian National Approval  Getting the registration at the CDM Executive Board Danida buys the CERs when they are delivered

13 Criteria for participating The underlying project must be technically and financially viable  The technical design  Financial viability/project financing  Legal and commercial status of the project The project should be likely to be approved as CDM project  Contribution to sustainable development  Likelihood of being additional  Existence of baseline methodology The project proponent is capable to implement the project  Technical and management capability  Financial solidity of the company

14 The formalities ActionDate Announcement of call for proposals 27 July 2005 Closing for proposals Pre-assessment/selection 3 October October - 21 November 2005 Announcement of results22 November 2005 Signing of Letter of Intent22 November – 29 November 2005 Second call with tentative closing date: 1 February 2006

15 Possible next step in the waste- management sector A number of workshops will be organised giving more information on the Project Development Facility  A follow-up workshop to develop Project Idea Notes (PINs) in the waste-management sector. If you have a project already then contact the project secretariat to get a template for a PIN.  A one-on-one consultation on project development and writing of PIN is possible.

Contact Secretariat of Danish CDM Project Facility c/o Royal Danish Embassy Menara Rajawali 25th Floor Jl. Mega Kuningan Jakarta Telephone: ext 114 Fax: Website: Or ECON (in Jakarta) – – Hp: Pelangi - – Phone: