UNIDO-MRI workshop report

1. UNIDO-MRI workshop report

2. Kyoto Protocol and UNIDO’s Energy Branch • UNIDO’s role in the UNFCCC/KP process constructed around Building Capacity to accelerate transfer of energy-efficient and climate-friendly industrial technologies • UNIDO engaged in: • Methodology development for CDM/JI projects • Capacity Building for CDM • Technology Transfer

3. MRI’s climate activities • A Japanese private think tank established in 1970, with a wide variety of activities • More than 10 years’ experience in climate-related research,with clients in both government and private sectors.

4. The workshop • June 24 – 25, Tokyo, Japan (UN University) • 20 speakers, 300 participants • The first of its kind as a public-private partnership • Focus on Asian CDM from an extensive perspective (policymakers, academia, private sector, finance sector)

5. Sessions • Opening and dignitaries • Session I: Keynotes • Session II: The academia • Session III: The financial sector • Session IV: Country issues • Session V: The private sector • Session V: Panel discussion

6. Opening and dignitaries • Mr. Carlos Magarinos (UNIDO) • “The industrial revolution requires “the capacity to deliver enough where there is too little”. • Mr. Atsushi Oi (METI) • Highlighted Japan’s decision to ratify KP. • Attaining a 6% reduction is not easy for Japan, and requires transfer of technology to developing nations • METI’s recent activities. • The move is on internationally to implement CDM. • Mr. Seiji Morimoto (MOFA) • The effort for common rules that include the USA; that CDM entities are not limited to governments; and the hope of using ODA in CDM.

7. Opening and dignitaries (contd.) • Mr. Sozaburo Okamatsu (RIETI-CDM EB) • CDM registry planned to come into place in early 2003. • Noted that CDM is based on international equity rule in a highly transparent operation broadcast on the Web. • Mr. Yoichi Kaya (Keio University) • CDM will be an indispensable tool in responding to climate change • Outlined Japan’s policy to comply with KP requirements (energy, forestry, commercial), which can turn out to be quite costly.

8. Keynotes • Mr. Lu Xuedu (China) • CDM allows AI countries to invest technology and financial resources in other countries, and thereby get emission reductions. • Institutional building in China is under way. • Mr. Neil Cohn (IETA) • Lack of harmonized rules may result in illiquid markets. • Trend from pre-compliance market to trading as a compliance tool. • CDM as a first bankable credit after Marrakech • US-generated credits may still have a role.

9. The academia • Dr. Jusen Asuka (Tohoku University) • Domestic policy framework based on realistic and not-so-realistic assumptions: dictates no ET/taxes etc., until 2005. • Highlights importance of a trading scheme with Russia • Dr. Axel Michaelowa (HWWA) • Noted Asia lagging in CDM, despite potential and the risk of FSUs banking / non-compliance. Political risk play a role. • Incentives: allowing CERs in the domestic system, exemptions from carbon taxes, careful baseline-setting.

10. The academia (contd.) • Dr. Ryuji Matsuhashi (Tokyo University) • Proposal of a Japanese CERUPT • Partial securitization of projects could increase IRR • Dr. Mitsutsune Yamaguchi (Keio University) • Highlighted Japan’s need to rely on Kyoto Mechanisms (but currently without government resources) • Potential contradiction of current voluntary target (by sector) and profit maximization behaviour in emissions trading (to be carried out by companies) • Case study in China

11. The financial sector • Mr. Vikram Widge (IFC) • Carbon finance alone may not start projects, but it helps reduce risk. • Highlights IFC’s financing activities (hydro, methane, biomass) • Mr. Ikuo Nishimura (Tepco) • PCF’s activities (23 projects, 10 agreements) • Defines carbon finance as the cost required to reduce GHGs. • Dr. Josef Janssen (UNISG) • Unilateral CDM model will be more important than the bilateral CDM model, hence don’t wait for foreign resources

12. The financial sector (contd.) • Mr. Junji Hatano (Mitsubishi Securities) • Demonstration of “financial additionality”most visible in difference in ROEs: thus, limiting equity can help enhance the effect of CERs on ROE. • Mr. Naoki Mori (JBIC) • Pollution control and climate-related projects which account for 30 percent of the ODA loans. Loans to small-scale business, two-step loans are available. • ODA “diversion criteria” still uncertain

13. Country perspectives and TT • Mr. Vute Wangwacharakul, (Thailand, EGTT member) • TT is both in KP and UNFCCC. Technological additionality. Thai CDM priorities. Transparency for full private participation, from Business counterpart to Business partner. • Mr. Guillermo Balce (ACE, Indonesia) • ACE-planned power and gas interconnection of its 10 ASEAN countries by 2020 a big CDM candidate. METI and EU $ 18M fund (Energy Efficiency and Renewable Energy). More projects than investors. • Ms. Jyoti Parikh (IGIDE, India) • CDM inextricably associated with TT and CB thereto. TT is both hard- and software, must include the what, which, how and why. Replicability and continuity beyond the CDM project itself. Indian criteria for SD in CDM.

14. Country perspectives(contd.) • Dr. Morihiro Kurushima (NEDO, Japan) • NEDO seeks to be a pioneer for Japan in the CDM field, channeling japanese investment to CDM/JI, standardizing and diffusing technologies, perhaps with a Fund approach (A world technology bank for the environment). Cooperation sought with Multilateral and Financial institutions. Examples in Mexico & Thailand • Mr. Robert Williams (UNIDO) • Elaborated on UNIDO’s activities on Methodologies, TT and Capacity Building for CDM/JI. Some examples of big projects in the energy field (Coalbed methane recovery in India, TVE, motor systems efficiency and cogeneration in China, etc).

15. The private sector • Mr. Mark Trexler (Trexler and Associates) • Companies need a CC strategy. Uncertainty in the market. Clear upwards trend in prices. Sinks and additionality will be key. Acting early an advantage. • Mr. Anthony DiNicola (UNOCAL) • Indonesian CDM priority of RE struggles with unsolved CDM project technicalities. Need to quickly institutionalize CDM. New geothermal projects to be CDM

16. The private sector (contd.) • Mr. John Kessels (CRL Energy Ltd.) • CDM projects are inextricably associated with technology transfer and capacity building thereto. NZ attitude, consortia. IET vs. JI. CDM and the WEC crossborder projects • Mr. Yuzuru Nonaka (J-Power) • Success of KP and the after-KP system depends much on the U.S. joining it. A macro analysis model shows the global target could only be achieved if there is world involvement, which makes CDM and emissions trading essential. • Mr. Kuniyuki Nishimura (MRI) • JEMS simulation, MRI consulting services with private cos. ET should be actively used, measures other than least-cost.

17. Panel discussion • There will be plenty of opportunities in the ASEAN region • Asia is called to be much more significant for the market and the viability of CDM • Asian commitment is clear to a CDM based on private transactions with limited government involvement • More clarification by the EB of procedures is necessary. • Criticism was voiced about the unresolved definition of additionality. • Major barrier for a higher japanese private sector involvement in the CDM is lack of clarity of the rules. • Carbon credits’ price and CDM “depth” would be heavily influenced by host government policy. • Private/public partnership could minimize government regulation • Private companies can implement CDM on their own if clear feasible procedures are set by the EB • Russia flooding the market with “hot air” would be unlikely

18. Panel discussion (contd.) • Need for a paradigm shift: “We have to look at the public of others” • CDM’s approach in Japan is by now a restrained practical enthusiasm • CDM’s degree of regulation will balance market efficiency & integrity • Main actors are looking forward to a fully integrated market in the near future • A lot can be learned about the complexities of CDM by doing small transactions • Academic institutions and international organizations can help business sectors understand how to operate the CDM with economic rationality • Also, partnership between public and private sectors is a good approach to the problem of how to apply the global market mechanism of CDM from one country to another.

19. Full report available from the following URL: http://www.unido.org/doc/310797.htmls Other information can be requested from energy@unido.org