CLEAN DEVELOPMENT MECHANISM

Green House Gasses(GHGs)

Green House Gas Carbon-Di-Oxide(CO2) Methane(CH4) Nitrous Oxide (N2O) Perfluoro Carbon(PFCs) Hydro fluoro Carbonbs(HFCs) Sulphur Hexa fluoride(SF6) Global Warming Potential Equivalent CER 1 21 310 Up to 9,500 Up to 11,700 Up to 23900

Certified Emission Reduction (CER) = 1 ton of carbon dioxide

The Kyoto protocol

n n

Emission reduction targets for Green House Gases (GHGs) only for Annex-1 (I.e. developed) countries Target to reduce overall GHGs emissions by at least 5.2% below 1990 levels in 2008-2012 Established three mechanisms to achieve GHGs reductions Clean Development Mechanism ( CDM): Developed & Developing countries International Emission Trading (IET) : Only developed countries Joint Implementation (JI) : Only developed countries

What is CDM
n

Project in a developing country generates reduction in greenhouse gas emissions Accrues Certified Emission Reduction (CER) credits equal to 1MT CO2) The credits used to contribute to the emission reduction commitments of developed countries Sale Proceeds

Developed Country

Carbon Credits

Developing Country

CDM - Update
GLOBAL
n

Till 148 parties ratifies Kyoto and amounting to 61.6% emissions USA & Australia major countries who have not ratified yet USSR ratified the same. 222 CDM projects were approved by executive board. COP-11 Meeting held in Nov., 2005 at Montreal Canada. US , Australia, China, India & South Korea launched new pact against Kyoto called Asia-Pacific Partnership for Clean Development & Climate. Endesa (Spain) plans 20 new CCGTs . Price of CER at present is approx 8$ / t CO2

CDM - Update
NATIONAL
n

Designated National Authority ( DNA) has provided host country approval for 350 projects as of May 2006. ( source : DNA site ) Four Indian projects have been approved by CDM-Executive Board as on 24th August 2005. (Source : UNFCCC ) Karnataka state is leading in this initiative and has already developed CDM projects in the areas of efficiency improvements in water pumping, street lighting and solid waste management. ( source : TERI report ) GAIL,ONGC AND ROURKELA STEEL PLANT invited tenders for providing a report on the opportunities for developing CDM projects at their plant. ( source : TERI report ) KPTCL imposed sharing of 70% of CER Revenue from the Grid Connected Energy Projects. Later agreed to drop the clause. ( source : TERI report )

CDM set up by UNFCCC

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CDM Executive Board n Supported by Secretariat Meth panel Accreditation Panel Working groups Designated Operational Entities

Facilitating CDM Implementation

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Designated National Authority National CDM Authority Inter Ministerial Committee Single Window clearance Project Concept Note (PCN) Project Design Document (PDD) Eight meetings since Cabinet approval

Single Window Clearance

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PCN as per MoEF format PDD as per UNFCCC format 20 copies each Two CDs Project promoter to give a presentation in the DNA meeting Host Country Approval

Project Cycle of CDM

Project Design & Formulation Host Country Approval Validation/ Registration Project Monitoring Verification/ Certification Issuance of Certified Emission Reductions (CERs)

Host Country Approval

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Emissions Additionality Sustainable Development Parties should have ratified Kyoto Protocol Voluntary participation

Sustainable Development Criteria

Prerogative of the Host Party

Economic well being

Social well being

Environmental well being

Validation
n

Designated Operational Entities

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JQA DNV Certification TUV GmbH SGS UK

Contd..
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DOE thoroughly vets the proposals and puts on UNFCCC website for one month for comments from public Meth panel for new methodology CDM Executive Board for Registration

Verification/Certification
n

DOE does the verification based on inspection of records, field visits Certification to CDM EB Issuance of CERs by EB to Partys account and Project participants as per sharing agreement

Availing the carbon credits

CDM PROJECT PROMOTER

Project Identification Project Construction Project Operation Endorsement by DNA Generation of Carbon credits

Documentation (PCN & PDD) PDD Validation by DOE

Finding buyer

Contract with buyer

Registration with UNFCCC

Verification/ Certification by DOE

Buyer pays Project Proponent

BUYER OF CER

CER

UNFCCC/EB Issues CERs

PCN : Project Concept Note PDD : Project Design Documentation DOE : Designated Operational Entity DNA : Designated National Authority of Host Country CER : Certified Emission Reduction

OPPORTUNITES
n

A route to attract latest technology Cost may get subsidized by carbon credit Cost of CER may go up by the end of first commitment period i.e 2012. After 10-15 years India may be an Annex-I country. In view of future perspective NTPC may start earning CER for its own sake. Already NTPC is undertaking projects which may attract CDM gains. Approved methodology may be available for DDG / Energy Conservation projects

PREREQUISITE FOR CDM PROJECT

Prove that it is not BUSINESS AS USUAL project

Add carbon chapter in FR / DPR

Adopt approved methodology or make a new one

Negotiate with developed country / party for sale of CERs

(Source:UNFCCC SITE) Step 0 . Preliminary screening based on the starting date of the project activity Pass Step 1. Identification of alternatives to the project activity consistent with current laws and regulation Pass Step 2: Investment analysis Pass Step 4. Common practice Pass Step 5 Impact of CDM registration Pass The project activity is additional Step 3. Barrier analysis

Addtionality Tool

Host Country Approval

( Source : DNA site)

Projects approved by DNA

As of 27.08.06 Indian DNA has approved 350 CDM projects that include Biomass/ Cogeneration, Industrial Processes/ Energy Efficiency, Municipal Solid Wastes, Fuel Switching & Renewable.

Transaction Cost
n

Cost of Preparation of Project Concept Note and Project Design Document Approval by MOEF. Designated Operational Entity (DOE) cost for validation of PDD. Fee to Executive Board for Registration. a) 0 to 1500 CER b) 1500 to 50000 CER c) More than 50000 CER

< 5 - 20 Lakhs

Nil

Rs 5 to 10 lakh

:$5,000 : $ 10,000 : $ 15,000 to 25,000

Fee to DOE for Verification and Certification of CERs. Revenue for UN Adaptation Fund. Revenue for Executive Board administrative expenses.

Rs 5 to 10 lakh 2% of CER 1- 2 % o CER

Subsidizing Cost
n

To mitigate cost involved in getting CERs issued , monitoring methods, estimation of CO2 credits following initiatives are available. a) Asian Development Bank(ADB) b) Geutsch Gesellschaft Technische Zusammenarbeit ( GTZ) c) UNDP d) Japanese Government Programme Carbon buyer may bear transaction cost for development as CDM Project.

PROJECTS UNDER CDM

In view of CERC / HCA / Methodology / CERs generated.

Category -I (Energy Efficiency Improvement Projects) a) R & M projects b) Supercritical Power Plants Category II (Fuel Switch / Cleaner Fuel Projects) a) Future LNG projects. b) Naptha to LNG c) Coal to LNG d) Natural Gas Based Combined Cycle Power Plant Category III ( Smaller Projects) a) Afforestation / Reforestation b) Decentralized Distribution Generation c) Ash Utilization d) Energy Conservation Projects

ISSUES
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CERCs issues will be in picture in category I projects. Methodology may be new for Engineering / R & M projects. Two different Designated Operational Entity (DOE) required for validation & certification in Engineering projects. Bundling is required in DDG / Energy Conservation projects. Carbon market status not very clear beyond 2012

CDM Project - Summary

Sl. No Project Capacity Additionality CER/Annum Money Earned* Rs(Crore/Annum) 11.84 4.16 Efficiency Improvement 1 2 North Karanpura BTPS (RWE Offer) 3x660 2x210 Super Critical Boiler -Condenser Cleaning -Turbine Blade Retrofit Naptha to NG 4,40,000 1,54,000

Fuel Switch 3 Anta-I Auraiya-I Kawas-I Naptha to NG 260MW @ 15% 1300 1300

2,06,206

5.56

Cleaner Fuel 4 Kawas-II 5 Gandhar-II

Clean Fuel Clean Fuel

14,78,256 14,78,256

39.91 39.91

* @ CER Cost 6$/CER & 1$ = Rs. 45

Pilot Projects
PROJECTS PROPOSED : R&M : Cleaner Fuel : Fuel Switch : MOU signed in NTPC & MOP. : BTPS : Kawas II & Gandhar II : Anta-I ;Auriya-I;Kawas-I (Neptha to NG) : Role of NTPC in helping Annex-I Countries to achieve their CO2 emission reduction targets through CDM. :BEE offer CER buyback arrangement : Budgetary offers of two consultantants collected

CONSULTANCY OPTIONS

: a) Option I (No cost) (c) Option II

SCOPE OF WORK

: a) To prepare PCN / PDD for identified project b) Host country approval c) Validation of PDD d) Baseline methodology approval e) Carbon credit sale agreement with buyer. f ) CER certification.

CDM in Engineering Projects

NATURE OF PROJECTS n Cleaner fuel (LNG ) based power plant n Cleaner fuel ( NG) based power plant n Fuel switch option from Naptha to LNG Super critical n Development of coal washery for NTPC n IGCC power plants n Removing SF6 circuit breakers ADVANTAGES n Bundling not required. ROAD BLOCK n Tariff policy & issues related to CERC are not clear. n Data will remain on web for one month for comments n Methodology may be new. n Two different DOE required for validation & certification. n Additionalties are to be decided case to case basis.
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: Future LNG plants : Future NG plants : Kayamkulam / Gandhar : Northkaranpura / Barh : Shimhadri

CDM In R&M Projects

NATURE OF PROJECTS n Energy efficiency improvement projects. ADVANTAGES n With carbon chapter in DPR ,NTPC may earn CER in future, ROAD BLOCK n Tariff policy & issues related to CERC are not clear. n Data will remain on web for one month for comments. n Methodology may be new. n Two different DOE required for validation & certification. n Additionalties are to be decided case to case basis.

Feasible Projects In R&M

R&M FOR NTPC STATIONS

AT 1LAKH RUNNING HOURS ; Kh STPS

: BTPS ; DADRI

MEGA R&M FOR NTPC SATATIONS AT 2 LAKH RUNNING HOURS KSTPS : SSTPS ;

CDM In Hydro Projects

NATURE OF PROJECTS n Kali-I,Kali-II & Hutong HEPP. n Run of river scheme ( i.e Loharinagpal / Tapoban Vishnugad) ADVANTAGES n With carbon chapter in DPR ,NTPC may earn CER in future, ROAD BLOCK n Presently big hydro not covered by CDM-EB. n Small Hydro (<15MW ) are covered in CDM.

CDM In DDG Projects

NATURE OF PROJECTS n Small in Kw range.

ADVANTAGES n Attractive projects for CDM-EB n May give higher rate for CER. n Methodology standardized n Single DOE may do validation & certification both.

ROAD BLOCK n Bundling of projects n Base line for similar projects in different regions.

CDM In Enviornment (Afforestation/ Reforestation)

Nature of Projects n Afforestation and Green Belt Development n Reforestation of Govt. Forest Land Advantages n Attractive Proposal for CDM-EB n Single DOE required n Not linked with Operating Parameters of project Road Block n Afforestation and Green Belt Development required as per MOEF/ SPCB Norms/ Stipulations - may not qualify n Reforestation of Govt. Forest Land undertaken by NTPC voluntarily may qualify for CDM n Bundling of Projects

Case study V DDG ( Biomass )

1 Name of the Project 2 Location of the Project 3 Brief Description of the project 4 Estimate of GHG abatement in 5 Estimated investment 6 PDD Developer / Consultant 7 Base line methodology 8 Designated operational entity 9 Project start date 10 Project completion date 11 Host Country Approval Status 12 CDM EB Approval Status
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Biomass Cogeneration Power Project. Kurkumbh; Pune ; Maharashtra 1.5MW 204691.5 t CO2 eq. Not available Mitcon Constancy Services Ltd. Approved Not mentioned August 2004 May 2005 Approved

Case study IV - Renewable energy ( Wind )

1 Name of the Project 2 Location of the Project 3 Brief Description of the project 4 Estimate of GHG abatement in 5 Estimated investment 6 PDD Developer / Consultant 7 Base line methodology 8 Designated operational entity 9 Project start date 10 Project completion date 11 Host Country Approval Status 12 CDM EB Approval Status
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Encon Wind Power ltd. Chitradurga ; Karnataka Reduce the burning of fossile fuel 44450 t CO2 eq. Not available Ernst &Young Pvt Ltd. SSC ( Type I.D.) Not mentioned January 2001 March 2002 Approved

CDM In Enviornment(Biodiesel)
Nature of Projects n Cultivation of Seeds of Biodiesel n Extraction, processing and use of Biodiesel Advantages n Attractive Proposal for CDM-EB n Single DOE required n Not linked with Operating Parameters of project Road Block n Methodology not clear n Bundling of Projects

Potential in Renewables
Technology Wind Power Small Hydropower (< 25 MW) Biomass Energy from Waste Solar photovoltaic Potential 45000 MW 15000 MW 19500 MW 1700 MW Cum. Installation upto March 31, 2003 1870 MW 1509 MW 484 MW 26 MW 121 MWp

Beneficiary Sectors-Potential
INDIAN INDUSTRIAL SECTOR : CARBON DIOXIDE EMISSIONS
Others 15%

Steel 10% Power 51%

Cement 4% Paper 1% Chemicals 3% Transportation 16%

Power Transportation Chemicals Paper Cement Steel Others

Carbon Dioxide emission as of the year 1995

SOURCE : HANDBOOK OF STATISTICS 1998

CDM in India
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Three projects received CERs Currently 23 of the 93 projects registered with EB are from India 8 methodologies approved by EB out of 29 submitted 350 projects have been accorded host country approval

Message from COP11/COP-MOP1

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CDM process related decisions Adoption of the Marrakesh Accords

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Proposals for additionality Prompt start deadline extended Bundling of large scale projects allowed Projects under a programme of activities can be registered New HFC 23 facilities not eligible for CDM

Strengthening of the CDM EB levy on the CER revenue Dialogue on Kyoto Protocol beyond 2012