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Regional Cooperation in Promotion and Sustaining CDM Initiatives A Case of ASEAN. WEERAWAT CHANTANAKOME, Ph. D. Executive Director ASEAN Centre for Energy (ACE) Jakarta, Indonesia.

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Regional Cooperation in Promotion and Sustaining CDM InitiativesA Case of ASEAN

WEERAWAT CHANTANAKOME, Ph. D.

Executive Director

ASEAN Centre for Energy (ACE)

Jakarta, Indonesia

* A paper presented at the Asian Regional Workshop on “Capacity Development for the Clean Development Mechanism (CD4CDM), October 19-21, 2005, AIT, Bangkok, Thailand--- “Exploring Cooperation in CDM Implementation in ASEAN”


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OUTLINE OF PRESENTATION Initiatives

  • Introduction to ASEAN and ACE

  • CO2 Emission & Reduction: ASEAN Profile

  • Status of Climate Change Treaties and CDM PROJECTS in ASEAN countries

  • CDM Investment Structures

  • Forecast CO2 Emission and Reduction / Market Value and Investment Opportunities

  • ASEAN CDM Host Country & Institutional Arrangements:

  • CDM Institutional Capacity Building

  • Way forwards for Cooperation


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The ASEAN Initiatives

Geography

Myanmar

Vietnam

PACIFIC

OCEAN

Lao PDR

South China

Sea

Thailand

Philippines

Cambodia

Gulf of

Thailand

Malaysia

Brunei Darussalam

Singapore

Indonesia

INDIAN

OCEAN


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INTRODUCTION Initiatives

  • ASEAN, one of the most dynamic economic regions of the world,

  • A heterogeneous mix of economies with greatly varying energy resource endowment and energy development situation.

  • In spite of these differences, the ten (10) ASEAN countries have common aspirations in achieving the Goals of Sustainable Energy Development and Utilization.


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ABOUT ACE Initiatives

  • Established on January 1, 1999 as an inter-governmental organization that is guided by a Governing Council composed of the Senior Officials on Energy (SOE Leaders) of the ASEAN countries.

  • Took over all the commitments, responsibilities, liabilities, and assets of the 10-year long ASEAN-EC Energy Management Training and Research Centre (AEEMTRC).

  • Core funding is provided by an Energy Endowment Fund established from equal contributions of the ten Member Countries and managed by a fund manager of the ASEAN Secretariat.


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Charter of ACE Initiatives

  • ACE is envisioned to be a catalyst for the economic growth and development of the ASEAN region by initiating, coordinating and facilitating regional as well as joint and collective activities on energy.

  • To realize this vision, the Centre will accelerate the integration of energy strategies within ASEAN by providing relevant information, state‑of‑the‑art technology, and expertise to ensure that over the long-term, necessary energy development policies and programs are in harmony with the economic growth and the environmental sustainability of the region.


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Organizations in the ASEAN Energy Sector Initiatives

ASEAN HEADS OF STATE/GOVERNMENT

OTHER MINISTERIAL

MEETINGS

OTHER MINISTERIAL

MEETINGS

A M M

AMMST

ASEAN

S G

A E M

A M E M

A S C

S O M

COST

S O M E

ASCOPE

ASEAN CENTRE FOR

ENERGY (ACE)

LEGEND:

AEBF: ASEAN Energy Business Forum

AEM: ASEAN Economic Ministers

AFOC: ASEAN Forum on Coal

AMEM: ASEAN Ministers of Energy Meeting

AMM: ASEAN Ministerial Meeting

AMMST: ASEAN Ministerial Meeting

on Science & Technology

ASC: ASEAN Standing Committee

ASCOPE: ASEAN Council on Petroleum

COST: Committee on Science & Technology

EE&C SSN: Energy Efficiency and

Conservation Subsectoral Network

HAPUA: Heads of ASEAN Power

Utilities/Authorities

NRSE SSN: New & Renewable Sources of

Energy Subsectoral Network

SCNCER: Sub-Committee on Non-Conventional

Energy Research

S G: Secretary General

SOM: Senior Officials Meeting

SOME: Senior Officials Meeting on Energy

REPP-SSN: Regional Energy Policy and Planning – Sub Sector Network

REPP-SSN

NRSE

SSN

EE & C

SSN

HAPUA

AEBF

AFOC

SCNCER

ASEAN

SECRETARIAT


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ASEAN Vision 2020 Initiatives

…."establish interconnecting arrangements in the field of energy utilities for electricity, natural gas and water within ASEAN through the ASEAN Power Grid and Trans-ASEAN Gas Pipeline, and promote cooperation in energy efficiency and conservation, as well as the development of new and renewable energyresources."

5


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Economic Profile Initiatives

Source: ASEAN+3 Energy Security Forum, Fereidun Fesharaki, FACTS Inc./EWCI Ltd., Cebu, Philippines, February 11, 2004


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Economic Profile Initiatives

  • ASEAN registering a 6.2 per cent GDP growth rate in 2004.

  • Projections for the 2005 year-end are also positive: ADB forecasts a 5.7 per cent GDP growth for Southeast Asia and 6.6 per cent for Asia in 2005-06 on the back of export growth and FDI expansion, including continued growth of China and India.


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Economic Profile Initiatives

  • An additional US$ 10 increase in oil prices would restrain GDP growth by 0.6 per cent on the average. In ASEAN, many countries recently trimmed their growth, citing rising fuel costs


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CO2 Emission & Reduction: ASEAN Profile Initiatives

CO2 EMISSION FROM FUEL COMBUSTION 1990-2001

Source: IEA, 2000; IEA – 2003 (IPCC)


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ENERGY POLICY ISSUES: InitiativesENVIRONMENT

CO2 Emissions Based on Electricity Demand Forecast 2020 (BAU) vs. Kyoto Protocol (KP)

Year

Conditions

1 Business As Usual (BAU) is CO2 Emission based on electricity demand forecast 2020.

2 Agreed worldwide CO2 reductions under Kyoto Protocol is 5.2% of 1990 CO2 emission levels.

3 Dollar value of CO2 emission reduction is 5.5 USD/MT CO2 as in recent transactions.


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ENERGY POLICY ISSUES: InitiativesENVIRONMENT

Graph Showing CO2 Emission Based on Electricity Demand Forecast 2020(BAU vs. Kyoto Protocol)


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ENERGY POLICY ISSUES: InitiativesENVIRONMENT

Total CO2 Reduction from RE and EE&C Plans in 2020in Mil. T CO2


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ENERGY POLICY ISSUES: InitiativesENVIRONMENT

CO2 Reduction from RE and EE&C Plans in 2020 of ASEAN Countries vs. KP with BAU as Baselinein Million Tons CO2


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ENERGY POLICY ISSUES Initiatives: ENVIRONMENT

Comparison of CO2 Emission on Three Scenarios: BAU, RE & EE&C Plans and KP


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Status of Climate Change Treaties Initiativesin the ASEAN


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CDM PROJECTS IN ASEAN COUNTRIES InitiativesSource: www.cdmwatch.org


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CDM Investment Structures Initiatives

  • Unilateral model

    • developing country would itself undertake actions to reduce emissions and then subsequently trade the CERs (certificate of emissions reductions) produced through such action on the international market .

  • Bilateral model

    • countries or private entities would negotiate agreements among themselves. Together, they would set criteria and rules for crediting.

  • Multilateral model

    • countries would offer projects for emission reductions to the CDM, to be picked up by the highest bidder in Annex 1 countries. Interested developing countries could each present a portfolio of projects and seek financial and technical support for their implementation.

  • Hybrid model

    • Combines features of unilateral and multilateral models.


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Unilateral CDM Initiatives

1. Project Development, Design and Financing

Ideas Capacity Financing

Host

2. Validation of Project Design

3. Monitoring by Project Operators

CERs

Operational Entities/ Executive Board

4. Verification and Certification


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Unilateral CDM Initiatives

  • Attractive to countries with sufficient capacity and resources to select, develop, finance, and operate sustainable development

  • Ensures that projects are closely knit with national sustainable development plans

  • Can promote wider international CDM participation


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Bilateral CDM Initiatives

1. Project Development, Design and Financing

ANNEX 1 Investors

Ideas Capacity Financing

Host

2. Validation of Project Design

3. Monitoring by Project Operators

CERs

Operational Entities/ Executive Board

4. Verification and Certification


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Bilateral CDM Initiatives

  • Consistent with conventional modes of foreign direct investment (FDI)

  • Provides most flexibility to project developers

  • Consistent with the existing development assistance practices

  • Concerns:

    • Large majority of FDI is concentrated in a small set of countries (China, Mexico, Brazil – 50 %) – will not deliver a geographic distribution of project

    • Bilateral approach favors large capital intensive infrastructure project – small renewable and energy efficiency projects may be rendered non competitive.


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Multilateral CDM Initiatives

ANNEX 1 Investors

CERs

$

1. Project Development, Design and Financing

CDM Fund

Ideas Capacity Financing

Host

2. Validation of Project Design

3. Monitoring by Project Operators

CERs

Operational Entities/ Executive Board

4. Verification and Certification


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Multilateral CDM Initiatives

  • May increase bargaining power to developing countries – dealing with fund managers whose mandate is compatible with their interests

  • Help shelve investors for the risks of individual project failures

  • Possible arrangements

    • Single supplier – give the greatest control over CDM investment flows but could slow the market development and create large inefficiencies

    • Multiple fund – variety of institutions operate, competing and co-existing CDM funds


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Hybrid CDM Initiatives

Annex 1 Private Investors

Other Multilateral CDM Funds

Domestic Investment

$

CERs

$

CERs

$

CERs

1. Project Development, Design and Financing

Ideas Capacity Financing

National CDM Fund

2. Validation of Project Design

3. Monitoring by Project Operators

CERs

Operational Entities/ Executive Board

4. Verification and Certification


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Forecast CO2 Emission Initiativesand Emission Reductionfrom Energy Sector for the ASEAN Countries(2001-2010)

* Using business-as-usual (BAU) as baseline


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Market Value Initiatives of Emission Reductions *2001-2010 in ASEAN: Investment Opportunities

* - Using business-as-usual as baseline

- Assuming USD 5.5 per ton CO2


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Summary of InitiativesMarkets/ Investment Opportunities from Clean Energy Initiatives in ASEAN(in million US Dollars)


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Conclusion Initiatives

  • The Clean Energy Development Market and Business Opportunities in the ASEAN Region during 2001-2010 range between 44 Billion USD and 85 Billion USD

  • Taking the proper gears for the RESCOs, the ESCOS and the CDM PromotionCompanies should be a way to prosper in this market.


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ASEAN CDM Host Country Initiatives

  • The large ASEAN countries have a varied and considerable CDM potential, particularly regarding bio-energy and geothermal.

  • The most attractive ASEAN CDM host country at the moment is likely to be Indonesia. Vietnam and Malaysia have institutions in place and thus fulfill the necessary conditions.

  • Thailand and the Philippines still have to clarify their approval procedures, but already have a considerable project pipeline.


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Institutional Arrangements for CDM in ASEAN countries Initiatives

  • Cambodia, Laos, Malaysia, Thailand and Vietnam have notified their DNA

  • Indonesia is likely to notify its DNA after the recent ratification of the Kyoto Protocol.

  • The Philippines are in the process of setting up the DNA. (?)

  • Brunei, Myanmar and Singapore have not yet started preparations. (?)


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CDM Institutional Capacity Building in ASEAN Initiatives

  • ASEAN have experience in developing CDM policies, setting up institutional arrangements and implementing CDM procedures.

  • Local capacity and experience is still limited in some countries. Within the region, therefore, the exchange of experience and co-ordination can support the implementation of CDM.

  • Needs for capacity building in ASEAN are:

    - Operational skills of DNA

    - Technical CDM project assessment

    - Establishment local Operational Entities

    - Awareness raising in longer term

    - Project development:

    * CDM life cycle or preparing proposals

    * Financing or transactions


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Ongoing Capacity Building Projects Initiatives in the ASEAN region

  • CDM-ASEAN (ASEAN region)

    - Energy sector, institutional

  • Japan IGES-MOE (Indonesia, Cambodia, Thailand, Vietnam, Philippines)

    - all levels of capacity building

  • WB/ESCAP (Northeast, Southeast and South Asia)

    - all levels of capacity building

  • CD4CDM/UNEP (Vietnam, Cambodia, Philippines)

    - Awareness building, project development, institutional

  • GTZ project on CDM institution building (Indonesia / Cambodia - Vietnam)

    - Procedures, DNA, project clearing house

  • Danish CDM capacity building (Thailand / Malaysia)

    - DNA, procedures, project development, awareness

  • UNDP (Philippines)

    - Institutional, project development, awareness

  • SouthSouthNorth (Indonesia)

    - Project development, sustainability criteria

  • Asia Pro-Eco (Cambodia, Laos, Vietnam)


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Problems & Recommendations Initiatives

  • Most projects are successful. Some problems, however,

    have been identified which limit the effectiveness of the projects:

    – Some overlap exist in scope and content

    – Projects do not sufficiently build on results of previous projects

    – The target group is sometimes not specific enough

    – Capacity building should start by raising awareness on the

    general issue on climate change since most people have very

    limited knowledge on the issue, then relate it to the more specific

    CDM issues.

    – The project activities are often limited to workshops and do not

    involve (on-the-job) training.

    – The role of local government in CDM is not clear and not

    adequately targeted in the capacity building projects

    Ref: Pelangi, 2004, Jakarta, Indonesia


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Recommendations Initiatives

  • Several recommendations have been made to increase the effectiveness of capacity building:

    – Improved evaluation of past projects

    – Stricter assessment of proposals by the recipient country and organisations beforehand

    – Capacity building should not be limited to transfer of knowledge but also include transfer of skills (on-the-job training)

    – Improved coordination of activities. This is mainly the

    responsibility of the recipient (host) country.

    – Better exchange of information or results between projects


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ASEAN Existing Body for Cooperation: Way Forwards… Initiatives

  • Roles of ASEAN Secretariat, ASEAN Centre for Energy (ACE), ASEAN CCI, complementary to the activities on the national level.

  • A future ASEAN Climate Change Initiative could facilitate the transfer of best practice and the exchange experiences within ASEAN.

  • The ongoing CDM-ASEAN Project (ACE/EAEF) can be seen as a first step (or pilot) towards establishing a regional framework for exchange of experience.

  • The possibility of the establishment of an ASEAN CDM Fund to fund CDM projects

  • ASEAN Senior Official Meeting on Energy (SOME)

  • ASEAN MINISTERS ON ENERGY MEETING (AMEM)


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A Commitment…. Initiatives

“…However, the ASEAN people are becoming aware that the climate is actually changing…

and their awareness may be the key to future change…”


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THANK YOU Initiativeswww.aseanenergy.org


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