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Promoting CDM in SAARC Countries- Feasibility Study (FQF STUDY)

This Report on Study of CDM Potential in SAARC countries is intended to serve several objectives. Primarily the Report is focused to assess and conclude the existence of potential CDM projects in these countries and highlight the reasons of too little success. Country specific information on specific sectors has been provided to facilitate the availability of approved methodologies but also to evaluate possibility of improving existing technology / development or transfer of technology from other nations. Status and baseline scenario existing in these countries differs and flexibility of CER generation will depend on the intent and viability of new technology. The report discusses the limiting factors that need to be overcome while planning to build success stories by targeting low hanging fruits.

For futher information, please contact:
Dr Sanjeevan Bajaj
CEO-FICCI Quality Forum
Phone No.: 23325312, 23738760-70
Email : s.bajaj@ficci.com

Editorials

• Copenhagen Accord (Download PDF)

COP-15 took place at Copenhagen from 7th December to 18th December, 2009. Copenhagen Accord is being made available as such for the benefit of our readers. We have tried to highlight important sections in the Accord so as to understand the crucial points.

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• Journey from COP-13 to COP15-A Recap (Download PDF)

COP-13 conducted in Bali in December 2007 came out with an important draft decision through Ad Hoc Working Group on Long-term Co-operative Action under the Convention. The Conference of Parties resolved that there is an urgent need to enhance implementation action to achieve the ultimate objectives of the Convention. - Mr. K H Sharma (CDM Head)

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• Kyoto protocol designs Clean Development Mechanism (Download PDF)

The nations around the world voluntarily united to sign the United Nations Framework Convention on Climate Change (UNFCCC) realizing the threat to earth due to increasing concentration of green house gases. Held in Rio de Janeiro from 3 to 14 June 1992, the treaty aimed at stabilizing greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. It included a legally non binding, voluntary pledge that the major industrialized nations would reduce their GHG emissions by year 2000,but realizing that the voluntary targets were not met unless a legally binding agreement was made a necessity....

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• CDM Registration Cycle: Implementation route(Download PDF)

The main steps involved in CDM project cycle...

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• CDM Project Development Requirements(Download PDF)

CDM project activities must result in reducing or absorbing (sequestering) GHGs that are real and measurable and would not have occurred in the absence of the proposed project activity (additionality) (UNFCCC 2001b, 20). In other words, to qualify for credits, a project activity must demonstrate that GHG emissions were reduced against the "baseline scenario," a representation of GHG emissions under normal circumstances...

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• Voluntary Projects issues Voluntary Emission Reductions (VERs) (Download PDF)

Voluntary Emission Reduction(s), VERs are generated due to the monitoring and reduction of Green house gas emissions associated with the individual operations. VERs are issued to the mitigation activities which happen because of voluntary initiative in addressing climate change and not mandatory requirement as described in Kyoto based mechanism. VERs must represent real verifiable emission reductions in addition to the business-as-usual scenario....

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• CDM Opportunity in Industries(Download PDF)

CDM promotes sustainable development in developing countries and allow industrialized countries to earn emission credits for their investments in emission-reducing projects in developing countries. Following are the industries that have an opportunity to implement clean development mechanism.

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Frequently Asked Questions

What is the Kyoto Protocol?
The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) strengthens the international response to climate change. Adopted by consensus at the third session of the Conference of the Parties (COP3) in December 1997, it contains legally binding emissions targets for Annex I (developed) countries for the post-2000 period. By arresting and reversing the upward trend in greenhouse gas emissions that started in these countries 150 years ago, the Protocol promises to move the international community one step closer to achieving the Convention's ultimate objective of preventing "dangerous anthropogenic (human-made) interference with the climate system".

What is the Clean Development Mechanism (CDM)?
The CDM was established by Article 12 of the Protocol and refers to climate change mitigation projects undertaken between Annex 1 countries and non-Annex 1 countries (see below). This new mechanism, whilst resembling JI, has important points of difference. In particular, project investments must contribute to the sustainable development of the non-Annex 1 host country, and must also be independently certified. This latter requirement gives rise to the term "certified emissions reductions" or CERs, which describe the output of CDM projects, and which under the terms of Article 12 can be banked from the year 2000, eight years before the first commitment period (2008-2012).

What is a CER?
CER's or Certified Emissions Reductions are a "certificate" just like a stock of share market. A CER is given by the CDM Executive Board to projects in developing countries to certify they have reduced green house gas emissions by one tonne of carbon dioxide per year. For example, if a project generates energy using wind power instead of burning coal, it can save 50 tonnes of carbon dioxide per year. There it can claim 50 cers (as one cer is equivalent to one tonne of carbon dioxide reduced). Developed countries buy CER's from developing countries under the CDM process to help them achieve their Kyoto targets.

What are the six green house gases under the Kyoto Protocol There are many gases that contribute to the green house effect. The Kyoto Protocol deals with six of them?
There are six green house gases covered by the Kyoto Protocol.
Gas Global Warming Potential
Carbon dioxide (CO2) 1
Methane (CH4) 21
Nitrous oxide (N2O) 310
Hydrofluorocarbons (HFCs) 140-11,700
Perfluorocarbons (PFCs) 7,000-9,200
Sulphur hexafluoride (SF6) 23,900
Source: IPCC Third Assessment Report. 2001 Climate Change: The Scientific Basis. Intergovernmental Panel on Climate Change

What are the Kyoto protocol's three flexibility mechanisms?
The Clean Development Mechanisms is one of three Kyoto protocol Flexibility mechanisms. The other two are Joint Implementation and International Emissions Trading. They help Annex I countries meet their emission reduction targets.
Joint Implementation
Set out in Article 6 of the Protocol, JI refers to climate change mitigation projects implemented between two Annex 1 countries (see below). JI allows for the creation, acquisition and transfer of "emission reduction units" or ERUs.
International Emissions trading
Article 17 of the Protocol allows for emissions-capped Annex B countries (see below) to transfer among themselves portions of their assigned amounts (AAs) of GHG emissions. Under this mechanism, countries that emit less than they are allowed under the Protocol (their AAs) can sell surplus allowances to those countries that have surpassed their AAs. Such transfers do not necessarily have to be directly linked to emission reductions from specific projects.

What is the European Emission trading system (EU-ETS)?
In January 2005, several European sectors including energy, metals, minerals and pulp and paper came under EU Emissions trading directive which sets carbon dioxide gas emission limits. If a company emits lower than its allowed limit, it may sell its extra allowance to other companies Who We Are not meeting their targets.

The penalty for violation is 40 Euro for every tonne of Carbon dioxide over the limit, and a requirement to purchase the missing emission allowances. Starting 2008, this will be increased to 100 Euros. The law in the future may be extended to include the chemical, aluminium and transport sectors.

In October 2004, the EU adopted a "linking directive" that allows companies to buy CER's from the Kyoto CDM mechanism to meet EU-ETS emission allowances, thus making European industry take very strong notice of the CDM market. When a European company buys a CER, the company gets an EU emission reductions unit in exchange for surrendering the CER to the country government - which the country will use to offset its Kyoto reduction targets.

Studies estimate the demand of CER's from European industry to be 102.20-288.5 million tonnes of C02 per year in 2010. This demand will vary though depending on if the EU imposes limits on the number of CER's industry can buy.

How do Annex I countries benefit from CDM?
All Annex-I countries (Except Belarus and Turkey) have legally binding green house gas emission reduction requirements under the Kyoto Protocol. The clean development mechanism is one of the "flexibility mechanisms" of the Protocol to help these countries meet these targets. Instead of countries reducing emissions of their own companies, Annex I countries can "buy" emission reductions in non-Annex I countries. For example a CDM project such as a company switching fuels from coal to biomass results in a reduction of 100,000 tonnes of carbon dioxide per year in the atmosphere. If an Annex I country buys these credits, it can count them for its Kyoto reduction targets.

How do developing countries benefit from CDM?
The Kyoto Protocol (Article 12) states:
"The purpose of the clean development mechanism shall be to assist Parties not included in Annex I in achieving sustainable development and in contributing to the ultimate objective of the Convention, and to assist Parties included in Annex I in achieving compliance with their quantified emission limitation and reduction commitments"

The idea was that developed countries get some flexibility in emission reductions in exchange for bring in investment in developing countries for projects and technologies that reduce green house gases.

What is a Baseline?
If a project gets 20,000 CER's it means that its emissions are 20,000 tonnes of carbon dioxide less than a reference point called a baseline.
A baseline for a CDM project gives the greenhouse gases emissions that would have occurred in the absence of the proposed CDM project activity.
There are three approaches to establishing baselines:
  • Existing actual or historical emissions, as applicable
  • Emission from a technology that represents an economically attractive course of action, taking into account barriers to investment
  • The average emissions of similar project activities undertaken in the previous five years, in similar social, economic, environmental and technological circumstances, and whose performance is among the top 20 per cent of their category.

At present, each project put forwards its own baseline, depending on the location of its operation, laws applicable to it and other factors. Projects, however, can borrow methodologies from other projects to develop a baseline.

What are the sustainable development criteria for CDM projects?
Sustainable development is a legal requirement of a CDM project. "It is the host party's (e.g. India's) prerogative to confirm whether a cdm mechanism project activity assists it in achieving sustainable development".

Different countries have different sustainable development criteria. In India, clearance for sustainability is granted by the National CDM Authority (NCDMA) and is spearheaded by the Union ministry of Environment and forests (MOEF) New Delhi.

The Indian National CDM Authority has the following sustainable development criteria:
  • Social well being: The project should lead to alleviation of poverty by generating additional employment, removal of social disparities and. leading to improvement in quality of life of people.
  • Economic well being: The project should bring in additional investment consistent with the needs of the people.
  • Environmental well being: This includes a discussion of impact of the project activity on resource sustainability and resource degradation. reduction of levels of pollution.
  • Technological well being: The activity should lead to transfer of environmentally safe and sound technologies that are comparable to best practices

Source: Indian National CDM Authority

What is the CDM Executive Board?
The Executive Board supervises the operation of CDM. It meets four or five times a year. The Board has final say on whether a project is approved or not and lays out procedures and guidelines for CDM. It is made of 10 members from countries part of the Kyoto protocol. Two from Annex I, Two from non annex I countries, one from small island developing states, and 1 from each of the 5 UN groupings. Director Climate Change Union ministry of environment and forests is currently concurrently a member of the CDM Executive Board.

What is a Designated Operational Entity (DOE)?
A Designated Operational Entity (DOE) is a company accredited by the CDM Executive Boards that checks whether projects are fulfilling CDM criteria. A CDM project must be checked by two processes - Validation and Verification. Validation is done once before initial project approval. Verification is done periodically after the project has been approved or registered. A Designated Operational Entity (DOE) is accredited provisionally by the CDM Executive Board, until confirmed by the meeting of the Parties to the Kyoto Protocol. There are currently 11 doe's globally, and 5 represented in India.

a) Validation
Based on the project design document (PDD), the DOE will evaluate and validate the proposed cdm project, confirming:
  1. Voluntary participation of parties
  2. Comments by stakeholders have been invited
  3. Project participants have submitted documentation on environmental impacts to the DOE
  4. The project will result in reduction in greenhouse gas that are additional
  5. A methodology has been adopted in accordance with CDM rules
  6. Provisions for monitoring, verification and reporting are in accordance with CDM rules
  7. The project complies with all other CDM rules

b) Verification
CDM project are monitored or "verified" after the project has been approved or registered by the CDM Executive Board. After the project has been registered by the Executive Board, the DOE periodically checks (usually once a year) whether emission reductions have actually taken place. It will then request that the EB issue CER's accordingly, based on this verification report. It is only after verification that CER's are actually delivered.

What is a Designated National Authority (DNA)?
An office, ministry, or other official entity appointed by a Party to the Kyoto Protocol to review and give national approval to projects proposed under the Clean Development Mechanism.
Source: UNFCCC Climate Change glossaryIndia's DNA is called the National CDM authority (NCDMA)
Structure of the NCDMA
Chairperson: Secretary (ministry of environment and forests, MOEF)
Member-secretary: Director (climate change), MOEF

Members:
  • Foreign secretary
  • Finance secretary
  • Secretary for industrial policy and promotion
  • Secretary of the Ministry of non-conventional energy sources
  • Secretary of the power ministry
  • Secretary of the Planning Commission
  • Joint secretary (climate change), Ministry of environment and forests (MOEF).

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