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CDM Opportunities in the Bio-Fuel & Ethanol as Fuel.

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Presentation on theme: "CDM Opportunities in the Bio-Fuel & Ethanol as Fuel."— Presentation transcript:

1 CDM Opportunities in the Bio-Fuel & Ethanol as Fuel

2 What all we will discuss  TERI : What is TERI, Centre for Global Environment Research, Activities in CDM  Climate Change: Green House Effect, International Negotiations,UNFCCC, Kyoto Protocol (KP)  Market Based Mechanisms of KP : Joint Implementation, Emissions Trading, Clean Development Mechanism (CDM)  Clean Development Mechanism: Additionality Criteria, Project development, Procedures  CDM and Bio Fuels: Bio Fuels & Mitigation in Emission of GHG  Ethanol & CDM : Barriers to Ethanol as CDM project, Addressing barriers and constraints  CDM National Strategy Study - Objectives

3 What is TERI  TERI (The Energy and Resources Institute) is an independent not-for profit organisation established in 1974, based at Delhi  Pursuing activities related to energy, environment and sustainable development  Strength of 350 professionals spread all over the world and drawn from multiple disciplines MISSION: To develop and promote technologies, policies and institutions for efficient and sustainable use of natural resources.

4 Centre for Global Environment Research  Dedicated centre with in TERI set up in 1989, working on climate change related issues including CDM  Undertakes research and outline effective policy initiatives that integrate developing country concerns in the search for effective and equitable solutions to global environmental challenges  Inventory and mitigation analysis (including CDM)  Vulnerability and adaptation assessment  Policy analysis, project analysis, CDM project development & technology evaluation  Capacity building, Outreach and awareness creation

5 Basics of Climate Change  Green House Gases: CO 2, methane, nitrous oxide, ozone, water vapor and other volatile organic gases.  What will happen without green house effect.  Human activities are increasing the concentration of GHG in the atmosphere enhancing the green house effect  Enhanced greenhouse effect leads to rise in average global temperatures & sea level rise changes in precipitation quantity and pattern changes in vegetation increased storm surges

6 International Negotiations  UN General Assembly (1990) set up the Intergovernmental Negotiating Committee to draft a framework convention (UNFCCC)  UNFCCC opened for signatures at Rio Earth Summit in 1992  Entered into force in March 1994  Ratified by 186 countries so far

7 UNFCCC - Objectives  Stabilization of CO 2 concentrations at a level that would prevent dangerous anthropogenic interference with the climate system  Take precautionary measures to anticipate, prevent or minimize the causes of climate change and mitigate its adverse impacts  Protect the climate...for present and future generations... on the basis of equity and the common but differentiated responsibility of countries and respective capabilities. All Parties to submit national communications  Return to 1990 levels of emissions by 2000  No binding commitments

8 Further Negotiations  COP 1  COP 2  COP 3 December 1997  Kyoto Protocol (KP)

9 Kyoto Protocol - Features H Six Green House Gases ( CO2, CH4, N2O, HFC, PFC, SF6) are covered H Overall GHG emission reductions of 5.2% over 1990 levels by Annex I parties of UNFCCC (Annex B of the KP) H Differentiated targets among Annex I (e.g. Japan 6%, US 7% reduction, Australia 108% of 1990 levels) - Binding commitments H First commitment period is ( )

10 Kyoto Protocol Ratification  To come into force Kyoto Protocol needs to be ratified by 55 countries (117 countries so far) accounting for 55 % of 1990 Annex I emissions (44.2% so far)  USA accounting for 36.1 % of Annex I emissions has refused to ratify  Ratification by Russia (17.4%) is critical

11 Kyoto Protocol - Flexibility Mechanisms  Annex B(of KP) countries are to take lead in limiting GHG emissions  Apart from domestic action emission targets can also be fulfilled by using following flexibility mechanisms Joint Implementation CDM Emissions trading  These mechanisms are expected to lower the cost of meeting commitments

12 Kyoto Mechanisms - Joint Implementation  Exchange of emissions reduction units (between legal entities with government approval)  Between developed countries  Project based  Price negotiated bilaterally

13 Kyoto Mechanisms - Emissions Trading  Exchange of emissions quotas between national governments  Between Annex B (of KP) parties  Not project based  Market and/or bilaterally determined price  Effective during the commitment period

14 Kyoto Mechanisms - Clean Development Mechanism  Trading of certified emission reduction units (CERs)  Between developed and developing country entities (government / private sector)  Project based mechanism  Market driven  Emission reduction at lower cost due to lower cost of mitigation in developing countries

15 Clean Development Mechanism (CDM)  GHG mitigation projects started after January 2000 are eligible and CERs can be acquired from 2000 and banked to meet emissions reduction commitments starting in  Project should lead to sustainable development in the host country  GHG reduction should be real & measurable.  The project should be additional  Environmental Additionality  Project Additionality  Financial Additionality  Technical Additionality

16 CDM - Additionality Criteria  Environmental : Emission reductions must be ‘additional to any that would occur in the absence of the certified project activity’.  Financial : Over & above ODA (official development assistance) and GEF (Global Environment Facility) funds  Technology : no dumping, appropriateness  Project : The project would not have other wise happened

17 Project development  Clearly define project boundaries  Develop an emissions baseline for the project - alternative to the project  Difference between emissions in the baseline and CDM option = emissions saved  Levels of baselines project specific or sector specific country/region specific (RETs: well-established emissions additionality: baseline standardization, project clustering, streamlined procedures)  Prepare project design document

18 Procedures  Validation - independent evaluation of project activity against CDM requirements.  Registration - acceptance by Executive Board of a validated project as a CDM project activity. It is a prerequisite for verification and certification  Monitoring - measurement of energy use, GHG emissions  Verification - periodic independent review and ex post determination of monitored emissions reductions  Certification - written assurance by designated operational entity that, during a specified time period, a project activity achieved the GHG emissions reductions as verified

19 TERI - Activities in CDM ] Developing country baseline ] Developing CDM projects in specific sectors ] Identification of CDM project within enterprises ] Developing CDM project: ] Baseline study, Examine Additionalities, estimation of mitigation potential, project viability studies, sustainable development analysis, business plan, Identifying OE, examination of possibilities for monitoring & verification ] Capacity building: Brain storming, training programs, workshops

20 CDM And Bio Fuels ] Bio fuels on prima-facie consideration are eligible for CDM benefits ] Agro waste ] Municipal waste ] Biogas ] Bio diesel ] Ethanol as fuel ] Plantation based biomass ] Effluent form argo processing industry (like from leather tanneries, starch processing, distilleries, slaughter houses, breweries)

21 CDM And Bio Fuels (Cont..) ] Some of the possible CDM projects are ] Use of ethanol or bio diesel as transport fuel ] Biogas from distilleries and breweries ] Fermentation based technologies for disposal (effective utilization) of black liquor from small paper mills ] Biomass based thermal applications in process industries (direct combustion, thermal gasification, bio methanation, conversion to ethanol ) ] Biomass based power generation : Direct combustion & conventional steam cycle, thermal gasification and & integrated combined cycle, Bio methanation & integrated combined cycle, Bio methanation and IC engine bases generator, conversion to ethanol & combined cycle)

22 Bio Fuels & Mitigation of Emissions of GHG ] For some of the above projects it is possible to take CDM benefits for mitigation in the emission of both methane and carbon dioxide ] For ethanol as a fuel it is only the mitigation in the emission of carbon dioxide which can be accounted for ] Carbon sink benefits for plantation based biomass can not still be taken as sinks are still not being allowed under CDM

23 Ethanol as Fuel & CDM ] Some of the issue which require deliberations while considering CDM benefits for ethanol as fuel are: ] There is leakages as significant amount of fossil fuel based energy would have been used in the cultivation and processing operations. This problem will not be that significant in case of production of ethanol from by products like molasses. ] The use of bio fuels in some instances may be mandated (like blending of ethanol up to 5 percent with gasoline in India) under such conditions the project can not be considered as additional ] Ownership of emission reduction credits ] CDM sinks projects are under discussions

24 Barriers - Ethanol as CDM projects  Project additionality  Low price of CERs  Eligible criteria  High transaction costs  CDM project development cost (for the early actors)

25 Addressing barriers and constraints Uncertainty regarding project additionality  One of the requirements of the CDM projects is that the project would not have otherwise (in the absence of additional revenues due to CDM) happened.  Thus it is important to examine why a project happens otherwise  A project happens otherwise either because they offer acceptable returns to the project promoters or they are required due to the law of the land. One can show project additionality as long as one can make a case that none of the above two conditions are satisfied  Inspite of the provision to consider the projects where the project activity has started after2000, these projects has the limitation regarding proving project additionality.  The low price of CERs seldom make a project to happen otherwise  It is important to incorporate intentions regarding CDM benefits at early stages of project development

26 Addressing barriers (Cont..)  High transaction costs: Developing standardized base Lines and bundling of number of smaller projects  CDM project development costs (for early actors) : Funding of CDM project development costs for early actors by institutions or industry associations  Uncertainties about CDM : One has to live with uncertainties, however the risks associated with uncertainties can be spread if the initiatives are taken by trade associations  Low price of CER : On a rough basis use of one ton of ethanol as fuel mitigates emission of about 0.6 to 0.7 ton of carbon dioxide. At about 5 dollars per CER (per ton of carbon dioxide) this amounts to about 3.5 US dollars (Rs. 150 to 160) per ton of ethanol.

27 CDM: National Strategy Study Objectives u Facilitate estimation of potential & costs of CDM-based GHG emission reductions from India and supply demand synthesis u Identification of key sectors & development of pipelines of potential CDM projects at sectoral levels (ethanol may be considered as one of the sectors) u Development of CDM project cycle, sectoral methodologies & guidelines to facilitate implementation of projects u Identification of key institutional, legal, financial & regulatory prerequisites to facilitate development and implementation of CDM projects u Human and institutional capacity building to identify, develop, implement, and process CDM projects in India, and to exploit global opportunities (Operators in sugar / ethanol industry may be included) u Disseminate study results, and experiences gained

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