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

CDM Opportunities in the Bio-Fuel & Ethanol as Fuel

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

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.

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

Basics of Climate Change

Green House Gases: CO2, 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

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 1994Ratified by 186 countries so far

UNFCCC - Objectives

Stabilization of CO2 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

Further Negotiations

COP 1

COP 2

COP 3 December 1997

Kyoto Protocol (KP)

Kyoto Protocol - Features

Six Green House Gases (CO2, CH4, N2O, HFC, PFC, SF6) are covered

Overall GHG emission reductions of 5.2% over 1990 levels by Annex I parties of UNFCCC (Annex B of the KP)

Differentiated targets among Annex I (e.g. Japan 6%, US 7% reduction, Australia 108% of 1990 levels) - Binding commitments

First commitment period is (2008-12)

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

Kyoto Protocol - Flexibility MechanismsAnnex B(of KP) countries are to take lead

in limiting GHG emissionsApart 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

Kyoto Mechanisms -Joint Implementation

Exchange of emissions reduction units

(between legal entities with government

approval)

Between developed countries

Project based

Price negotiated bilaterally

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

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

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 2008-2012

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

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

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

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

TERI - Activities in CDM

Developing country baselineDeveloping CDM projects in specific sectors Identification of CDM project within

enterprisesDeveloping 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

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)

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)

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

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

Barriers - Ethanol as CDM projects

Project additionality

Low price of CERs

Eligible criteria

High transaction costs

CDM project development cost (for the early

actors)

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

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.

CDM: National Strategy Study Objectives Facilitate estimation of potential & costs of CDM-based GHG

emission reductions from India and supply demand synthesis Identification of key sectors & development of pipelines of

potential CDM projects at sectoral levels (ethanol may be considered as one of the sectors)

Development of CDM project cycle, sectoral methodologies & guidelines to facilitate implementation of projects

Identification of key institutional, legal, financial & regulatory prerequisites to facilitate development and implementation of CDM projects

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)

Disseminate study results , and experiences gained