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Lehman Lee & Xu’s Beijing office. June 23 th. 2008. Clean Development Mechanism. DOING BUSINESS IN CHINA. abonidenobili@cplex.it. aldo@lehmanlaw.com. Aldo Settimio Boni de Nobili Associate - China desk - Beijing. DOING BUSINESS IN CHINA. Clean Development Mechanism.

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clean development mechanism

Lehman Lee & Xu’s Beijing office

June 23th

2008

Clean Development Mechanism

DOING BUSINESS IN CHINA

abonidenobili@cplex.it

aldo@lehmanlaw.com

Aldo Settimio Boni de Nobili

Associate - China desk - Beijing

facing global warming

DOING BUSINESS IN CHINA

Clean Development Mechanism

Facing global warming

GLOBAL WARMING

EFFECTS

IPCC

Increase in the temperature of Earth’s surface and oceans

Established in 1998 by WMO and UNEP

Sea level

1990-2100 = 1.4° C – 5.8° C

TASK:

Precipitations and extreme weather events

evaluate the risk of climate change

Agriculture

ACTIVITY:

Glaciers

reports about UNFCCC implementation

Species extinctions

2

unfccc

DOING BUSINESS IN CHINA

Clean Development Mechanism

UNFCCC
  • UNCED Rio de Janeiro 1992
  • Signed in 1992 by 154 nations
  • Parties = 192 countries
  • 1994 entered into force
  • COP
  • Aim: stabilizing GHG to prevent dangerous interference with the climate system
  • “Common but differentiated responsibilities”
  • Non-binding

Non-annex 1

  • report annual emissions and sinks
  • submit annual inventories

Annex 1

NO RESTRICTIONS

Developed countries

Annex 2

Developing countries

OECD

Provide financial resources to Non-annex 1

kyoto protocol

DOING BUSINESS IN CHINA

Clean Development Mechanism

Kyoto Protocol
  • COP3 Kyoto 11 Dec 1993
  • In force 16 Feb 2005
  • June 2008: 182 parties
  • 36 Annex 1 + EU = reduce GHG (61.6%)
  • Cyprus, Malta and Kazakhstan intend to participate
  • 137 Non-annex 1 ratified: no obligation
  • US not ratified

1° committment period = 2008-12

  • 1.3 emission allowances in 2nd commitment period for every ton of GHG exceeding
  • suspension from transfers of credits

GAINING CREDITS BY UNDER-POLLUTING

Industrial entities

Governments

Emissions cap

reduce national emissions 5.2% below 1990 baseline

Credits

other parties

$60 billion in 2007

brokers

Actual emissions

carbon projects developers

Buy credits

Buy credits

exchanges

4

emissions offset

DOING BUSINESS IN CHINA

Clean Development Mechanism

Emissions offset

Emissions exceeding

OFFSET

CO2 emissions cap

Carbon credits

Emissions allowed

JI

CDM

ET

5

kyoto protocol s flexible mechanisms

DOING BUSINESS IN CHINA

Clean Development Mechanism

Kyoto protocol’s flexible mechanisms

Emissions Trading (ET)

  • Article 17 Kyoto Protocol
  • Annex 1 – Annex 1

Joint Implementation (JI)

  • Article 6 Kyoto Protocol
  • Annex 1 – Annex 1

Clean Development Mechanism (CDM)

  • Article 12 Kyoto Protocol
  • Annex 1 – Non Annex 1

6

cdm market in china

DOING BUSINESS IN CHINA

Clean Development Mechanism

CDM market in china

INTENDED CERs BUYERS

PROJECT TYPES

WHY

Competitive labour and facilities costs

WORLD BANK SAYS:

50% of CERs

POTENTIALITIES

2-8 bln US$ per year

1197 projects nationally approved (April 2008): +400% 2006

210 projects internationally registered: + 500% 2006

CURRENT STATUS

1449 projects are being nationally approved

625 approved hydro projects: 50% of the total approved projects

7

7

slide8

DOING BUSINESS IN CHINA

Clean Development Mechanism

laws

INTERNATIONAL LEVEL

NATIONAL LEVEL

8

authorities

DOING BUSINESS IN CHINA

Clean Development Mechanism

authorities

National Coordination Committee on Climate Change (NCCCC)

  • reviewing national CDM policies, rules and standard
  • approving Board’s members

Host governments + Designated National Authorities (DNA)

  • national approval

Chair

NDRC

  • validation (outset)
  • making publicly available the PDD
  • receiving public comments and stakeholders’ comments
  • verification and certification of CERs (operation)

National CDM Project Board

  • examination and approval
  • reporting to NCCCC on progress in CDM activities
  • making reccomendations on the amendments of the CDM Measures

Designated Operational Entities (DOE)

NDRC - MOST

Co-Chairs

MOFA

Vice Chair

  • recommendations to the COP/MOP
  • approve new methodologies
  • DOEs accrediting and suspending
  • reviewing accreditation procedures
  • make publicly available CDM activities and procedures
  • CDM project registry
  • reviewing CR and VR
  • issuing CERs.

SEPA – CMA – MF - MA

Board

CDM Executive Board (EB)

DNA

  • accepting applications
  • final approval

NDRC

9

cdm requirements

DOING BUSINESS IN CHINA

Clean Development Mechanism

CDM requirements
  • China’s legal system, sustainable development strategies and policies
  • not introduce new obligations
  • promote the transfer of environmentally sound technology

Funding for CDM projects from the developed countries shall be additional to their current official development assistance and their financial obligations under the Convention.

PROJECT

Additionality

(Marrakech Accords)

“Chinese funded or Chinese-holding enterprises within the territory of China are eligible to conduct CDM projects with foreign partners” (art. 11 CDM Measures)

  • 100% Chinese
  • 51% Chinese (at least)

PROJECT OWNER

  • FIEs?
  • Hong Kong / Macau?

10

typical investment structure

DOING BUSINESS IN CHINA

Clean Development Mechanism

Typical investment structure

Government

65%

(HFC – PFC)

30%

(N2O)

2%

(Priority areas)

Broker

Company

TAXES

CERs purchaser

Other chinese taxes

RMB/tCO2

CERs

RMB/tCO2

CDM Project

Private company

Domestic company

Foreign investor

Governmental body

100% Chinese

Financial institution

FIE 51% Chinese (at least)

NGO

Project owner

11

11

cdm projects types

DOING BUSINESS IN CHINA

Clean Development Mechanism

Cdm projects types

Energy efficiency

Industrial process changes

Renewable energy

Methane recovery

Cogeneration

Afforestation and reforestation

Agriculture

Transports

priority

areas PRC

12

procedures

DOING BUSINESS IN CHINA

Clean Development Mechanism

Procedures

National level

NDRC

Project owner

PIN

Documents:

--application form

--PDD

--enterprise status

--general information

--project financing

Project owner

PDD

  • stakeholders

DNA + N Board

Approval

  • LOA
  • DOE ‘s designation
  • consultation
  • validation report

DOE

Validation

Expert review procedure (30 days)

  • filing of VR and LOA
  • 8 weeks (potential review)
  • EB files decision to PO
  • PO files decision to NDRC

EB

Registration

  • object
  • modality: monitoring plan PDD
  • submitting reports to NDRC and DOE

Project owner

Implementation and monitoring

Decision from National CDM Board

DOE’s designation

Project review

Validation Report to the EB

  • DOE’s designation
  • Verification Report
  • Certification Report

DOE

Verification

  • CERs: 15 days after reports
  • send to participants’ accounts at request

Certification and issuance

LOA (20-30 days)

EB

International

level

13

slide14

Lehman Lee & Xu’s Beijing office

June 23th

2008

THANK YOU FOR YOUR ATTENTION

DOING BUSINESS IN CHINA

Clean Development Mechanism

abonidenobili@cplex.it

aldo@lehmanlaw.com

Aldo Settimio Boni de Nobili

Associate - China desk - Beijing