1. Regional Cooperation in Promoting and Sustaining CDM Initiatives Ashok Sarkar, Ph.D. Regional and Sustainable Development Department Asian Development Bank (ADB), Manila, Philippines * CD4CDM Workshop Asian Institute of Technology, Bangkok, Thailand 21 October 2005 * The views presented herein are the author’s own made in his personal capacity and do not necessarily represent that of the ADB

2. R.FED & UKRAINE 0% W&E EUROPE -8% CANADA - 6% US - 7% AUSTRALIA +8% JAPAN -6% N. ZEALAND 0% Global Kyoto Commitment 38 countries faced reduction/limitation commitments - overall reduction of 5.2% from 1990 emission levels Commitments respond to a GHG reduction of 30%-40% below business as usual forecasts over period 2008 - 2012 2 nd Commitment Period (2013-2017) 3 rd Commitment Period (2018-2022)

3. Annex 1 targets Who’s missing their targets?

4. How Big a Market Will It Be? –2 x 10 9 tons traded at @ $5-20 = $10- 40 billion –Global market may exceed $100 billion per year by 2020 as estimated by the Financial Times –The Economist (October, 1999): $1 trillion global trading market if clear rules are established

5. Annual Volumes Traded (MtCO2e) to 2012 Vintages Source: State and Trends of the Carbon Market 2005, World Bank & Point Carbon Market Outlook July 2005

6. Estimated Market Value (US$M) Source: State and Trends of the Carbon Market 2005, World Bank & Point Carbon Market Outlook July 2005

7. Who is Buying? Jan 03 – Dec 04Jan 04 – Apr 05 Source: World Bank 2005

8. Who is Selling? Jan 03 – Dec 04Jan 04 – Apr 05 Source: World Bank 2005

9. Who is Selling? (2) 35 countries have hosted projects since 2001 India, Brazil & Chile account for 58% of total volume since 2001 With Bulgaria & Romania – 70% India & Brazil dominant countries China & Mexico emerging as major players Trades tend to concentrate on larger, middle-income countries – consistent with FDI trends

10. Technology Breakdown Source: World Bank 2005 Jan 03 – Dec 04Jan 04 – Apr 05

11. Role of CDM in Fostering the Clean Energy Challenge CDM Incentives EE/RE Market Rational Tariffs Subsidies’ Removal Economies of Scale Open, decentralized markets Life cycle costing Procedures EE Standards & Labels Building EE Codes Mandatory EE Audits ESCO Development Utility DSM Credit enhancement (Financial) mechanisms POLICY & MARKETS GEF Incentives

12. Supporting Framework in ADB ADB Energy Policy 2000’s operational priorities: “…addressing global environmental impacts, by supporting use of clean energy and Kyoto Protocol mechanism for GHG abatement…..” “…promoting the use of renewable energy, demand side management and energy efficiency…” “…promote regional and sub-regional cooperation…” Energy Efficiency Initiative: Launched in 2005 for developing operational strategy and options, including innovative financial instruments for increased share of energy efficiency in lending Clean Development Mechanism Facility: Established 2003 for upstream CDM support and mainstreaming (project preparation through transaction) in ADB loan projects REACH Program and PREGA Project: Launched in 2001, mainly for capacity building focused on CDM, renewables, energy efficiency.

13. ADB Energy Efficiency Initiative 2005 Lowered Energy Intensity in Asia Energy SecurityGHG Reduction Consumer benefits ADB’s Strategies (Lending terms, instruments & Procedures) Country Environment (Tariffs, legislations, Institutions, standards, Codes, etc.) G8 mandate Kyoto Protocol GEF, etc.

14. ADB CDM Facility Set up in 2003 Honest “broker” role Screening projects for CDM potential Identification of potential buyers Development of new baseline and monitoring methodologies (if required) Preparation of Project Design Document (PDD) Stakeholder Consultation Seek a Letter of Host Country Approval Arranging validation Negotiation of Emission Reduction Purchase Agreement (ERPA) Registration with CDM Executive Board Arranging verification Capacity Building

15. Renewable Energy, Energy Efficiency and Climate Change Program (http://www.adb.org/reach) –Netherlands Cooperation Fund for Promotion of Renewable Energy and Energy Efficiency ($6.0 million) PREGA (TA 5972-REG) -$4.5 million –Canadian Cooperation Fund for Climate Change (Can $5 million) –Danish Cooperation Fund for Renewable Energy and Energy Efficiency in Rural Areas (DKK 30 million) –Finnish TA Grant Fund (for renewable energy) (~Euro 1.8 million)

16. Promotion of Renewable Energy, Energy Efficiency and Greenhouse Gas Abatement (PREGA) RETA 5972 ($4.5 million) through Dutch Coop Fund Activities (2002-2004)- Phase 1 a.Capacity building on REGA project preparation b.Identification of REGA opportunities c.Technical, financial, economic, environmental/ GHG evaluation of projects d.Review of barriers and policy assessment e.Dissemination of lessons learned and demonstration through pilot projects Phase 2 (2005) – additional focus on bankable projects, CDM preparation and REGA mainstreaming in financial sector Phase 3 (2006) – focus on fund

17. PREGA Organization Participating Counterparts: –National Counterpart Agency (NCA) – serves as the Executing Agency –National Implementation Committee (of relevant government agencies and other stakeholders) – provides strategic direction for PREGA –National Technical Experts (NTEs) – serves as implementation consultants –International and Domestic Technical Experts

18. Canadian Cooperation Fund - Projects TA 3840-PRC: “Opportunities for the Clean Development Mechanism in the Energy Sector in China” Approved in March 2002, Completed in 2004 Guidelines and action plans developed for small-scale CDM activities Seven small-scale GHG reduction projects that could be eligible for CDM identified and developed Guidelines for small-scale CDM projects in China

19. Canadian Cooperation Fund - Projects (2) TA-6064-REG: Climate Change Adaptation for the Pacific (ClimaP): Integrating Adaptation Measures into the Programs and Project Cycles- Approved November 2002 TA 4137-INO: Carbon Sequestration in Indonesia- Assist Government in piloting a carbon sequestration project – Approved July 2003. TA 4496-IND: Capacity Building for CDM in India – approved December 2004 TA 4333-INO: Gas Generation from Waste in Palm Oil Industry in Indonesia- approved May 2004

20. Danish Cooperation Fund DKK 30 million trust fund from the Government of Denmark Recipients are DMCs with annual per capita GNP of less than $2,500. To finance technical assistance including project preparation, training and advisory services and institutional support To support activities on renewable energy in rural areas and small towns Focus on conversion to increased efficiency and cleaner fuels in energy supply systems and increased efficiency and conservation at the end use level.

21. Danish Cooperation Fund Projects TA 3965-MON: Renewable Energy Development in Small Towns and Rural Areas- Approved November 2002 TA 4054-INO: Power Welfare Scheme – Approved December 2002 TA 3874-AFG: Renewable Energy Development for Poverty Reduction – Approved March 2003 TA 6102-REG: Pacific Islands: Promotion of Renewable Energy and Energy Efficiency in the Pacific (REEP)- Approved April 2003 TA 4173-UZB: Off-Grid Renewable Energy Development- Approved September 2003 TA 4174-PHI: Rehabilitation of Renewable Energy projects for Rural Electrification and Livelihood Development – Approved September 2003 TA 4309-PRC: Renewable Energy for Poverty Reduction- Approved Dec 2003 TA 4500-PAK: Capacity Building for AEDB- Approved Dec 2004

22. Lessons Learned Advantages –enhanced energy security, –reliable supplies, –cleaner air and improved health, and –new job opportunities Barriers to RE/EE exist –Low energy tariffs, explicit/implicit subsidies –Cost disadvantages in the short term –Lack of relevant institutional, legal and policy framework –Monopolistic, centralized energy service markets –Political commitment or lack thereof –Limited financial sector involvement

23. Lessons Learned (2) CDM could be a catalyst in promoting the EE/RE agenda Some of the countries in the region are global leaders in the CDM market Some countries have established mature institutional structures and regulations Financial sector involvement generally low Many “best practices” exist in CDM project development and need to be replicated CDM expertise could be shared within the region through effective capacity building programs Regional/Sub-regional cooperation is the key to fostering the CDM challenge

24. Thank You Ashok Sarkar Regional and Sustainable Development Department Asian Development Bank P.O. Box 789, 0980 Manila, Philippines. Tel: (63-2) 632-6624 Fax: (63-2) 636-2198 E-mails: asarkar@adb.org, ashok_sarkar@hotmail.comasarkar@adb.orgashok_sarkar@hotmail.com Websites: http://www.adb.org/cdmf, http://www.adb.org/reachhttp://www.adb.org/cdmfhttp://www.adb.org/reach