Progress of the CDM

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The CDM and perspectives for Africas
participation
Daniele Violetti Team Leader Registration and
Issuance Unit Sustainable Development Mechanisms
Programme UNFCCC
West Africa Carbon Finance Investment Forum for
Financial Institutions 12-14 February
2008 Dakar, Senegal
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Progress of the CDM Contents

1. Background to the CDM
2. The work so far
3. What Bali meant for the CDM in Africa
4. From now on

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Progress of the CDM
1. Background to the CDM
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Progress of the CDM 1. Background to the CDM

1. Institutional base
2. Late comer, early starter
3. Quick tour through the CDM project cycle
4. Selling CERs the basics

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Progress of the CDM 1. Background to the
CDM Institutional Base The Kyoto
Protocol (i)

• The Kyoto Protocol establishes mandatory targets
  on greenhouse-gas emissions for developed
  economies (Annex B) which have accepted it.
• The overall target of reducing greenhouse-gas
  emissions from Annex B countries is 5 below
  existing 1990 levels, which ranges from -8 per
  cent to 10 per cent of individual emissions
  levels on a country specific basis.
• This mandatory emissions limit is to be initially
  applied during the first commitment period (2008
  to 2012).
• Annex B countries can meet their targets by
• Domestic abatement policies and measures
• Participating in the three flexibility
  mechanisms
• Clean Development Mechanism (CDM)
• Joint Implementation (JI)
• International Emissions Trading (IET)

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Progress of the CDM 1. Background to the
CDM Institutional Base Associated
Bodies (i)

• Conference of the Parties serving as Meeting of
  the Parties to the Kyoto Protocol
• Overall authority over and provides guidance to
  the CDM
• Decides on recommendations made by the CDM
  Executive Board
• Decides on the designation of Operational
  Entities accredited by the EB
• Other related duties/authority

COP/MOP

• Designated National Authority
• Formally represents the party (country)
  participating in the CDM
• Approves the participation of interested entities
  in a CDM project
• Procedural details of approval are sovereign to
  each party

DNA

• CDM Executive Board
• Supervises the CDM under the authority and
  guidance of the COP/MOP
• Main duties (inter alia)
• Approves new methodologies
• Accreditation of operational entities
• Supervises the CDM Registry
• Accepts validated projects as CDM activities
• Instructs the issuance of CERs

EB
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Progress of the CDM 1. Background to the
CDM Institutional Base Associated
Bodies (ii)
Panels and Working Groups
Methodologies panel
Working group for small-scale CDM project
activities
Working group on afforestation and reforestation
project activities
EB
Registration and Issuance Team
CDM Accreditation Panel CDM Accreditation
Assessment Team
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Progress of the CDM 1. Background to the
CDM Institutional Base Associated
Bodies (iii)

• Designated Operational Entities
• Organisation accredited by the EB for
• Validating and requesting registration of CDM
  projects
• Verifying emissions reductions and requesting
  issuance of CERs to the EB

DOEs
Project Participants Private or public entities
authorised by a party involved in a CDM project
activity
PPs
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Progress of the CDM 1. Background to the
CDM Late comer, early starter

• The Clean Development Mechanism (CDM) is
  considered to be a late invention in the
  negotiation of the Kyoto Protocol (Lecocq and
  Ambrosi, 2007).
• Proposed in November 1997 by Brazilian and US
  negotiators as a means for Non-Annex B parties to
  promote sustainable development in their
  countries, while at the same time helping Annex B
  countries meet their emissions reduction
  commitments.
• Finally included in the Kyoto Protocol under
  Article 12.
• Operational through the Marrakesh Accords
  (November 2001).
• First meeting of the CDM Executive Board during
  the same event (November 2001).
• First CDM project activity to be registered
  18/November/2004.
• First CDM project activity to have CERs issued
  20/October/2005.
• CDM Registry was operational since November 2004
  (as a stand alone system).
• By the time the ITL was up and running and ready
  to go live nearly 86 million CERs had been
  issued and 995 CDM project activities had
  requested registration.

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Progress of the CDM 1. Background to the
CDM Quick tour through the CDM
project cycle
Project Idea
Project Design Document (PDD)
Country Approval
Validation
Registration
Monitoring
Verification Certification
Issuance of CERs
Through DOEs
Distribution of CERs
Through Focal Point
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Progress of the CDM 1. Background to the
CDM Selling CERs The basics

• The CDM was not specifically designed as another
  emissions trading mechanism.
• It allows Non-Annex B entities/parties to help
  Annex B entities/parties meet their reduction
  commitments by investing in CDM projects in
  exchange of CERs.
• This investment can take the shape of a
  buying-and-selling transaction over the CER units
  on either a spot or forward basis. There are
  different structures that can be adopted by
  project owners and investors, depending on
  financing requirements, the nature of the
  underlying CDM project and other inherent
  factors.
• After issuance(primary market)
  distribution/allocation of CERs can only be
  performed among participants in the same CDM
  project (PPs).
• Buyers must be registered as PPs
• Focal point has to submit required documents

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Progress of the CDM 1. Background to the
CDM Selling CERs The basics
EB Instructs CDM Registry Administrator to issue
CERs
SOP Adaptation
2
Upon instruction of the CDM Registry Administrator
Pending Account Of the CDM Registry
Holding account National registry (Annex B)
Temporary holding account (Annex B)
ITL
Holding account National registry (Annex B)
Upon instruction from the nominated Focal Point
(FP) in accordance with MoC
IET
Permanent holding account (Non Annex B)
Holding account National registry (Annex B)
(Upon acc. holder instruction)
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Progress of the CDM 1. Background to the
CDM Selling CERs The basics

• The CDM Registry
• Limited range of functions compared to national
  registries
• Issuance ? Pending account
• Transfers (Internal and External) restricted to
  holding accounts of PPs only
• Cancellation
• SOP Adaptation (2 of each issuance)
• CDM registry is not used for compliance

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Progress of the CDM 1. Background to the
CDM Selling CERs The basics

• Forwarding of CERs from the Pending Account
• Share of Proceeds to cover administrative
  expenses (SOP Admin) has to be paid
• USD 0.10 per certified emission reduction issued
  for the first 15,000 tonnes of CO2 equivalent for
  which issuance is requested in a given calendar
  year
• USD 0.20 per certified emission reduction issued
  for any amount in excess of 15,000 tonnes of CO2
  equivalent for which issuance is requested in a
  given calendar year.
• SOP Admin applies to the expected average annual
  emission reduction for the project activity over
  its crediting period.
• Registration fee counts towards SOP Admin and is
  automatically deducted.
• Security code sent to FP once SOP Admin payment
  is cleared.
• FP uploads forwarding request using security
  code, prints out the form and submits it duly
  signed to Registration and Issuance Unit.
• Request for forwarding has to be in accordance
  with MoC.

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Progress of the CDM 1. Background to the
CDM Selling CERs The basics

• Forwarding of CERs from a Permanent Holding
  Account
• Account holder (account representative) submits
  forwarding request form duly signed to
  Registration and Issuance Unit.
• CDM Registry team clears and executes the
  transaction.
• Opening and maintaining a holding account in the
  CDM Registry (temporary or permanent) does not
  have any associated fee.
• Information on how to apply for a holding account
  in the CDM Registry can be found on
  http//cdm.unfccc.int/Issuance/IssuanceCERs.html

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Progress of the CDM
2. The work so far
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Progress of the CDM 2. The work so far

1. Registered CDM projects
2. Issuance of CERs
3. Regional distribution

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STATUS OF THE CDM MEASURING SUCCESS
gt 2,900 projectsgt 2.6 billion CERs expected
to the end of 2012
In pipeline
918 registered CDM projects1.16 billion CERs
expected to the end of 2012
To date
(assumption no extension of crediting periods)
Map and statistics accessible from
http//cdm.unfccc.int/
Status 7 February 2008
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Progress of the CDM 2. The work so far
Registered CDM projects (i)
Assumption All activities deliver
simultaneously their expected annual average
emission reductions Assumption No renewal of
crediting periods
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Progress of the CDM 2. The work so far
Registered CDM projects (ii)
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Progress of the CDM 2. The work so far
Registered CDM projects (iii)
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Progress of the CDM 2. The work so far
Issuance of CERs
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Progress of the CDM 2. The work so far
Regional Distribution (i)

• Despite encouraging progress under the Nairobi
  Framework, Africa still underrepresented in the
  CDM.

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Progress of the CDM 2. The work so far
Regional Distribution (ii)
Total number Number in African region Percentage
Registered CDM projects Registered CDM projects Registered CDM projects Registered CDM projects
At COP/MOP 2, Nairobi 421 11 2.61
To date 918 24 2.61
CDM projects in the pipeline CDM projects in the pipeline CDM projects in the pipeline CDM projects in the pipeline
At COP/MOP 2, Nairobi 1402 35 2.50
To date 3035 55 1.81
Designated National Authorities Designated National Authorities Designated National Authorities Designated National Authorities
At COP/MOP 2, Nairobi 112 29 25.89
To date 128 35 27.34
Designated Operational Entities Designated Operational Entities Designated Operational Entities Designated Operational Entities
At COP/MOP 2, Nairobi 17 1 5.89
To date 18 1 5.55
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Progress of the CDM 2. The work so far
Regional Distribution (iii)
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Nairobi Framework To catalyze CDM in Africa

• Announced at COP/MOP2 by the UN SG
• Partners UNFCCC, UNDP, UNEP, AfDB and WB New
  UN ECA
• Web page http//cdm.unfccc.int/Nairobi_Framework/
  index.html
• CDM DNA Forum Africa Addis Ababa in October
• New joint project proposal launched in Bali
  (Activity can start when funding is available)
• New all-Africa carbon forum to be held in
  Senegal in September 2008
• Focus of the Framework
• - Build capacity in developing CDM project
  activities
• - Build and enhance capacity of CDM DNAs to
  become fully
• - Promote investment opportunities for
  projects
• - Improve information sharing / outreach /
  education and training
• - Inter-agency coordination

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Progress of the CDM 2. The work so far
The CDM bazaar
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Progress of the CDM
3. What Bali meant for the CDM in
Africa
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Progress of the CDM 3. What Bali meant for the
CDM in Africa (highlights)

• Decision CMP.3
• abolishes the payment of the registration fee and
  share of proceeds at issuance for clean
  development mechanism project activities hosted
  in least developed countries (LCDs)
• encourages Parties included in Annex I to the
  Convention (Annex I Parties), that are willing to
  do so, to support initiatives, such as the
  Nairobi Framework, that address barriers to
  regional distribution, and also to consider
  further financial support
• encourages project participants, stakeholders and
  experts to make use of the CDM Bazaar and provide
  feedback to improve it

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Progress of the CDM
4. From now on
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Progress of the CDM 4. From now on

• The Secretariat observes a strong confidence on
  the CDM across the carbon market.
• CERs have consolidated as reliable carbon asset
  class.
• Despite an impressive growth in the number of CDM
  projects and issuance of CERs, Africa still lags
  behind.
• Interested parties are encouraged to take
  advantage of the CDM Bazaar and the information
  contained on the Secretariats web site.
• We look forward to your visit (cdm.unfccc.int).

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Progress of the CDM
THANK YOU!!!
CDM Bazaar http//www.cdmbazaar.net/ Catalogue of
decisions http//cdm.unfccc.int/Reference/catalog
ue/search Information cdm.unfccc.int cdm-info_at_unfc
cc.int
Registration and Issuance Unit Sustainable
Development Mechanisms UNFCCC