CDM and project overview

1
Clean Development Mechanism Opportunities in
India

Meghana Kshirsagar Environment Specialist,
CDM-INDIA( Technical Cell), Designated National
Authority Ministry of Environment Forests New
Delhi, India
2
Kyoto Protocol to the UNFCCC

• Signed in 1997 came in force since 16 February
  2005
• Ratified by 162 countries (USA and Australia-
  Major non-participants
• Commits industrialised countries to reducing
  their greenhouse gas emissions by, on average,
  5.2 below 1990 levels in 2008-12
• Six greenhouse gases covered CO2, CH4, N2O,
  HFC/PFC, SF6

3
Clean Development Mechanism

• One of the three flexible mechanisms under the KP
• Enables developed countries (known as Annex B
  countries) to meet their emission reduction
  commitments in a flexible and cost-effective
  manner
• Assists developing countries (non-Annex B
  countries) in meeting their sustainable
  development objectives

4
CDM Project Cycle
CDM ExecutiveBoard
ProjectOwner
Registration
Project Idea
Project Owner
Monitoring ofEmission Reductions
ProjectOwner
Project Design Document
Operational Entity
Verification Certificationof Emission
Reductions
DNA
Host Country Approval
CERIssuance
CDM ExecutiveBoard
ApprovalBaseline Methodology
CDM ExecutiveBoard
Operational Entity
periodically during crediting time unless
approved method. is used
Validation
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Project Design Document

• Important document in the CDM project cycle
• Standardized format defined by UNFCCC-http//cdm.u
  nfccc.int/Reference/Documents/cdmpdd/English/CDM_P
  DD_ver02.pdf
• Covers various details (such as- General
  description, Baseline methodology, Monitoring
  methodology and plan, GHG Estimation,
  Environmental impacts, Stakeholders comments
  etc.)
• Revised from time to time.

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CDM in India

• India signed the convention in June 1992 and
  ratified it in November 1993
• Acceded to the Kyoto Protocol on 26 August 2002
• The Designated National Authority (DNA) in
  Ministry of Environment and Forests (MoEF)
  became operational since December 2003
• India is currently a member of the CDM Executive
  Board, chairs the Methodological Panel of the CDM
  Executive Board
• Effective institutional framework with proactive
  DNA which issues Host Country Approval in 60 days
  after the project submission.

7
Contd

• The DNA has approved 391 CDM projects more than
  all other host countries combined
• India has 114 registered projects with CDM EB
• Headed by Secretary (EF) with members drawn
  from various Ministries
• Sectors covered with the major participation from
  public and private sector
• India leads and has varied project portfolio of
  different sectors and types i.e. Energy
  Efficiency, Fuel Switching, Industrial Process,
  MSW, Renewable, Renewable (Biomass)

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Host Country Approval

• Sustainable development criteria are set by the
  DNA
• Social, Economic, Environmental and Technological
  well being.
• No fee charged
• Indian DNA website www.cdmindia.nic.in

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Host Country Approval Criteria

• Fulfillment of the UNFCCC criteria
• Emissions Additionality
• Contributing to Sustainable Development, i.e.,
• Promoting economic well-being
• Ensuring environmental well-being
• Support social well being
• Parties should have ratified Kyoto Protocol
• Confirmation of Voluntary participation

10
CDM Statistics (as on September 2006)
Projects registered internationally by CDM EB
114 Host country Approved by India 391
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Portfolio of Host Country Approved Projects
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Small - Scale CDM Projects

• Size limits for small-scale projects
• Electricity generation from renewable sources, up
  to 15 MW pa
• Energy efficiency projects saving, up to 15 GWh
  p.a.
• Projects reducing, and emitting themselves, up to
  15,000 t CO2e p.a.
• SSC projects benefit from simplified rules and
  procedures
• Simplified PDD
• Same operational entity may undertake validation
  and verification / certification
• Simplified modalities and procedures for
  smallscale CDM projects http//cdm.unfccc.int/Re
  ference/Documents/AnnexII/English/annexII.pdf

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CDM in SMEs

• Renewable energy
• for electricity generation
• for mechanical energy
• Thermal energy
• Biomass co-generation (economic feasibility ?)
• Fuel switching
• Energy efficiency improvements
• End-use EE improvements (Energy Efficient
  equipments as Motors, Lamps, Ballasts,
  Refrigerators, Fans, AC, Appliances etc.)
• Supply-side energy efficiency improvements
  (Upgrading TD systems)
• Waste Heat Recovery
• Process modification

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Challenges for CDM in SMEs

• Lack of awareness about CDM
• Tedious process
• High cost involved for documentation, validation
  and Monitoring Verification of emission
  reductions
• Inability of new promoters to bring in equity to
  be able to avail of financing
• Lack of development of project ideas and
  promoters for SME projects.

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Transaction Costs (TC)

• Investment which the project proponent shall
  invest to monetize the CDM benefits.
• TC may include costs towards
• consultants for developing CDM project.
• Validation of the CDM projects
• Registration of the project with EB
• lt15,000 t CO2 eq. 5,000 USD
• gt 15,000 lt50,000 t CO2 eq. 10,000 USD
• gt50,000 lt100,000 t CO2 eq. 15,000 USD
• gt100,000 lt200,000 t CO2 eq.20,000 USD
• gt200,000 t CO2 eq. 30,000 USD
• Apart from the above, EB deducts 2 of the CDM
  revenue towards Adaptation Fund.
• TC varies between 10-20 of the total revenues
  depending upon the type and size of the project.

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How to reduce transactions costs

• Do verification and certification at long
  intervals
• Streamline the information needs on each step of
  the project cycle
• Standardization of parameters
• Validation and verification Registration and
  certification fees proportional to the size of
  the project
• Go for bilateral CDM projects
• OR
• Sectoral CDM/ Programmatic CDM/ Bundling

Source Michaelowa et al (2003)
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Sectoral CDM

• Refers to regional, sectoral, sub-sectoral, or
  cross-sectoral project activities that are the
  result of deliberate governmental policies.
• Bundling of projects- Same type, different type
• Sectoral benchmark which allows crediting of all
  projects below the benchmark without any further
  additionality check
• Programmes
• Policies
• Sectoral CDM is already there!

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Programmatic CDM

• Project activities occur as the result of a
  deliberate program. The program can be a public/
  private sector measure
• Bundling of all sizes of projects allowed.
• Program results in a multitude of dispersed
  actions.
• GHG reducing actions do not necessarily occur at
  the same time.
• The type, the size and the timing of the emission
  reducing actions may not be known at the time of
  project registration.
• While GHG reducing actions can be implemented by
  one or more entities, the program has one
  enacting agent,
• In programmatic CDM, the program is the project.
• Programmatic project activity is done through one
  single PDD.
• GTZ CDM-India plans to do CB for implementing
  Programmatic CDM in Steel reheating Sector
  identified under UNDP GEF project.
• Detailed guidelines still to be made clear!

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Bundling- Key Points

• combining or aggregating a number of small-scale
  projects and/or project activities into a single
  emissions reduction project without the loss of
  distinctive characteristics of each project
• Link to General Principles of Bundling EB
  decision 21 http//cdm.unfccc.int/EB/Meetings/021
  /eb21repan21.pdf
• Bundling can be done at the following stages in
  the project cycle
• project design document,
• validation,
• registration,
• monitoring, verification
• certification.
• The transaction costs for bundled projects
  basically consists of
• Upfront costs related to the CDM project cycle
  and organisational aspects of the bundle
• Yearly running costs related to verification and
  certification of CERs generated.
• GTZ CDM-India supported a Bundled project (Gold
  Standard CDM ) on Solar Community Kitchens-Host
  Country approved, validation in pipeline.

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Bundling- Key Points

• Legal Requirements
• Any contracts and agreements will have to be
  integrated into the overall project structure to
  ensure the successful implementation and share
  risks, responsibilities and benefits to the
  appropriate parties.
• The exact types of agreement or contracts
  required will vary from project-to-project
• Some template documents for the sale of CERs
  available at.
• http//www.ieta.org/ieta/www/pages/download.php?do
  cID311
• http//www.cd4cdm.org/Publications/CDM20Legal20I
  ssues20Guidebook.pdf

Source A guide to bundling small scale CDM
projects
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Bundling- Key Points

• Risks involved
• CDM Specific Risks
• CDM Licensing/ regulatory (risk of delay, failure
  to registration after some TC is already paid,
  risks asssociated with crediting period, no
  concrete system after post 2012 etc.)
• Political risks (regulatory changes, taxation
  etc.)
• Carbon Market/ financial (uncertainity about
  prices etc.)
• Normal project Risks
• Cost/ delay (due to licensing permitting
  barriers)
• Technology (less than expected performance)
• Generally found in all CDM projects
• Additional risks involved in bundling due to
  increased no. of Parties, location etc.

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Bundling- Key Points

• Bundling at various stages TC reduced if
  bundled at earlier stage
• Project Assessment and evaluation for
  individual project
• Baseline and monitoring plans limited to
  projects that can apply common plans
• Monitoring techniques low cost and innovative
• Bundling sizes As large as possible, limited to
  SSC size.
• Development Stage / Timing individual project
  in similar development stages
• Bundling organisation- competent and skilled

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Government of India Initiatives

• Directed all PSU to explore CDM Projects
• Electricity Tariff Fixation CDM benefits needs
  to be considered
• Assessment of CDM potential in all new green
  field power projects, instructed nodal agencies
  (PFC, REC, NHPC)

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Opportunities for Cooperation

• Promoting higher efficiency equipments and
  technology
• Efficiency in power generation and TD
• Energy Efficiency in Refrigeration sector
• Involvement of the public sector agencies in
  undertaking EE activities
• Improving rural energy supply efficiency
• Encourage bundling of smaller scale, innovative
  projects with greater SD benefits
• Explore opportunities for sector trading schemes
  (Sectoral Programmatic CDM)

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GTZ CDM - India activities

• Established GTZ CDM - India office in August 2003
  in collaboration with Bureau of Energy Efficiency
  (BEE)
• Established Technical Cell in Climate Change
  Division, MoEF, Govt. of India
• Created awareness amongst more then 2000 project
  developers
• Trained 100 plus project consultants other
  stakeholders
• Provided financial support to project developers
  training for consultants to develop 10 PDDs
• Organised four Capacity Building missions for
  different sectors Cement, Pulp Paper, Iron
  Steel, Power, Petrochemical (Reliance IOC),
• Prepared new methodologies for Power sector, RM,
  New technologies and Biofuel and Refrigeration
  sector

27
Contd

• Developed and maintaining the website of Indian
  National CDM Authority (www,cdmindia.nic.in)
  along with project portfolio.
• Maintaining a knowledge website
  (www.cdmindia.com)
• Developed a standard Emission Reduction Sellers
  Agreement which will be made available on the
  website of www.cdmindia.com
• Provides free advisory services evaluation of
  new CDM Projects
• Long term MoU with CMA, RIL, NTPC and CEA
• Under PPPs provided in-house capacity building
  for Indias largest Petro-chemical industries
  (Reliance) resulting 7 CDM projects
• GTZ CDM-India supported a Bundled project (Gold
  Standard CDM ) on Solar Community Kitchens-Host
  Country approved, validation in pipeline.
• Developed baseline database for India Power Sector

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Way forward

• Identify new potential Industrial sector that
  needs CDM capacity building
• Preparation of methodology for Refrigeration
  sector
• Compilation of National database for baseline
  elements for Iron Steel, Aluminum and Pulp
  Paper
• Promotion of Indian CDM projects in international
  meetings, fairs and climate negotiations

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Thank you
Meghana Kshirsagar (Ms.)Environment Specialist,
GTZ CDM-IndiaA-33, Gulmohar Park Delhi - 110049.
IndiaPh 0091-11-26611021, 26528840Fax
0091-11-26537673E-mail meghana_at_cdmindia.com
Website www.cdmindia.com