October 5, 2013

CARBON FINANCING: NEW BUSINESS OPPORTUNITIES

Session 5: Flexibility y Mechanisms of KYOTO Protocol : Development of CDM

CleanDevelopmentMechanism(CDM)inIndia

Course Instructor: Er. Ashwani Kumar,

Asstt. Prof. Faculty of Planning, CEPT, Ahmedabad - 9

Clean Development Mechanism in India

CDM in India CDM Potential P i l In I India I di Initial Response in India Status of Potential Harnessing CDM Issues: Institutional Baselines Establishment Technology Transfer Project Risk What need to be done? CDM in Future

Course Instructor: Er. Ashwani Kumar,
Asstt. Prof. Faculty of Planning, CEPT, Ahmedabad - 9

CDM PROJECT DEVELOPMENT PROCESS: CASE

Course Instructor: Er. Ashwani Kumar,

Asstt. Prof. Faculty of Planning, CEPT, Ahmedabad - 9

CDM PROJECT DEVELOPMENT PROCESS: CASE

Course Instructor: Er. Ashwani Kumar,

Asstt. Prof. Faculty of Planning, CEPT, Ahmedabad - 9

CDM PROJECT DEVELOPMENT PROCESS: CASE

Course Instructor: Er. Ashwani Kumar,

Asstt. Prof. Faculty of Planning, CEPT, Ahmedabad - 9

CDM POTENTIAL IN INDIA

Onethirdofemissionreductiontargets(Annex 1) IdentifiedCDMpotentialinIndia
Energy Transport T t Agriculture Waste Industrial

AgricultureandForestryhaveissues
[ [Disaggregated, gg g ,smalllandholdings, g ,g grazing grequirements, q ,transactioncost, , carbonsinkuncertainties]

CarbonMitigationPotential
DemandsideEE SupplysideEE ElectricityT&D RenewableElectricityTech FuelSwitching

INITIAL RESPONSE OF CDM

Buyers preference overriddes the other robust criteria such as least cost mitigation g and national development p p priorities Documents during initial stages lacks in
Content and form of PIN/PDD Articulation to related to sustainable development/national priorities

Differences in states geographical location and economic development status

Coastline (Wind Energy, Energy AP, AP TN, TN Gujarat) Sugar Industry (Cogeneration UP, Maharashtra) 12 no. Energy Intensive Industries (Steel, Cement Fertilizers etc. F l Switching Fuel S it hi g and d EE EE, All industrialized i d t i li d St States) t )

INITIAL RESPONSE TO CDM

Some projects (cogen) shifted to CDM due to termination of subsidy and earlier ODA grant Steel and Cement Industries benefitted to improve on EE, process modifications/modernisation modifications/modernisation, heat recovery Electricity y sector benefitted a lot Fuel switching, g, Renewable Although least cost options Agriculture, Forestry and Transport were not in initial list

CDM POTENTIAL IN INDIA : CONDUCIVE ENVIRONMENT READY ?

GoodAwarenessamongallstakeholdersaboutCDM Ambitiouslyaimedrenewablepoliciesandelaborate environmentalregulations ConcernsexhibitedonlowerCERpricesanduncertaintieson protocolbeyond2012 HighbenefitprojectionsfromCDMprojectsoverlookingthe groundlevel/implementationissuesisharmfulforlongterm CDMsuccess Biasin Bi i f favourof fbil bilateral t lCDMprojects j t with ithhi high hcosts t over unilaterallowcostprojects E Economic i R Rent torCERs CER vs.investment i t topportunity t it elsewhere l h

CDM STATUS IN INDIA

Un exploited south-south south south CDM Sustainable development objectives j are overlooked and viewed as external to project Risk

CarbonServiceprovider

EcoCapita FirstClimate(India)Pvt.Ltd. GERES GrouponRenewableEnergy, Environment

WHICH ARE THE CONSULTANT IN INDIA (DOE)?

PriceWaterhouseCooper E&Y Winrock DNV TERI KBSCertificationServices

For more details DoEs with UNFCCC http://cdm.unfccc.int/DOE/list/index.html

CDM IN INDIA : ISSUES AND CONCERNS MARKET AND CDM SIZE

Low Price of f CER C due to absence of f strong buyers and number of sellers Host country approval / transaction costs Smaller projects are common?
Low project risk cover in CDM leading to small projects Unilateral projects have higher risk Capital scarcity Simplified procedure under Marrakesh Lower transaction cost

Lack of identified portfolio of high mitigation potential large projects

CDM IN INDIA : ISSUES AND CONCERNS INSTITUTIONAL

Quick establishment of DNA in MoEF, but effective functioning

Resources Long term institutional strategy Independence Professional incompetence Weak industry linkages

Countrys y Political structure ( (Centre and State) ) leads to multiplicity of agencies (subsidy and pricing) Participation p of Financial Institutions Limited number of institutions for research and for various stages of CDM project

CDM IN INDIA : ISSUES AND CONCERNS T: ECHNICAL BASELINES ESTABLISHMENT IN INDIA ISSUES - BASELINE

R Range of ftechnology h l from f vintage i toultramodern l d T Technologies h l i UrbanfullmarketfunctionsandRuralincomplete DiverseandregionalsocioeconomiccontextProjectlevelCER accountingissensitivethemethodologyandbaseline determination. Cooperativerulemaking EnvironmentalIntegrity Transaction cost Complexitiesvaryfromsectortosector Prevailingtechnologyandpractices Economicscaleofoperations

CDM IN INDIA : ISSUES AND CONCERNS D:IVERSITY BASELINES ESTABLISHMENT IN INDIA ISSUES IN BASELINE

Di Diverse state policies li i Sectoral structure, structure technology and practice diversity Average emissions (80%) or marginal emissions (20%) Reconciliation of National aggregation, State baselines trend and Project baseline Clarity Cl it of fb baseline li b become a prime i criteria it i th than th the mitigation iti ti potential or sustainable development alignment

CDM IN INDIA : ISSUES AND CONCERNS TECHNOLOGY TRANSFER

Initial projects had low technology transfer potential Conventional route - open market acquisition than TT as integral part of CDM Existence vs. widespread of a technology Technology exports (south-south) ODA additionality

CDM IN INDIA : ISSUES AND CONCERNS - ProjectRisks

O l Overlapping i regulations l i b by multiple l i l agencies i Legal Risk (location) Political Risk (Divergent views on several matters) Judicial Risk (power to reviews administrative actions, PIL, decision delays, CER treatment ) Ever shifting baseline and operating environment Contract enforcement IPR and technology risk Risk sharing mechanism

WHAT NEED TO BE DONE?

Capacity Building of local Consultants Consultants, proponents etc. etc Clear identification of CDM portfolio with National Priorities and Sustainable development goals Market development, Corrections and reforms DNA as Autonomous Institution Institutional Arrangement for co-ordinating co ordinating the capacity building, R&D, Awareness, project prospecting etc. Standardized CDM service formats

DISCUSSION ?

Th k you Thank

CourseInstructor: Er.AshwaniKumar,
Asstt.Prof. FacultyofPlanning,CEPT,Ahmedabad 9