Kyoto Protocol and

the CDM
Kyoto Protocol
and the CDM

A.K. ASTHANA
DIRECTOR

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 Session Agenda:

1. Introduction to
Climate Change
Kyoto Protocol
and the CDM

2. UNFCCC and the Kyoto protocol

3. Flexible Mechanisms: CDM, JI and ET
4. CDM and CP
5. Exercise: Can you do CDM?

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 CLIMATE CHANGE
Introduction to Climate Change

A few basic facts

Human activities are releasing greenhouse gases (GHG)

into the atmosphere.

Climate change is a global issue:

1 tCO2 emitted in India = 1 tCO2 emitted in USA.

Rising levels of greenhouse gases are already changing

the climate.

Climate models predict the global temperature will rise by

about 1,4 to 5,8 degrees by 2100.

Climate change is likely to have a significant impact on the

global environment, economy and society.
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 CLIMATE CHANGE
The greenhouse gas effect

1) Solar radiation
5 2 2) Reflected back to space

3) Absorbed by atmosphere
6 1 4) Infra-red radiations
emitted from Earth

5) Some of the IR passes

4 through the atmosphere
3
6) Some is absorbed and
re-emitted by greenhouse
gas molecules

The effect is increasing temperatures on Earth

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The Greenhouse gases
Greenhouse gases and GWP

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CLIMATE CHANGE
Greenhouse gases are increasing…

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CLIMATE CHANGE
…and so is the temperature

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 CLIMATE CHANGE
Climate change impact by 2100

TEMPERATURE PRECIPITATIONS

5 degrees = What separates us from the last glacial era (-15 000 BC)

Models’ forecasts : +1,4 to +5,8 degrees by 2100.

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UNFCCC
Time taken to reach equilibrium

CO2 concentration, temperature, and sea level 9

continue to rise long after emissions are reduced !
CLIMATE CHANGE
Some early visual impact

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 CLIMATE CHANGE
Less visual but with major impact
Agriculture and food security
Consequences of Crop yields, irrigation demands...
climate change:
Forest
Composition, health and productivity...

Water resources
Water supply, water quality...

Coastal areas
Erosion, inundation, cost of prevention...

Species and natural areas

> Temperature increase
Biodiversity, modification of ecosystems...
> Sea level rise
> More rain
Human health
Infectious diseases, human settlements...
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 UNFCCC
Overview of UNFCCC

United Nations Framework Convention on

Climate Change
A global legal instrument (international agreement) on
the control and management of greenhouse gases
(GHG).
Adopted in 1992, entered into force in 1994.
Status of participation: 189 Parties.
Contains 2 annexes:
Annex 1: countries with obligations to take measures to
mitigate the effects of climate change
Annex 2: countries with obligations to provide financing
to developing countries for their obligations under UNFCC
Affiliated instruments: Kyoto Protocol. 12
 KYOTO PROTOCOL
Bringing UNFCCC into action

The Kyoto Protocol

An addition to UNFCCC that requires developed
countries to limit their GHG emissions in 2012, as
compared to their emissions in 1990.
Provides detailed methods and mechanisms for how the
emission reductions can be achieved, measured and
verified.
All members in UNFCCC have not agreed to sign the
Kyoto Protocol!
Adopted in 1997, but required the ratification of more than
55 countries representing more than 55% of GHG
emissions.
Entered into force on February 16th, 2005 after
ratification of the Russian Federation (now 163 countries
covering 61.6% of global emissions have ratified the
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protocol).
 KYOTO PROTOCOL
A market-based instrument

Kyoto Protocol Characteristics

Commits Annex B countries to reduce GHG emissions by
5.2% by 2012 compared to 1990.
Actual commitment period: 2008 - 2012
Individual goals for each country (-8 to +10 %)

Three mechanisms to help countries to reach their

national commitments
1. Emissions Trading System (ETS)
2. Joint Implementation (JI)
3. Clean Development Mechanism (CDM)

6 greenhouse gases:
CO2, CH4, N2O, PFCs, HFCs, SF6. 14
 KYOTO PROTOCOL
Annex B countries

Australia Estonia Latvia Russia

Austria Finland Liechtenstein Slovakia
Belarus France Lithuania Slovenia
Belgium Germany Luxembourg Spain
Bulgaria Greece Netherlands Sweden
Canada Hungary New Zealand Switzerland
Croatia Iceland Norway Turkey
Czech Rep Ireland Poland Ukraine
Denmark Italy Portugal UK
EC Japan Romania USA
* Countries with economies in transition to a market economy.
* Countries which did not ratify Kyoto protocol.
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 KYOTO PROTOCOL
“Flexible mechanisms”
CDM - Clean Development Mechanism
Allows public or private entities to invest in greenhouse gas (GHG)
mitigating activities in developing countries.
CERs (Certified Emission Reductions) can be used by the project
investor to meet its own commitments, or sold on the open market.
JI - Joint Implementation
Emission reduction projects implemented jointly between Annex I
countries (developed countries and transition economies).
ERUs (Emission Reduction Units) can be used by the project investor
to meet its own commitments, or sold on the open market.
ET - Emissions Trading
Can be used as supplementary to actions to meet reduction
commitments.
One AAU (Assigned Amount Units) represents the tradable right to
emit one t CO2eq. 16
 KYOTO PROTOCOL
CO2 market mechanisms

Limitations of CO2 emissions in

developed countries (Annex I)

4 options for companies

1/ Pay expensive 2/ Carry out carbon 3/ Buy emissions 4/ Carry out carbon
fines. reduction through credits on the reduction through
processes CO2 market (ETS). technology transfers
improvement. in CDM or JI project.

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 Clean Development Mechanism
The idea

The Clean Development Mechanism (CDM) is:

A mechanism that allows Annex B Countries to undertake GHG

emission reduction projects in non-annex B countries, and to use the
achieved emission reductions to meet their own emission goal.

CDM works because emission reductions are many times more

expensive to achieve in Annex B countries than in non-Annex B
countries (the opportunities for emission reduction are bigger there).

Twin objectives of CDM:

Help Annex 1 countries meet their objectives in a cost-effective
way;
Contribute to sustainable development of the host country. 18
 CDM
Core features: Additionality and baselines

“A project is eligible for CDM if greenhouse gas emissions are reduced

below those that would have occurred in the absence of the CDM project.”

GHG emissions
(tCO2eq) 1. Validation of project design, 2. Verification / Certification
baseline and monitoring plan of emission reductions

Emissions baseline

ADDITIONAL
EMISSION
REDUCTIONS

Emissions after the project

Years
Project implementation 19
 CDM
Basic requirements

Emissions Lower emissions, no leakage, no double

counting.
Financial No ODA, no GEF funds, should lead to
additional money inflow.
Regulatory The project should exceed regulatory
standards.
Technological CDM should promote appropriate new
technologies.
Investment CDM should make the IRR of the project an
acceptable one. The project should not have
happened without the CDM revenue.
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 CDM
Where is CDM applicable ?

Renewable energy Waste management

> Wind power
> Solar
> Biomass power
> Hydro power
Energy efficiency measures
> Boiler and steam efficiency
> Pumps and pumping systems
> Efficient cooling systems
> Back pressure turbines
> etc…
Cogeneration in industries having both
steam and power requirements
Power sector
> Induction of new technologies which are
efficient (thermal)
> Reduction in technical T&D losses
Fuel switching
> From fossil fuel to green fuel like biomass…
> Capturing of landfill methane emissions
to generate power
> Utilisation of waste and waste water
emissions for generation of energy
Electrical energy saving
1 kWh = 0.8 ~ 0.9 kg CO2
Power generation (waste heat / renewable)
1 MW = 4.000 ~ 5.000 t CO2
Coal saving
1 kg = 1.3 ~ 1.6 kg CO2
Fuel oil saving
1 litre oil = 3 ~ 3.5 kg CO2
NG based power generation
1 kWh generation = 0.35 ~ 0.45 kg CO2
1 kg NG burning/saving = 2.4 ~ 2.5 kg CO2 21
 CDM
Crediting period

Carbon credit (CER) can be generated as from now:

> Banking by buyer for use towards compliance in 2008-2012.
> Banking by project proponent for sale in later years.

Crediting period:
Usually starting the later of CDM registration, and start of project
operation.
Fixed crediting period of up to 10 years.
OR
Renewable crediting periods of up to 7 years
(maximum 3 x 7 years).

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 STATISTICS
Registered CDM projects
Statistics on July 1st 2006 from http://cdm.unfccc.int/Statistics/

Registered project by host countries*

Expected average annual CERs from
registered projects by host countries*

* List of host countries:

Argentina, Armenia, Bangladesh, Bhutan, Bolivia, Brazil, Chile, China, Colombia, Costa Rica, Ecuador, El Salvador, Fiji, 23
Guatemala, Honduras, India, Indonesia, Israel, Jamaica, Malaysia, Mexico, Morocco, Nepal, Nicaragua, Panama, Papua
New Guinea, Peru, Republic of Korea, Republic of Moldova, South Africa, Sri Lanka and Viet Nam.
 CDM
ET: How are CERs sold ?

Carbon funds > International tenders for CDM projects

available through > Voluntary corporate initiatives
> Multilateral Funds
> EU commitments for carbon purchase
> Bilateral negotiations with the consortium of buyers

Prices of CERs > Average price of 7,5 US$ / tCO2eq in 2005 (3 to 14 US$).

What determines > Likelihood Seller will deliver verifiable reduction on schedule.
prices of CERs ? > Creditworthiness and experience of the project developer.
> Technical and technological viability of the project.
> Liabilities the Seller is willing to take in the event the project fails to
deliver including penalties for non-delivery and willful default / gross
negligence.
> Vintages: in some markets, early vintages (until 2012) are priced
higher because the Buyer’s willingness to pay in order to meet
compliance.
> Likelihood of host country approval. 24
> Environmental and social compliance and additional benefits.
OPPORTUNITIES
ET: Future demand for CERs

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 Kyoto Protocol and
Kyoto Protocol
and the CDM

the CDM
Thank you for your attention!

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