1. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Clean Development Mechanisms: Role in the Climate Policy & Design of projects Lazare Nzeyimana Department of Water and Environment lazare.nzeyimana@sweco.se

2. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA 1- Introduction: Climate Change History Historical remarks –Svante Arrenius – Theoretically argued the correlation between levels of greenhouse gases and atmospheric temperature –1930s – academic discussion without any real impact –1970/80s – Other more acute problems… Oil shocks, CFCs ect.. 1987 – Bruntland Commission, ”Our Common Future” 1988 – Establishment of the IPCC (Intergovernmental Panel on Climate Change 1992 – Agenda 21 and the Rio conference – led to UNFCCC –United Nations Framework Convention on Climate Change 1997 – The formulation of the Kyoto Protocol (KP)

3. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA The Kyoto protocol (KP) Historical remarks –Entered in to force on 16th of February 2005 when Russia signed and approaved the protocol –At least 55 parties of the UNFCCC, accounting for at least 55% of the Annex 1 countries CO2eqv-emissions in 1990 –As of 14th of January 2009, 184 countries and one regional economic integration organization (the EEC) have deposited instruments of ratifications, accessions, approvals or acceptances. –63.7% of the total CO2 emissions for 1990 of the Annex I Parties have ratified the Protocol.

4. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA The Kyoto Protocol (KP) Separates Annex 1 countries and non Annex 1 countries –Annex 1 countries – Developed economies and economies in transition according to UNFCCC –Non Annex 1 countries – Less developed economies according to UNFCCC Obligations for an Annex 1 underwriter of the KP –Emission reduction targets for the period 2008 – 2012 (-5% in total for all Annex 1) compared to the base year 1990 –Setting up of national greenhouse gas inventory for 1990 and forward with yearly reporting –Implement national programmes for implementation of a climate friendly society including informational activities –Setting up of specialized entity that deals with all Kyoto related matters

5. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA The Kyoto Protocol Content – An Annex 1 country is assigned AAUs (Assigned Amount Units) equal to their 1990 emissions minus their respective emission reduction target Number of AAUs = Total ton CO2eqv1990 – Total ton CO2eqv reduction2008-2012, yearly –Each country is obliged not to emit more CO2eqv than number of held AAUs +/- purchased/sold other emission rights through Kyoto flexible mechanisms –This means the system has a flexibility, enabling Annex 1 countries to fulfil obligations (quantified emission limitations) through market mechanisms –Market mechanisms enables cost efficient emission reductions

6. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA The Kyoto Flexible Mechanisms 1.International Emission Trading (IET), Cap and trade - AAUs 2.Joint Implementation (JI) - ERUs 3.Clean Development Mechanism (CDM) - CERs All mechanisms to keep greenhouse gases at set level within specified time period!

7. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA International Emission Trading (IET) - Cap and trade All Annex 1 countries are given a certain amount of emission allowances (corresponding to a cap) –AAU – Assigned Amount Unit, equivalent to emissions in base year 1990 –Tradable between countries as bilateral trade –Transferable through JI or CDM project mechanisms –Cap is lowered for each trading period

8. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Example of International Emissions Trading Country A&B both emits 100 000 ton CO2 equivalents The Kyoto allocates 95 000 AAUs (Assigned Amount Units) each Deficit of AAUs 5 000 AAUs Two choices to fulfill Kyoto obligations: 1. Buy 5 000 AAUs for market price (95 000 AAUs + 5 000 AAUs = 100 000 AAUs = actuall emissions) 2. Reduce emission with 5 000 ton for the cost of X EUR/ton (95 000 AAUs = 100 000 ton – 5000 ton = 95 000 ton = actual emissions) 3. Reduce emissions with 10 000 AAUs and sell the 5000 in surplus (95 000 AAUs – 5000 AAUs = 90 000 AAUs = 100 000 ton – 10 000 ton = 90 000 ton = actual emissions) Market price per AAU € 5 - 30 Country A (Selling) Cost for reducing emission € 5 Country B (Buying) Cost for reducing emission € 30

9. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Clean Development Mechanism (CDM) CDM - Project based mechanism of the Kyoto protocol –An Annex 1 country can use emission reductions from a project in non Annex 1 country to fulfil required emission reductions –The Annex 1 country is referred to as financing party and the non Annex 1 country as the host country –CO2 equivalent – Certified Emission Right (CER) –When the project has been approved by the CDM executive board, CERs are issued and transferred to the financing party –In reality increases the cap, but also increases the system boundaries –An emissions reduction in a country without quantitative emission limitations will still result in a net zero balance of the cap

10. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA CDM Statistics

11. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA CDM Statistics

12. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA CDM Statistics

13. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA 2- Actors and stakeholders

14. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA UNFCCC institutions in the project cycles CDM projects structure –CDM Executive Board –Designated National Authorities (DNA) –Designated Operational Entities (DOE)

15. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Commercial actors in the project cycles 1- Profit driven organizations – who does what? –Project finance institutions (Development banks, commercial banks) –Buyers of credits –Project developers 2- Market participants– who does what? –Trading sector participants –Brokers –Financial speculatory actors

16. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA 3- The market system

17. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Carbon Exchanges EUAs traded in many exchanges that have clearing services –EUA Contracts, spot trade –Financial contracts such as futures for EUA Nordpool European Energy Exchange – EEX European Climate Exchange – ECX Financial sector involved!

18. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Non compliant sector Carbon Off-setting –Company goodwill/profiling –Individuals (ex. transport) –Can be purchased from other than UNFCCC projects The New South Wales GHG abatement scheme Chicago Climate Exchange Gold Standard – Quality projects, may increase value of ERUs/CERs

19. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA CDM Board JI Committee Non Annex 1 country AAUs for Annex 1 country Annex 1 country The carbon market system in the EU - flow of CO2 allowances and cash CDM projects JI Developer UNFCCC Financial Institution Buyer of CER/ERU ERUs Track I CERs Project financing Carbon financing – ERU payment Carbon financing – CER payment Project financing ERUs CERs ERUs Track II Trader/Broker End user, Trading sector participant Carbon Credit Exchange EUA, AAU EUA, AAU, ERU, CER JI Focal Point CO2 allowance Finacial Flow EUA, AAU EUA, AAU from NAP

20. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA 4- The projects

21. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA CDM Project lifecycle

22. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA The PDD Content of the PDD –Choice of methodology –Applicability Scenarios, definitions and cases –Baseline Forward scenario for emissions Identification of alternative scenarios Project boundaries and activities Project emissions and leakage Additionality –Monitoring methodology Specifications of monitoring parameters for measurements

23. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Methodologies Different types of methodologies (2009) –CDM project activities (larger projects) 76 approved large scale methodologies 40 approved small scale methodologies –Afforestation and reforestation CDM project activities 10 approved large scale methodologies 5 approved small scale methodologies

24. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Example of CDM methodologies AM0036 “Fuel switch from fossil fuels to biomass residues in boilers for heat generation” AM0001 “Incineration of HFC 23 waste streams” AM0031 “Baseline Methodology for Bus Rapid Transit Projects” AM0035 “SF6 Emission Reductions in Electrical Grids” AR-AM0002 “Restoration of degraded lands through afforestation/reforestation” AR-AM0004 “Reforestation or afforestation of land currently under agricultural use” AR-AM0008 “Afforestation or reforestation on degraded land for sustainable wood production” AMS I.B. ”Mechanical energy for the user with or without electrical energy” AMS I.C. ”Thermal energy for the user with or without electricity” AMS III. B. ”Switching fossil fuels”

25. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA PDD emissions Project emission calculation ERy = BEy − PEy − LEy Where: –ERy = Emission reductions during the year y (tCO2/yr) –BEy = Baseline emissions during the year y (tCO2/yr) –PEy = Project emissions during the year y (tCO2/yr) –LEy = Leakage emissions during the year y (tCO2/yr)

26. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA To pass the additionality test Additionality Criteria Argumentation Evidence

27. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Bureaucracy… Rationale –Tracability –Transparency –Measurability –Equality

28. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Services Examples where SWECO can offer services: –Compilation PDDs –Feasibility study of projects –Technical Due Diligence –Financial Due Diligence –Negotiation with buyers (ERPAs)

29. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA To sum up …. Thank you for your attention! Seller Buyer CDM- Market Sweco

30. A DVANCED I NTERNATIONAL C OURSE I N L OCAL E NVIRONMENTAL M ANAGEMENT I N U RBAN A REAS 2010 AFRICA Thank you very much Asante saana