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CDM Benchmarks BEE Workshop on CO 2 Benchmarks for Cement June 2007 Urs Brodmann Member of CDM-India Expert Group Facto PowerPoint Presentation
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CDM Benchmarks BEE Workshop on CO 2 Benchmarks for Cement June 2007 Urs Brodmann Member of CDM-India Expert Group Factor Consulting + Management AG Zurich, Switzerland urs.brodmann@factorglobal.com www.factorglobal.com. Factor Consulting + Management: Our Services... since 1999.

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CDM BenchmarksBEE Workshop on CO2 Benchmarks for CementJune 2007

Urs BrodmannMember of CDM-India Expert GroupFactor Consulting + Management AG

Zurich, Switzerland

urs.brodmann@factorglobal.comwww.factorglobal.com

BEE: CDM Benchmarks for Cement

factor consulting management our services since 1999
Factor Consulting + Management:Our Services... since 1999

Carbon Asset Development

Carbon Financing

Mitigating Climate Change

Corporate Greenhouse GasManagement

BEE: CDM Benchmarks for Cement

overview
Overview
  • CDM Rules
  • CDM Statistics – General
  • CDM Statistics – Cement
  • Proposal for CDM Benchmarking

BEE: CDM Benchmarks for Cement

kyoto protocol to the united nations framework convention on climate change
Kyoto Protocolto the United Nations Framework Convention on Climate Change
  • Signed in 1997; in force since 16 February 2005
  • Ratified by >130 countries
    • Major non-participants: USA and Australia
  • Industrialised (= Annex 1) countries are to to reduce their greenhouse gas emissions by 5% below 1990 levels in 2008-12
    • Individual, quantified emission targets for each industrialized country
    • Six greenhouse gases covered: CO2, CH4, N2O, HFC/PFC, SF6
  • “Flexibility mechanisms” for financing emission reductions abroad:
    • Clean Development Mechanism (CDM)
    • Joint Implementation (JI)
    • International Emissions Trading

BEE: CDM Benchmarks for Cement

cdm objectives and organization
CDM Objectives and Organization
  • Principle: Emission reductions in developing countries can be certified and sold
    • Buyers = Annex 1 governments and companies located in these countries
  • Twin objectives:
    • Help buyer countries meet their GHG reduction objectives cost-effectively
    • Contribute to sustainable development of the host countries
  • Rules, modalities and procedures are defined in:
    • Kyoto Protocol (1997)
    • Follow-up decisions of COP, especially Marrakesh Accords (2001), and
    • Decisions of CDM Executive Board
  • CDM Executive Board:
    • Responsible for further development of CDM rules, and supervising implementation
    • Composed of 10 Members + 10 Alternates
    • Reports to the Conference of the Parties (COP)

BEE: CDM Benchmarks for Cement

eligible project types
Eligible Project Types
  • In principle, any project reducing “Kyoto gases” in the atmosphere:
    • Kyoto Gases: CO2, CH4, N2O, HFC/PFC, SF6
  • Carbon sinks are included:
    • Afforestation, reforestation
    • Technical sequestration (rules to be established)
  • Exclusions:
    • Nuclear energy
    • Avoided deforestation (Forest protection)
  • Tradable unit: “Certified emission reductions” (CER)
    • 1 CER equals 1 metric tonne of CO2-equivalent (CO2e)

BEE: CDM Benchmarks for Cement

baseline and additionality of cdm projects

Emissions baseline

Additional emission

reductions

Emissions with project

Baseline and Additionalityof CDM Projects

GHG emissions [t CO2-eq]

Project implementation

Year

BEE: CDM Benchmarks for Cement

additionality
Additionality
  • CDM is an incentive to achieve additional emission reductions
  • CDM is NOT a reward for past or BAU emission reductions
  • A project activity (and the resulting emission reductions) is additional if it is not the baseline scenario
    • i.e., the project activity should not occur “anyway”
  • Goal is to makeprojectshappen which without CDM revenues would not be viable.
  • Without additionality, CDM will lead to global increase in emissions
    • In comparison with a “Kyoto without CDM” world
    • Avoid that business-as-usual efficiency gains in developing countries are used to fulfil commitments of Annex 1 Countries

BEE: CDM Benchmarks for Cement

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CDM Project Cycle:Steps towards certified emission reductions (CERs)

CDM ExecutiveBoard

ProjectOwner

Project Idea

Registration

Project Owner

Monitoring ofEmission Reductions*

ProjectOwner

Project Design Document

Operational Entity

Verification & Certificationof Emission Reductions*

DNA

Host Country Approval

CERIssuance *

CDM ExecutiveBoard

ApprovalBaseline Methodology* *

CDM ExecutiveBoard

Operational Entity

* periodically during crediting time* * unless approved method. is used

Validation

BEE: CDM Benchmarks for Cement

overview1
Overview
  • CDM Rules
  • CDM Statistics – General
  • CDM Statistics – Cement
  • Proposal for CDM Benchmarking

BEE: CDM Benchmarks for Cement

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CDM Statistics (as per 7 June 2006)

  • Projects registered: 720
    • Of which located in India: 215 - World Leader
  • Projects submitted for registration: about 80
  • Projects known to be prepared for registration (undertaken public stakeholder consultation process): >800
  • Projects submitted to CDM Executive Board for approval of baseline methodology: 202

BEE: CDM Benchmarks for Cement

720 registered cdm projects per 29 may 2006
720 Registered CDM Projects(per 29 May 2006)

BEE: CDM Benchmarks for Cement

registered cdm projects per 29 may 2007 expected emission reductions
Registered CDM Projects (per 29 May 2007):Expected Emission Reductions

Total = 156MtCO2e /yr

BEE: CDM Benchmarks for Cement

number of registered cdm projects by quarter
Number of Registered CDM Projects by Quarter

BEE: CDM Benchmarks for Cement

approved large scale methodologies per may 2007
Approved Large Scale Methodologies (per May 2007)

Total = 48

BEE: CDM Benchmarks for Cement

overview2
Overview
  • CDM Rules
  • CDM Statistics – General
  • CDM Statistics – Cement
  • Proposal for CDM Benchmarking

BEE: CDM Benchmarks for Cement

registered cement projects by country
Registered Cement Projects by Country

BEE: CDM Benchmarks for Cement

emission reductions tco2 yr of registered cement projects by type india
Emission Reductions (tCO2/yr) of Registered Cement Projects by Type, India

BEE: CDM Benchmarks for Cement

rejected cement projects 1
Rejected Cement Projects (1)

BEE: CDM Benchmarks for Cement

rejected cement projects 2
Rejected Cement Projects (2)

BEE: CDM Benchmarks for Cement

cement projects under review
Cement Projects under Review

BEE: CDM Benchmarks for Cement

overview3
Overview
  • CDM Rules
  • CDM Statistics – General
  • CDM Statistics – Cement
  • Proposal for CDM Benchmarking

BEE: CDM Benchmarks for Cement

objective of benchmarking
Objective of Benchmarking

Twin objective of CDM benchmarks:

  • Baseline for calculation of emission reductions
  • No additionality test – any project beating the baseline qualifies as additional (“additionality threshold”)

Methodology for determination of the benchmark will be submitted to CDM Executive Board for approval

    • Once approved, methodology can be used by various project activities
    • Quantified benchmark to be validated by DOE for each project

BEE: CDM Benchmarks for Cement

benchmarking concept

Benchmark

CER*

Benchmarking Concept

CER* = additional reductions due to project

Emissions rate (t CO2 /t)

Production in region (t /yr)

BEE: CDM Benchmarks for Cement

existing cdm methodologies for cement
Existing CDM Methodologies for Cement

BEE: CDM Benchmarks for Cement

benchmark proposal draft for discussion
Benchmark Proposal(Draft for Discussion)
  • Develop benchmark forenergy intensity of kiln, in MJ /t clinker
  • Benchmark level =Average energy intensity of 20% best-performing “comparable” units
    • “Top 20%” is anchored in Marrakesh Accords as one possible principle for baseline setting
  • CERs = (BM – En.IntensityKiln) x CO2-Intensity of kiln fuel

BEE: CDM Benchmarks for Cement

benchmark proposal draft for discussion cont d
Benchmark Proposal(Draft for Discussion) – Cont.d
  • Why for energy intensity of kiln?
    • Biggest gap of current CDM rules
  • Why energy benchmark, not CO2-benchmark?
    • CO2-benchmarks more complex, less acceptable(mixing thermal efficiency and fuel types)
  • Why clinker-based, not cement-based?

 Clinker is logical choice for kiln efficiency benchmark

BEE: CDM Benchmarks for Cement

key issues methodological
Key Issues - Methodological
  • Need to distinguish new kilns vs. existing kilns ?
  • Thermal energy only, or thermal + electrical ?
  • Differentiate benchmarks based on project circumstances ?
    • Cement type
    • Kiln size
    • Raw materials
    • Fuels
    • Etc. etc.
  • Geographic scope:
    • Whole of India, vs. sub-national vs. international ?

BEE: CDM Benchmarks for Cement

key issues procedural
Key Issues - Procedural
  • Data: Need transparent, comprehensive database on kiln energy intensity
    • Data on drivers (e.g., raw mats., fuels, etc.) also required, if goal is to have set of differentiated benchmarks
  • Confidentiality: Need to address concerns re. confidentiality
  • Projects: Need at least one pilot project, to submit CDM methodology for approval
  • Responsibility: Who does what?

BEE: CDM Benchmarks for Cement

establishing the database points to consider
Establishing the Database:Points to Consider
  • Use existing data where available;Coordinate with ongoing and planned data collection:
    • Data submitted to BEE under Energy Conservation Act
    • Data collected by CMA / NCB
    • Data collected by CSI
  • Questions to be addressed:
    • Which data has been / will be collected ?
    • Who is coordinating the collection process ?
    • What is the timeline ?
    • Can data be used within existing confidentiality agreements ?
    • Can scope of data be extended for future collection rounds ?

BEE: CDM Benchmarks for Cement

tentative timeline
Tentative Timeline
  • June 07: Draft strategy & stakeholder buy-in
  • Aug 07: Detailed strategy and concept; start data collection identify 1-2 pilot project(s)
  • Oct 07: Start data analysis & methodology development
  • Jan 07: Submit benchmarking methodology for approval to CDM Executive Board (EB)
  • Jun 08: Methodology approved by CDM-EB
  • Aug 08: Pilot projects registered as CDM activities

BEE: CDM Benchmarks for Cement

conclusions
Conclusions
  • CDM is real:
    • Significant opportunities for Indian cement industry
  • CDM is becoming more difficult:
    • Executive Board getting tough on additionality
    • ... leading to higher transaction costs & projects being rejected
  • Benchmarks for kiln energy intensity should simplify CDM
    • Eliminate need for additionality test, and simplify baseline setting
  • Transparent, comprehensive database required for benchmark setting
    • Ways towards this database to be discussed
    • Coordination with ongoing & planned activities is key

BEE: CDM Benchmarks for Cement

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Thank you!

www.factorglobal.com

BEE: CDM Benchmarks for Cement