Title: Dr' Markus Schwegler Senior Advisor Climate Protection International CIM Expert The Administrative C
1Dr. Markus SchweglerSenior Advisor Climate
Protection - International CIM ExpertThe
Administrative Centre for China's Agenda 21
(ACCA21)Ministry of Science and Technology (MOST)
The Clean Development Mechanism (CDM) Challenges
and Opportunities for the German Industry in China
2The Chinese Climate Policy
- 1992 China approved and ratified the UNFCCC
UNFCCC - 1998 China signed the Kyoto Protocol
- 2002 China approved the Kyoto Protocol
- 2004 DNA was founded with the Interim Measures
- 2005 On 12 October 2005, Measures for Operation
and Management of Clean Development Mechanism
Projects (CDM Measures)
3Points to Note under CDM Measures
- Resource of emission reductions owned by the PRC
government - Outputs of CDM Projects are owned by PRC project
owner - Proceeds from sale of outputs jointly owned by
PRC government and PRC project owner - PRC government entitled to
- 65 of the transfer price of the outputs from HFC
and PFC Projects - 30 of the transfer price of the outputs from N2O
Projects - 2 of the transfer price of the outputs from new
and renewable energy Projects
4The priority areas for CDM projects in China
- Energy efficiency improvement
- Development and utilization of new and renewable
energy and - Methane recovery and utilization
- (Measures for Operation and Management of Clean
Development Mechanism Projects in China)
5Basic Preconditions for a CDM Project
- In order to determine the general eligibility of
the proposed project, many aspects have to be
taken into consideration - Only projects that reduce emissions of at least
one of the six greenhouse gases acknowledged by
the Kyoto Protocol are generally eligible to
qualify as a CDM project and produce certifiable
and tradable emission reductions. - As a general rule projects that produce real
reductions, that are measured and verified and
are surplus to current regulations will qualify. - Projects also have to be based in a country that
is a party to the Kyoto Protocol and has
completed the ratification process.
6How does the CDM help a project?
- Increased returns?
- A CDM project activity is entitled to receive 1
CER for every tonne of CO2 equivalent reduced. - CERs are market products which are allowed to be
traded. - The money received from the sale of CERs becomes
a source of additional cash flow for the project.
? - Attracting CDM investors/funds?
- Various financial supporters/investors,
- national governments,
- bilateral and multilateral financial institutions
and commercial banks, etc. - numerous CDM funds (e.g. Prototype Carbon Fund,
Community Development Carbon Fund, BioCarbon Fund)
7The Economics of Wind farm and Hydro Power
Projects
Hydro power project 7.5 MW installed
capacity 28,448 t CO2 ERs p.a.(10 years) Project
costs US 4.5m Carbon value 5/ t CO2
1.42m 8/ t CO2 2.27m Proportion of
project costs 5/ t CO2 31.5 8/ t CO2
50.5
Wind farm project 20 MW installed
capacity 50,000 t CO2 ERs p.a.(10 years) Project
costs US20m () Carbon value 5/ t CO2
2.5m 8/ t CO2 4.0m Proportion of
project costs 5/ t CO2 12.5 8/ t CO2
20
8Conditions for CDM projects - Is my project CDM
eligible?
- The CDM eligibility depends on specific project
circumstances and a quick answer cannot be
provided. The main CDM eligibility criteria are
that - The project is not a baseline scenario
- The project is additional and
- The project contributes to sustainable
development.
9What Kinds of Projects/Sectors?
- 1. Renewable Energy Projects
- Biomass Energy
- 2. Waste-to-energy projects
- Municipal Solid Waste landfill biogas capture and
power generation - Agribusiness Waste to Energy Rice Husk Power
Plants Palm Oil waste to energy, Farm Biogas - 3. Community and agro forestry
- Biomass Energy
- 4. Large Scale Energy Efficiency
- 5. Coal Bed Methane
- 6. Transport
- Bio fuel
- 7. Industrial Gas Incineration N20, HFC23
10Project categories eligible under the CDM
11Status of CDM Projects and Expected CERs until
end of 2012 1
- Number of Project
- CDM project pipeline gt1300
- Registered 448
- Requesting registration 48
- CERs issued
- Expected CERs until 2012 gt1,500,000,000
- Total based on registered projects (356) gt
680,000,000 - Total based on projects requesting registration
(75) gt 20,000,000 - 1) as as of 15 November 2006
12Chinas CDM Potential and Opportunities
- Potential
- Coal baseline
- Rapid industrialization
- Low energy efficiency infrastructure
- Favourable investment conditions
- Estimated Potential 50 of the today CDM Market
- Opportunities
- Energy Efficiency
- Renewable Energy
- CBM/CMM
- Fuel conversions and new technology for power
generation
13Mitigation Potential in Three Priority Areas
14Opportunities and Risks
- Opportunities
- Largest CDM Potential worldwide
- High Foreign investments
- CDM host country rating (Point Carbon)
- Expected average annual CERs
- Technology Transfer Opportunities
- Approved Methodologies in China
- Priority Sectors in China
- SD and EHS benefits
- Risks
- Uncertainties about Carbon offset prices
- International approval process
- Currency risks
- CER validity after Kyoto
- Baseline risks
- Project risks
- Regulatory risks
- Technology risks
15Barriers for CDM in China
- Legal framework (51 percent majority Chinese
ownership of CDM projects) - Controlling the price of CERs (8 )
- Regulatory uncertainty
- Difficulty to identify Chinese partners
- Lack of knowledge and skills to identify CDM
opportunities - Lack of experience to assess risks and develop
projects - General lack of market transparency and ability
to find suitable projects - Lack of understanding or interest by Chinese
enterprises
- CDM not fully accepted and understood as
financial tool - Complexity of the CDM Cycle
- The currently low CER price in the buyer driven
market - Availability of data
- Confidentiality Transparency
- Local DOEs
- Transactions costs
- Large number of different players
16Experiences with CDM in China
- Foreign CDM Participants stakeholders
- CER buyers dominate
- Low interest in project development and
investment - Lack of understanding of the Chinese framework
and market conditions - Don't fully understand the risks and don't want
to deal with it (51/49 rule) - Looking for help to find projects
- Looking for help to deal with contractual and
risks issues - Language problem
- Chinese CDM Participants stakeholders
- Limited knowledge of CDM
- Misunderstanding of the financial mechanism
- Up front payment
- Transaction costs
- Project Complexity
- Language problem
- Limited understanding of the operational aspects
of CDM (PIN, PDD) - Difficulties to access foreign project partners
and buyers
17Conclusion and Outlook
- China has a huge energy demand due to the high
economic growth - Heavy environmental toll related to energy issues
- Great potential for energy saving and energy
efficiency improvements - Great potential for CDM Projects
- Implementation of the CDM in China can deliver
significant local economic and sustainable
development co-benefits - Chinas CDM potential represents a substantial
component of the global carbon market - CDM projects must be identified and developed
within the next couple of years for China to
capitalize on its CDM potential during the first
commitment period from 2008 to 2012. - Chinese and foreign enterprises face barriers to
CDM development and implementation in practice.
18Dr. Markus SchweglerSenior Advisor Climate
Protection (mschwegler_at_mac.com)
Thank you for your attention
- There is now time for discussion