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Regional Cooperation in Promotion and Sustaining CDM

InitiativesA Case of ASEAN

WEERAWAT CHANTANAKOME, Ph. D.Executive DirectorASEAN 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 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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GeographyThe ASEAN

INDIANOCEAN

PACIFICOCEAN

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INTRODUCTION 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 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

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 ASEAN HEADS OF

STATE/GOVERNMENT

AMMSTOTHER MINISTERIAL

MEETINGS

ASEAN CENTRE

FORENERGY

(ACE)

COST

A M M ASEANS G

A E M OTHER MINISTERIAL

MEETINGS

A S C S O MASCOPE

NRSESSN

EE & CSSN

HAPUA AEBF AFOCSCNCER

ASEANSECRETARIAT

A M E M

S O M ELEGEND:

AEBF: ASEAN Energy Business ForumAEM: ASEAN Economic MinistersAFOC: ASEAN Forum on CoalAMEM: ASEAN Ministers of Energy MeetingAMM: ASEAN Ministerial MeetingAMMST: ASEAN Ministerial Meeting on Science & Technology ASC: ASEAN Standing CommitteeASCOPE: ASEAN Council on PetroleumCOST: Committee on Science & TechnologyEE&C SSN: Energy Efficiency and Conservation Subsectoral NetworkHAPUA: Heads of ASEAN Power Utilities/AuthoritiesNRSE SSN: New & Renewable Sources of Energy Subsectoral NetworkSCNCER: Sub-Committee on Non-Conventional Energy ResearchS G: Secretary GeneralSOM: Senior Officials MeetingSOME: Senior Officials Meeting on EnergyREPP-SSN: Regional Energy Policy and Planning – Sub Sector Network

REPP-SSN

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ASEAN Vision 2020…."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 energy resources."

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Selected Economic Indicators for ASEAN+3 Countries, 2002

Population, Population, GDP, GDP, Real GDP, GDPPC, GDPPC,

millions share of ASEAN+3

current, million US$

share of ASEAN+3 growth US$/head Rank of 10

Brunei 0.4 0.0% 4,040 0.1% 3.2% 11,509 3Cambodia 13.5 0.7% 3,667 0.1% 4.5% 272 12Indonesia 231.3 11.5% 185,899 2.9% 3.7% 804 9Lao, PDR 5.5 0.3% 1,841 0.0% 5.8% 333 11Malaysia 24.5 1.2% 94,889 1.5% 4.1% 3,868 5Myanmar 48.9 2.4% 8,559 0.1% 5.0% 175 13Philippines 80.5 4.0% 78,900 1.2% 4.4% 980 7Singapore 4.2 0.2% 87,727 1.4% 2.2% 20,887 2Thailand 61.6 3.1% 122,555 1.9% 5.3% 1,990 6Vietnam 80.6 4.0% 34,507 0.5% 6.8% 428 10ASEAN 551.0 27.4% 622,584 9.8% 4.1% 1,130China 1,284.5 63.9% 1,236,690 19.5% 8.0% 963 8Japan 127.7 6.4% 3,997,042 63.2% 0.2% 31,300 1Korea 47.6 2.4% 472,501 7.5% 6.3% 9,918 4Three 1,460 72.6% 5,706,232 90.2% 2.4% 3,909 ASEAN+3 2,011 100.0% 6,328,816 100.0% 2.5% 3,147

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

Economic Profile

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Economic Profile 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 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 FROM FUEL COMBUSTION 1990-2001

CountryTotal CO2

Emissions (1990)

Total CO2 Emissions

(1998)

Total CO2 Emissions

(2001)Brunei 3.20 4.91 5.12Cambodia n.d n.d. n.d.Indonesia 141.55 226.46 283.50Lao PDR n.d. n.d. n.d.Malaysia 47.40 92.40 108.77Myanmar 3.95 7.84 6.74Philippines 36.03 61.99 67.62Singapore 34.76 43.46 45.93Thailand 80.20 148.10 156.40Vietnam 17.96 32.87 45.75ASEAN 365.05 618.03 719.56

Source: IEA, 2000; IEA – 2003 (IPCC)

CO2 Emission & Reduction: ASEAN Profile

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

2000 2005 2010 2015 2020

Business As Usual (BAU) in million tons CO2

196.66 141.00 200.00 280.00 358.00

Kyoto Protocol (KP) in million tons CO2

43.02 43.02 43.02 43.02 43.02

Emission Reduction from BAU to KP in million tons CO2

253.64 98.06 157.37 236.89 308.95

Value of Emission Reduction from BAU to KP in million US Dollars3

295.04 539.31 865.53 1302.87 1,699.24

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.

YearConditions

ENERGY POLICY ISSUES: ENVIRONMENT

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

Kyoto Protocol)

ENERGY POLICY ISSUES: ENVIRONMENT

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

Energy Efficiency &Conservation

RenewableEnergy

Total

Brunei 0.09 0.22 0.31Cambodia 0.09 1.94 2.03Indonesia 4.36 12.59 16.95Lao P.D.R 0.06 1.29 1.35Malaysia 2.73 9.03 11.76Myanmar 0.06 1.47 1.53Philippines 3.53 5.80 9.33Singapore 0.15 0.11 0.26Thailand 3.93 14.34 18.27Vietnam 4.24 20.72 24.96

Total 19.26 67.54 86.80

ENERGY POLICY ISSUES: ENVIRONMENT

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

in Million Tons CO2

Country

Total CO2 Reduction from EE&C and RE

Plans(a)

Kyoto Protocol with BAU as

baseline(b)

Difference(b-a)

Brunei 0.31 1.00 0.69Cambodia 2.03 0.42 -1.61

Indonesia 16.95 77.39 60.44

Lao P.D.R 1.35 -0.12 -1.47Malaysia 11.76 60.87 49.11Myanmar 1.53 -0.28 -1.81Philippines 9.33 54.99 45.66Singapore 0.26 14.70 14.44Thailand 18.27 60.50 42.23

Vietnam 24.96 39.50 14.54Total 86.80 308.95 222.22

ENERGY POLICY ISSUES: ENVIRONMENT

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Comparison of CO2 Emission on Three Scenarios:

BAU, RE & EE&C Plans and KP

ENERGY POLICY ISSUES: ENVIRONMENT

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Status of Climate Change Treaties in the ASEAN

Country

UNFCCStatus of Ratification

As of 17 February 2003

Kyoto ProtocolStatus of RatificationAs of 14 August 2003

Signature RatificationAccession

Entry into force

Signature RatificationAccession

Brunei - - - - -Cambodia - 18/12/95 (Ac) 17/03/96 - 22/08/02 (Ac)Indonesia 05/06/92 23/08/94 (R) 21/11/94 13/07/98 (OK) -Lao PDR - 04/01/95 (Ac) 04/04/95 - 06/02/03 (Ac)Malaysia 09/06/93 13/07/94 (R) 11/10/94 12/03/99 04/09/02 (R)

Myanmar 11/06/92 25/11/94 (R) 23/02/95 12/08/03 -Philippines 12/06/92 02/08/94 (R) 31/10/94 15/04/98 /10/03 (R)Singapore 13/06/92 29/05/97 (R) 27/08/97 - -Thailand 12/06/92 28/12/94 (R) 28/03/95 02/02/99 28/08/02 (R)Vietnam 11/06/92 16/11/94 (R) 14/02/95 02/12/98 25/09/02 (R)

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CDM PROJECTS IN ASEAN COUNTRIESSource: www.cdmwatch.org

Country CDM ProjectBrunei Not signatory to UNFCC and Kyoto ProtocolCambodia Studies by PREGA, UNEP and NEDOIndonesia -Micro-hydro project

-Unocal’s Sarulla geothermal project-Unocal’s Wayan Windu geothermal project-Palm oil west power plant-Utilization of plantation waste and forest segmentation for fuel switching project-Indocement energy efficiency project-Kansai wood waste recycling plant-Yogyakarta urban bus project-East Kalimantan plantation project

Lao PDR -Malaysia -Biomass power generation project

-Bumibiopower biomass power plant-Air Hitam landfill gas capture project-Palm oil plant gas capture project-Felda Lepar Hilir Palm Oil Mill biogas project

Myanmar Studies by NEDOPhilippine PV/LPG and biomass projectThailand -Rice husk power plant project

-AT Biopower rice husk power project-Yala rubber wood waste plant project-Mitr Phol’s Dan Chang Cogeneration project-Bangkok Landfill gas project

Singapore Not signatory to Kyoto ProtocolVietnam -Thongly landfill gas project

-Rang Dong gas planning project-Tree planting

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CDM Investment Structures 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 CDM1. Project Development, Design and Financing

2. Validation of Project Design

3. Monitoring by Project Operators

4. Verification and Certification

Operational Entities/ Executive Board

HostIdeas Capacity Financing

CERs

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Unilateral CDM

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 CDM1. Project Development, Design and Financing

2. Validation of Project Design

3. Monitoring by Project Operators

4. Verification and Certification

Operational Entities/ Executive Board

ANNEX 1 Investors

Host

Ideas Capacity Financing

CERs

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Bilateral CDM

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

1. Project Development, Design and Financing

2. Validation of Project Design

3. Monitoring by Project Operators

4. Verification and Certification

Operational Entities/ Executive Board

CDM Fund

Host

Ideas Capacity Financing

CERs

ANNEX 1 Investors

$ CERs

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Multilateral CDM 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

1. Project Development, Design and Financing

2. Validation of Project Design

3. Monitoring by Project Operators

4. Verification and Certification

Operational Entities/ Executive Board

National CDM FundIdeas Capacity Financing

CERs

Annex 1 Private Investors

Other Multilateral CDM Funds

Domestic Investment

CERsCERsCERs$

$ $

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Forecast CO2 Emission and Emission Reduction from Energy Sector for the ASEAN Countries (2001-2010)

ScenarioEmission

(in million tons CO2 )

Emission Reduction

(in million tons CO2 )

Business-as-usual 7,610 -Emission reduction on fossil fuels

- 879

Emission reduction on RE & EE programs

- 512

Emission reduction by Kyoto Protocol (5.2% of 1990)

2,519 5,091

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

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

Scenario Value in Mill. US Dollar

Emission Reduction from fossil

fuels

4,836

Emission Reduction from RE

and EE Programs

2,815

Emission Reduction by Kyoto

Protocol Standard

28,000

* - Using business-as-usual as baseline - Assuming USD 5.5 per ton CO2

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

MARKET

INVESTMENT OPPORTUNITIES

2001-2010Low High

Renewable Energy 19,476 27,467Energy Efficiency and Conservation

17,054 29,672

Clean Development Mechanism (CDM)

7,651 28,000

Total 44,181 85,139

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Conclusion

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 Promotion Companies should be a way to prosper in this market.

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ASEAN CDM Host Country

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

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 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 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 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 thegeneral issue on climate change since most people have verylimited knowledge on the issue, then relate it to the more specificCDM issues.– The project activities are often limited to workshops and do notinvolve (on-the-job) training.– The role of local government in CDM is not clear and notadequately targeted in the capacity building projects

Ref: Pelangi, 2004, Jakarta, Indonesia

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Recommendations

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 theresponsibility of the recipient (host) country.– Better exchange of information or results between projects

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ASEAN Existing Body for Cooperation: Way Forwards… 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….

“…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 YOUwww.aseanenergy.org