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Programmatic CDM: An Approach to Obtaining Carbon Credits

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Title: Programmatic CDM: An Approach to Obtaining Carbon Credits


1
Programmatic CDM An Approach to Obtaining
Carbon Credits
  • Presentation by Charles Murove
  • Free State Provincial Workshop
  • CDM Awareness Raising Workshop
  • President Hotel, Bloemfontein (15th July 2009)

2
Some acronyms
  • UNFCCC United Nations Framework Convention of
    Climate Change
  • CDM Clean Development Mechanism
  • EB Executive Board
  • DNA Designated National Authority
  • PIN Project Idea Note
  • LNO Letter of No Objection
  • PDD Project Design Document
  • CER Certified Emission Reduction
  • ERPA Emission Reduction Purchase Agreement
  • pCDM Programmatic CDM
  • PoA Programme of Activity
  • CPA CDM Project Activity
  • CME Coordinating Managing Entity

3
CDM Programming in SA
  • Refer to DNA presentation
  • Points to note
  • yes stand-alone CDM works
  • yes SA has some registered CDM projects
  • yes a few have received issueances
  • But
  • There are barriers militating against wide scale
    adoption of CDM in developing countries
  • hence the potential role of pCDM incl. in SA

4
Items to be covered
  • Why pCDM?
  • What is it?
  • Why Is It Important?
  • A Very Brief History
  • Programmes vs Bundles
  • Where We Are Now?
  • UNFCCC Procedures/Guidance
  • Status of methodologies
  • Issues to consider
  • Role of the Programme Entity
  • What do participants do?
  • Programmatic CDM (pCDM) and CDM Methodologies
  • Role of the DOE
  • How to move pCDM forward
  • If time allows The Marbek-SPF pCDM project

5
Why pCDM?
  • As Yvo de Boor, Executive Secretary of the United
    Nations Framework Convention on Climate Change
    (UNFCCC) has said
  • Programmatic CDM is expected to enormously
    enhance the chances of small and poor countries
    getting access to the CDM. In such countries,
    single projects are often too small to be
    commercially attractive. As a consequence, many
    small and poor countries are not benefiting from
    the CDM at the moment. The programmatic approach
    could dramatically change this.

6
Why pCDM/2?
  • Stand-alone CDM has a number of constraints which
    include high transaction costs per activity and
    require a long lead times from project
    development to actual issuance of the CER
    certificate
  • To assist overcome some of the constraints
  • Innovations towards strengthening the CDM
  • rather than implement a stand-alone CDM
    project activity,
  • execute a programme of activities (pCDM) or
    implement sectoral CDM (sCDM)
  • Focus of this presentation is pCDM

7
Typical CDM Project Cycle (Source Carbon
Fund/CF)
8
Projects (stand-alone CDM) need to be of a
sufficient scale to be attractive economically
viable (Source - South Pole Carbon)
50
Registering CDM projects involves a number of
fixed costs
And therefore a project requires sufficient
scale to overcome these costs and to be
profitable/attractive
  • PIN development
  • PDD development
  • Advisory services
  • Validation
  • Registration
  • Verification
  • Issuance

Present value of CDM costs and revenues 000 EUR
Revenues
Costs
Project size 000 tCO2e
9
What is it?
  • A programme rather than a project activity.
  • A group of similar CDM project activities
    organised by a single entity (CME).
  • Can take place in many different locations
    (including multi-country) over a long period of
    time (up to 28 years).
  • The programme can be implemented by a public or
    private entity.

10
Why Is It Important?
  • Particularly important for energy efficiency and
    renewable energy (EERE) projects as it has the
    potential to reduce transaction costs/activity.
  • It also allows smaller project activities to get
    credits even if not ready to proceed nowthe
    long tail projects which are presently
    neglected.
  • How does it do this?
  • Facilitates corporate programmes which may
    introduce the same improvement in many different
    facilities over time.
  • Encourages use of standards and policies as a
    basis for CDM projects, removing the perverse
    incentive.

11
Long-tail and Short-tail EE Projects
Volume of Reductions
Number of Projects
Stand-alone CDM
Distributed CDM
High savings/ High cost/Single location
Low savings/lower cost/many locations
Adapted from C Figueres M Phillips, 2007,
unpublished draft.
12
A Very Brief History
  • Introduced at COP11/MOP1--2005
  • Finally approved at EB32 in June 2007
  • Guidance and procedures plus templates for PDDs
    issued in July 2007.
  • Methodologies now being revised to incorporate
    programmatic.
  • As many as 10? programmes now at validation, none
    approved yet.

13
The Final Word.
  • A programme of activities (PoA) is a voluntary
    coordinated action by a private or public entity
    which coordinates and implements any
    policy/measure or stated goal (i.e. incentive
    schemes and voluntary programmes), which leads to
    GHG emission reductions or increases net
    greenhouse gas removals by sinks that are
    additional to any that would occur in the absence
    of the PoA, via an unlimited number of CDM
    Programme Activities (CPAs).

14
The Final Word, continued.
  • All CPAs of a PoA shall apply the same approved
    baseline and monitoring methodology, involving
    one type of technology or set of interrelated
    measures in the same type of facility/installation
    / land.

15
And one more thing.
  • The physical boundary of a PoA may extend to
    more than one country provided that each
    participating non-annex I host Party provides
    confirmation that the PoA, and thereby all CPAs,
    assists it in achieving sustainable development

16
Programmes vs Bundles
  • Bundle
  • a set of different project activities undertaken
    at approximately the same time (i.e. for the same
    crediting period) either by different project
    developers or by the same developer in different
    locations. (May use different technologies and
    baselines)
  • Purpose to increase the size of the project
    being registered, e.g. by bundling a number of
    very small-scale projects to achieve a larger
    project which still qualifies as small-scale.

17
Programmes vs Bundles/2
  • Programme
  • a set of project activities which are broadly
    similar, e.g. have the same baseline and use the
    same technology, but take place over a wide area
    and over a long period of time, e.g. with
    different crediting periods.
  • Purpose to facilitate the implementation of a
    measure or set of measures (e.g. energy
    efficiency) which would otherwise be too costly
    to implement as separate project activities.

18
Bundles Within Programmes
  • Preference for using small-scale methodologies
    for programmatic CDM
  • Wider range of approved methodologies
  • Fits the smaller size of most EE and RE projects
  • Leads to possibility of bundling projects
    together to further reduce transaction costs,
    e.g. large number of small solar projects.
  • Unlike regular bundling, subject to single
    technology/set of measures/single methodology
    rule.

19
Duration, Crediting Periods
  • EB 32
  • The duration of the PoA, not exceeding gt28 years,
    shall be defined by the entity at the time of
    request for registration of the PoA. Any CPA can
    be added to the PoA at any time during the
    duration of the PoA by the coordinating/ managing
    entity.
  • CPAs will declare their crediting period at the
    time they are added to the PoA, and this period
    cannot be outside of the project duration.

20
Role of the Coordinating Entity
  • The PoA must be submitted by one
    coordinating-managing-entity (CME) which can be
    private or public.
  • This entity does not necessarily implement the
    GHG reductions but rather provides the framework
    and incentives for others to do so.
  • The CME communicates with the EB on all matters,
    including the registration of CERs.
  • The CME must ensure that double counting does not
    occur, i.e. activities in the program are not
    registered as a separate CDM project activity,
    nor are they part of another registered CDM
    program.

21
What does the CME Do?
  • Is accredited by DNA as a voluntary party
  • Develops the PoA PIN PDD
  • Establishes procedures for project entry to the
    programme and confirms eligibility.
  • Submits PoA PDD and CPA PDDs to DOE
  • Coordinates sale of credits and initial
    periodic verification.
  • Is the sole channel of communication with the DNA
    and CDM EB.

22
What Do the Participants/Developers Do?
  • Develop PDDs for their project activity,
    following the template provided by the PoA.
  • Submit the PDDs to the CME for onward
    transmission to the EB
  • Are responsible for monitoring of the emissions
    reductions.
  • Receive the CERs from their project activity (or
    a share of same)

23
Types of Programme
  • Single measure/single location
  • Example Improved ceiling insulation in
    buildings
  • Several measures/single location
  • Example Measures to improve boiler efficiency
  • Single measure/many locations
  • Example Replacing incandescent w/CFLs
    countrywide.
  • Several measures/many locations
  • Example Set of related efficiency measures for
    buildings, e.g. aircon/eff.lights/
    ballasts/fans

24
Methodologies
  • All CPAs must use the same baseline and
    monitoring methodology.
  • For energy efficiency, the number of approved
    demandside methodologies is very small.
  • BUT, can use small-scale methodologies provided
    that
  • The individual CPAs fall under the small-scale
    threshold, regardless of total programme size.
  • This threshold now revised to 60 gWh per annum
    for e.e, or 60,000 tonnes CO2-e for other
    projects.

25
Opportunities
  • PoAs based on standards
  • Subject to effectiveness/currency
  • 4-5 e.e. standards currently under SABS review
  • PoAs based on energy efficiency measures or sets
    of interrelated measures, e.g.
  • Compressor optimisation
  • VSDs for conveyors
  • Chiller optimisation/upgrades

26
The Energy Efficiency Accord (EEA) Programmatic
CDM Project (pCDM)
  • Funded by Global Opportunities Fund GOF (now
    Strategic Projects Fund - SPF) and SANERI.
  • Joint venture between NBI and Marbek.
  • NBI planned to incorporate as a sponsored
    programme under the Sustainable Futures Unit.
  • The EE Accord Technical Committee (EETC) to be
    involved and to constitute a management committee
    for the CME.
  • A PoA will be created and a pilot project
    activity developed
  • Three technologies/measures reviewed and SWH
    technology selected by EETC.
  • NBI no longer part of the initiative
  • CEF NEEA now on board

27
Where We Are NowUNFCCC Status
  • Procedures/Guidance in place but subject to
    revision at any time.
  • Methodologies
  • Small-scale all now contain conditions for
    programmes of activities.
  • Large-scale under review, some changes made.
  • Main concern is leakage.
  • EB clarification/decision pending regarding DOE
    liability and programme monitoring issues.

28
Issues to consider.
29
Role of the Programme Entity
  • In the PoA_DD, CME responsibilities have to be
    specified, e.g.
  • overall management of the programme, including
    all documentation and registration
  • only party authorized to communicate with the DNA
    and the CDM EB on behalf of project participants
  • Advisory services for technical and procedural
    matters, including screening new applicants.
  • Maintaining a project database and archive of
    monitoring reports.

30
What must participants do?
  • Will have to sign a binding agreement to allow
    CME to manage the programme and retain a portion
    of CERs to cover operating costs.
  • Will have to fill in template (non-specific
    CPA_DD) and submit to CME.
  • Will have to guarantee that they are not part of
    another programme or seeking registration as a
    separate CPA.

31
The Role of the DOE
  • Crucial Role as it is the DOE that validates the
    PDDs and certifies the projects on behalf of EB.
  • The CDM EB has decreed that DOEs must bear risk
    of under-estimation or other errors.
  • Raises a number of questions
  • Deduction penalties said to accrue to DOE in
    case of unqualified CPAs
  • DOEs want to restrict this liability to
    unqualified PoAs
  • Need clearer guidance for extent of
    CPA-registration work (before starting activities
    instead of corrections by review cases)
  • Need to have flowing issuance requests rather
    than put issuance on hold because of
    verification concerns on a single CPA

32
Issues that need to be resolved
  • DOEs are reluctant to take on pCDM
    programme/projects risks
  • As a result pCDM validation has stalled
  • CDM EB is reviewing liability issues with a view
    to minimise risks to DOE
  • More clarity on process needed are programmes
    subject to more stringent review than projects?
  • Who bears responsibility for CPAs that enter the
    programme after the initial validation/
    registration?
  • Issuance flow provide assurance that CPAs
    failing verification will not block the flow of
    qualifying CPAs.

33
Programmatic CDM Projects Under Development
34
Background
  • Funding from SPF and SANERI
  • SANERI funding focuses on background research,
    selection of technologies
  • SPF work focuses on programme development,
    implementation
  • Deliverables
  • A working CDM programme, validated and registered
    with the CDM EB

35
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36
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37
Project 1 Boiler Steam System Optimisation
  • Covers range of capital-cost improvements in
    boiler and steam systems, treated as a set of
    interrelated measures.
  • Uses small-scale methodology AMS II.C
  • Demandside Energy Efficiency Project Activities
    for Specific Technologies
  • Project Design Document will include boilerplate
    information for calculating baselines,
    establishing additionality, and analysing
    interactive effects of adopting more than one
    measure.

38
Project 2Installation of Variable-Speed Drives
  • Covers installation in a range of applications
    including VSDs for pumps, fans, conveyors.
  • Could be applied to some buildings applications
    operating under variable load conditions, e.g.
    chillers.
  • Uses small-scale methodology AMS II.C
  • Demandside Energy Efficiency Project Activities
    for Specific Technologies
  • PDD Document will include boilerplate information
    for a range of specific applications.

39
Project 3 Solar Hot Water (SWH) for
Commercial-Industrial Applications
  • Selected by the EETC
  • Covers ablution uses and low-temperature process
    uses (lt60 C).
  • Uses small-scale methodology AMS I.C, Thermal
    Energy for the User with or without electricity.
  • Technologies used will have to adhere to national
    standards (SANS 1307 and SANS 10106)
  • Integration with Eskom Industrial and Commercial
    DSM programme (SWH Component).
  • Status PoA_PDD and non-specific CPA_PDD
    completed, first specific CPA_PDD under
    development.

40
Other pCDM Initiatives
  • The National Sustainable Housing Facility
  • Focuses onENERGY EFFICIENCY
  • Who are the key role players?
  • KUYASA CDM PROJECT
  • SSN
  • DBSA
  • GENESIS
  • DANIDA
  • More about this in a later presentation.

41
Thank you for your attention!
For more information or to discuss becoming a
participant contact Charles Murove Marbek
Resource Consultants Africa 8 Victory
Road Greenside 2196 Johannesburg T 27 11 888
1194 F 27 11 782 4054 C27 82 347 0032
CharlesM_at_Marbek.co.za http//www.marbek.co.za
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