Climate and Energy / Market Mechanisms

Fourth workshop on enhancing the regional distribution of CDM projects in Asia and the Pacific
-Opportunities for CDM and carbon markets post-2012-

The Fourth workshop on enhancing the regional distribution of CDM projects in the Asia and the Pacific, organised by ADB, IGES and UNFCCC Secretariat, has successfully been concluded. The workshop took place on 4-5 September 2013 at the headquarters of the Asian Development Bank in Manila, the Philippines, and was attended by more than 100 participants from across the Asia-Pacific. The objective was to improve regional distribution of clean development mechanisms (CDM) projects in the region, from the view that CDM opportunities remain even at the challenging time of low credit demand and price. At the same time, it is clear that a range of initiatives to incentivise greenhouse gases reduction is emerging, thereby paving the path to low-carbon development.

This workshop was largely divided into two parts - one was a series of presentations from experienced experts and practitioners with opportunities to ask questions. The other part consisted of small breakout sessions, in which participants were able to have more interactive discussions.

Date 4-5 September 2013
Venue ADB Headquarters, Manila, Philippines
Organisers Asian Development Bank (ADB), Institute for Global Environmental Strategies (IGES), UNFCCC Secretariat
Collaborator United Nations Development Programme(UNDP)
Host Country Government of the Philippines
Document Agenda535KB
Agenda & Presentation materials
Day 1, 4 September 2013
WELCOME REMARKS

Mr. Demetrio L. Ignacio, Department of Environment & Natural Resources, the Philippines, and Mr. Woochong Um gave their opening remarks to the participants at this workshop.

SESSION 1: INTRODUCTION

Ms. Fatima-Zahra Taibi and Mr. Kazuhisa Koakutsu provided an overview of the workshop and the background of the currents status of CDM.

Introduction of the workshop objectives and expected outcomes
Kazuhisa Koakutsu, IGES
PDF (403KB)
Situation of CDM, challenges and opportunities
Fatima Zahra Taibi, UNFCCC secretariat
PDF (590KB)

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SESSION 2: FINDING THE RIGHT MARKET

Session 2 of the workshop was 'Finding the right market'. The session was designed to provide insights into the current status of CDM market. It was planned to find possible buyers for CERs in the market post-December 2012. It provided a review of avenues for existing registered CDM projects and newly registered projects to sell their CERs. The session was chaired by Ms. Preety Bhandari – Principal Climate Change Specialist in Regional and Sustainable Development Department – Climate Change Unit of the Asian Development Bank.

The first presentation of the session was by Mr. Vinay Deodhar – methodological expert with the UNFCCC and former member of Accreditation Panel. His presentation was on 'Development of New Carbon Market Mechanisms: Lessons learnt from CDM experience'. He presented a history of the development of market-based mechanisms and explained the rationale behind the rules and changes that followed the initial adaptation of the rules. Mr. Deodhar expressed confidence that the learning of CDM will help in development of newer mechanisms.

The next presentation on 'Emerging opportunities for selling CERs in Non EU market' was given by Ms. Bayarmaa Amarjargal of Clean Energy LLC, New Carbon Group Mongolia. She shared her experience regarding two wind projects in Mongolia and explained the strategy adapted to market the emissions reduction generated by these projects. Her presentation listed potential Non EU carbon markets such as Japanese Crediting Mechanisms, Proposed market in Australia, New Zealand as well as other parts of the world where CERs may be accepted as emissions reduction offsets against local obligations.

Ms Bayarmaa's presentation was followed by Mr. V. K. Duggal – Sr. Climate Change Specialist at Asian Development Bank. He discussed 'CER Buying Beyond the First Commitment Period of Kyoto Protocol'. Mr. Duggal explained the requirements for the project proponent to sell CERs to Future Carbon Fund (FCF) of ADB and gave a broad indication of prices that have been paid for by the fund.

The final presentation was by Mr. Shafiqul Alam of IIDEC in Bangladesh. He shared his experience of selling CERs for the two registered projects and the process that followed the approval of the project. The presentation described various commercial angles. He also listed some possible buyers of CERs. The session ended with question and answers between members of the panel and the participants.

Facilitator Preety Bhandari, Asian Development Bank
Development of new carbon market mechanisms: Lessons from CDM experience
Vinay Deodhar, Energy & Environment Consultant
PDF (251KB)
Emerging opportunities for selling CERs in Non-EU markets
Bayarmaa Amarjargal, Clean Energy LLC New Com Group Mongolia
PDF (1.35MB)
CER buying beyond first commitment period of Kyoto Protocol
V. K. Duggal, Future Carbon Fund, ADB
PDF (533KB)
Pathways to financial gain from a registered CDM project
Shafiqul Alam, IIDFC, Bangladesh
PDF (360KB)

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SESSION 3: PROGRAMME OF ACTIVITIES (POA) AND STANDARDISED BASELINES (SB): WHAT HAVE WE LEARNED?

This session was facilitated by Mr. Kenta Usui, a researcher at IGES. It highlighted the role of the CDM Programme of Activities (PoA) and Standardised Baseline (SB) in the context of improving the regional distribution of CDM. All speakers represented countries with limited CDM registration as well as having diverse backgrounds such as banker, project developer and government official. First, Ms. Tuul Galzagd, Xac Bank of Mongolia, presented her perspective on implementing "MicroEnergy Credits – Microfinance for Clean Energy Product Lines – Mongolia" as a Coordinating Management Entity (CME) of PoA, highlighting its substantial benefits to Mongolian households and the innovative method of monitoring using smartphones and GPS. She also highlighted Xac Bank's work with the Global Climate Partnership Fund, which channels climate change mitigation finance to developing countries through local banks.

Mr. Shaymal Barman from Greentech Carbon Solution, Bangladesh, provided a comprehensive presentation on challenges to implement PoA in Bangladesh and identified six categories of barriers including regulatory, investment, CER market, technology, implementation and monitoring & verification.

Finally, Mr. Uy Kamal from the Climate Change Office, Cambodian Ministry of Environment, presented his experience in developing and designing a standardised baseline in the rice mill sector of Cambodia. He concluded that the SB is useful for PoA, but its applicability of other carbon credits mechanisms remains in question.

All presentations were complemented by other participants from the same countries – Mongolia, Bangladesh and Cambodia. Questions from the floor included how the PoA credits can be used in voluntary markets, the potential mitigation effect of PoA, whether SB is likely to increase CDM registration, and whether CDM in LDCs are seen as more promising than in non-LDCs.

Facilitator: Kenta Usui, IGES
Mongolian experience on household-level CDM PoA and other carbon finance instruments
Tuul Galzagd, Xac Bank, Mongolia
PDF (1.54MB)
Implementing PoA in a LDC context
Shaymal Barman, Greentech Carbon Solutions, Bangladesh
PDF (640KB)
Experience in designing standardised baseline in rice mill sector in Cambodia
Uy Kamal, Climate Change Office, Cambodian Ministry of Environment
PDF (2.44MB)

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SESSION 4: CDM: THE FUTURE WE WANT

The goal of this session was to explore the possible ways forward for the CDM, its linkages to emerging approaches such as NAMAs and new market mechanisms, and its potential to act as a contact point among the different carbon markets.

Mr. Miguel Naranjo provided a general overview of the on-going revision of the CDM Modalities and Procedures, highlighting the main proposals by the CDM Executive Board and stakeholders who have participated, including the dedicated workshop last June in Bonn.

Ms. Malin Ahlberg stressed the potential of the CDM to act as an open source for knowledge and tools to use in emerging trading systems and mechanisms, as well as to become a common global offset standard, with some suggested reforms.

Mr. Gareth Phillips referred to the CDM as a mechanism that must continue, that will provide a basis for emerging ones, and that will probably become just one in a pool of options, possibly serving countries that cannot develop their own domestic systems and mechanisms.

Mr. Akihisa Kuriyama highlighted the continued improvements to the rules and procedures of the CDM during its lifetime, and its potential to be the standard for all baseline and credit mechanisms.

Discussion with the audience underlined the opportunity for the CDM to be the basis for future mechanisms and ETSs, while ensuring that it is maintained as the standard mechanism in a world that will have many options.

Facilitator: Fatima Zahra Taibi, UNFCCC secretariat
Review of the CDM Modalities & Procedures. Summary of the submissions to the SBI and outcomes from the recent workshop
Miguel Naranjo, UNFCCC Secretariat
PDF (267KB)
How would we want the CDM to look like and how CDM infrastructure could be used scaling up PoA and standardized baselines to NAMAs
Malin Ahlberg, Federal Environment Agency of Germany
PDF (253KB)
Tomorrow's opportunities for CDM
Gareth Phillips, Project developer Forum Chair
PDF (440kB)
Lessons learned from the CDM and its perspectives among future mechanisms
Akihisa Kuriyama, IGES
PDF (611kB)

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Day 2, 5 September 2013
SESSION 5: EMERGING INTERNATIONAL MARKETS AND MECHANISMS

Session 5 of the workshop was 'Emerging International Markets and Mechanisms'. The carbon market is evolving and international climate change negotiations are on-going to limit global GHG emissions to a level that would halt the global average temperature below a two degree centigrade threshold. This session explored opportunities of international and domestic carbon finance / market schemes of different countries and entities. The session was chaired by Dr. Xuedu Lu – Advisor in Regional and Sustainable Development Department –of the Asian Development Bank.

The first presentation of the session was by Mr. Kazuhisa Koakutsu from IGES. He introduced the Japanese initiative of Joint Crediting Mechanism (JCM). His presentation involved an explanation on modalities of operation for JCM. He described how simplified versions of emissions reduction calculations are helping in quantification. The commitment displayed by Japan towards emissions reduction and technology transfer through this mechanism was demonstrated in the presentation.

The next presentation on 'Progress on the Development of a Voluntary Carbon Market in Thailand' was given by Ms. Sumon Sumetchoengparachya of the Thailand Greenhouse Gas Management Association. She explained the objectives of setting up a voluntary carbon market in Thailand. She then described the structure of GHG emission markets in Thailand and presented the eligibility criteria of projects and implementation timeline of various schemes.

Ms Sumon's presentation was followed by Ms. Lingshui Mo – Carbon Market Specialist at Asian Development Bank. She discussed 'Linking Emission Trading Systems -Outlook of Future Carbon Market in Asia and the Pacific. She explained how carbon markets in each country are emerging and how this situation increases complexity of mitigation actions as well as costs of GHG mitigation. Linking of each carbon market in Asia Pacific region would help in reducing procedures as well as cost. She explained the principles of linking and possibilities of linking in Asia and the Pacific.

The final presentation of the session was by Mr. Inchul Hwang of KEMCO in South Korea. He shared Korea's views on C – NAMA – a post-2020 crediting mechanism. This is the ex-post issuance of credit based on net reduction, acknowledging emissions mitigation outcomes from implementing NAMA. Mr. Hwang clearly outlined the differences between C – NAMA with Sectorial crediting mechanism and the Kyoto Mechanism. The session ended with questions and answers between members of the panels and the participants.

Facilitator: Xuedu Lu, Asian Development Bank
Japanese initiative on Joint Crediting Mechanism
Kazuhisa Koakutsu, IGES
PDF (1.1MB)
Status of selected countries regarding preparation of Carbon Market
Sumon Sumetchoengprachya, Thailand DNA
PDF (1.2MB)
Linking of GHG Emission Trading Schemes
Lingshui Mo, ADB
PDF (6MB)
Korean proposal on NAMA crediting
Inchul Hwang, Korean Energy Management Corporation
PDF (432MB)

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SESSION 6 – A1:
CDM IN LDCS AND SIDS – WHAT IS THE KEY FOR SUCCESS AND REPLICATION?

During this breakout session, participants heard from the UNFCCC secretariat on some reasons for lower rates of participation of LDCs and SIDS in the CDM, and from consultant Mr. Srikanth Subbarao on his experience in the Pacific region.

The discussion focused mainly on some suggested solutions and opportunities for LDCs and SIDS in Asia and the Pacific. The creation of a possible “regional DNA” for the Pacific was suggested as a way forward for the small islands that still do not have DNA, and would have a difficult time assigning this additional responsibility.

Focusing on small and microscale projects was indicated as the main option, in the form of PoAs, and promoting those project types with easier monitoring methodologies (such as hydro energy generation).

The importance of further simplification of rules for LDCs and SIDS was mentioned, as well as the importance to focus on sustainable development co-benefits for the promotion of the projects.

Facilitator: Miguel Naranjo, UNFCCC Secretariat PDF (161KB)
Discussant: Srikanth Subbarao, Vanuatu DNA PDF (500KB)

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SESSION 6 – A2:
DEFINING PRIORITY SECTORS: FOR DEVELOPMENT OF SB: KEY TOOLS

Participants heard from the UNFCCC secretariat on a proposed approach to define priority sectors for the development of standardised baselines. This approach would help national authorities to select one or two sectors to start development.

From the discussion, it was clear that the availability of data is in many cases the key challenge to overcome. Also very important are the total potential for emission reductions of the sectors, the availability of expertise, and national priorities.

Participants were also reminded that development of the standardised baseline under measure 3 (methane destruction) of the current SB guidelines is quite straightforward.

Facilitator: Miguel Naranjo, UNFCCC Secretariat PDF (142KB)
Discussant: DNA Myanmar PDF (3.1MB)

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SESSION 6 – A3:
THE ROLE OF CAPACITY BUILDING

This session shared ideas on the role of capacity building based on CDM experiences and discussions focused on how to continue building capacity in the current context of diversity of carbon markets.

Mr. Akihisa Kuriyama, an IGES researcher, demonstrated lessons learnt from CDM capacity building activities in developing countries. It is found that capacity building on DNA such as documenting supports has contributed to increase the number of registered project in the country. He also mentioned that those practices could be helpful to scale up mitigation activities such as PoA and implementation of new market mechanisms.

Participants facilitated by Mr. Koakutsu pointed out that capacity building activity should be customised for each country depending on its capacity and human resources. Especially for LDC, general contents such as how project participants can complete all CDM process are preferable rather than technical contents.

They also mentioned that the assessment of capacity building activity, as Mr. Kuriyama had explained, is very helpful in improving the effectiveness of capacity building activities that are provided by donors in developed countries. The assessment should also include a questionnaire on the importance and effectiveness of capacity building for both donors and recipients.

Finally, the discussion also touched upon the possibility of web-based seminars, or webinars. Participants conclude that webinars are one of the most convenient channels to access information on the CDM. However, technical consultation on sites is to overcome the barriers that project participants would face with.

Facilitator: Kazuhisa Koakutsu, IGES
Discussant: Akihisa Kuriyama, IGES PDF (373KB)

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SESSION 6 – B1:
DEVELOPING DOMESTIC EMISSIONS TRADING SCHEMES AND THEIR INTER-LINKAGE?

This sub session was part of the larger framework whereby smaller interactive sessions give participants a chance to express their views on ‘Evolving Carbon Markets’. Sub session B 1 explored the development of domestic emissions trading schemes and their linkages. The session was facilitated by Mr. Hemant Nandanpawar from the Technical Support Facility within the Carbon Market Program of ADB.

The session started with an overview by the facilitator of the domestic carbon markets across the world. Mr. Nandanpawar further explained why linkages were necessary within domestic trading schemes. The next presentation was given by Ms. Lingshui Mo from the Technical Support Facility, ADB Carbon Market Program. She gave a practical example of how the Australian emissions trading scheme can be linked with domestic trading schemes in China. A generic view of the conditions of this linkage and the strategic steps / approaches was described, before moving on to an actual case study. Ms. Lingshui ended her presentation with possible solutions to key issues of legal framework, capacity building and the review / adjustment of caps.

Participants concluded that the linking of domestic mechanisms is a challenge but it has to be done in view of advantages of reduced mitigation costs.

Facilitator: Hemant Nandanpawar, ADB PDF (66KB)
Discussant: Lingshui Mo, ADB PDF (119KB)

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SESSION 6 – B2:
FVA AND NMM: WHAT IS ON THE TABLE?

This session covered the recent development of the negotiation outcome and some views on the possible direction on the Framework for Various Approaches (FVA) and New Market-based Mechanism (NMM) under the UNFCCC.

Mr. Kazuhisa Koakutsu provided an overview of the UNFCCC discussion on the market mechanism starting from Bali (COP13) to the decision in Doha (COP18). He summarised that the FVA’s role is to promote cost-effectiveness of mitigation actions while recognising various approaches and mechanisms being developed individually or jointly with increased transparency and consistency. The NMM is to stimulate mitigation across broad segments of the economy while assisting developed country Parties’ commitment.

Mr. Inchul Hwang commented on whether FVA will include the voluntary market mechanism such as VSC and Gold Standard. He further stated the definition and scope of non-market mechanism has not been made clear yet. He summarised that the NMM will be fully implemented from 2020.

Mr. Gareth Phillips argued that the FVA is a set of guidance, tools and procedures. The non-market mechanism will include agriculture, transport and household sector where traditional market-based approaches could not be intervened. He further stated that the carbon market mechanism will be established under the NMM.

Facilitator: Kazuhisa Koakutsu, IGES PDF (474KB)
Discussant: Gareth Phillips, Project developer Forum Chair PDF (350KB)
Discussant: Inchul Hwang, KEMCO

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SESSION 6 – B3:
DOMESTIC CARBON MARKETS : POTENTIAL MARKETS FOR CERS?

This sub session was part of the larger framework whereby smaller interactive sessions would give participants a chance to express their views on ‘Evolving Carbon Markets’. Sub session B 3 explored the linkage of domestic carbon markets with CDM. The session was facilitated by Mr. Darshak Mehta from the Technical Support Facility within the Carbon Market Program of ADB.

The session began with an overview of the domestic carbon markets of the world by the facilitator. The possible structure and timing of implementation of various domestic schemes was discussed during the brief introduction. The next presentation was given by Mr. Hoang Manh Hoa from the Ministry of Natural Resources and Environment, Viet Nam.

He described the current status, timeline and structure of the domestic GHG market that is under planning in Viet Nam. This presentation helped to understand the possibilities of linkages of Viet Nam system with CDM. The participants debated on various issues including use of the domestic emissions trading scheme in very small countries and the need to have a domestic scheme v/s international scheme. Discussion also focused on the need for infrastructure when setting up domestic trading schemes, and looked at the issue from the perspective of private investors.

Participants concluded that the use of CERs in domestic carbon market will present multiple benefits. It will provide ready-made infrastructure for the projects and will also help in the reduction of efforts as well as costs.

Facilitator: Darshak Mehta, ADB
Discussant: Hoang Manh Hoa, Ministry of Natural Resources and Environment, Viet Nam PDF (608KB)

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SESSION 6 – C1/C3:
INNOVATION IN CARBON FINANCE

(This session was held twice due to high interest from participants) The facilitator, IGES’s Mr. Kenta Usui, pointed out a key challenge of carbon finance – that few financers appreciate carbon-reducing projects because climate change mitigation is often not a priority in the development agenda and such projects do not yield high financial return. As a response to this challenge, Ms. Malin Ahlberg, Director of the Management Board of the Future of Carbon Market Foundation, presented a financial scheme offered by the Foundation. In essence, the Foundation provides start-up financing via upfront payments on carbon credits at a price not linked to the market. It primarily targets PoA, as the Foundation sees PoA a key to scale-up mitigation activities in developing countries. Many questions were taken from the floor regarding the details of the scheme, including the selection and pricing criteria, and the timeline for application. Some questions concerned the Japanese Joint Crediting Mechanism (JCM). The questions included JCM’s relation to NAMAs and consistency of JCM methodologies among different partner countries as well as with CDM, and the facilitator responded to these questions.

Facilitator: Kenta Usui, IGES PDF (309KB)
Discussant: Malin Ahlberg, Federal Environment Agency of Germany PDF (626KB)
SESSION 6 – C2:
CDM LOAN SCHEME:REDUCING BARRIERS

The audience learned about the rules and procedures of the CDM Loan Scheme, which provides interest-free loans to projects in countries with less than 10 registered CDM projects, for PDD development, validation and/or first verification.

They were reminded of the opportunities that the scheme brings, and clarifications were provided on its rules.

The CDM Loan Scheme has approved 36 loans to date, with a total commitment of over USD 4.5 million.

Facilitator: Fatima Zahra Taibi, UNFCCC Secretariat PDF (225KB)
Discussant: Shaymal Barman, Greentech Carbon Solutions, Bangladesh
SESSION 7: WRAP-UP DISCUSSIONS AND THE WAY FORWARD

At the beginning of the session, all the facilitators from session 6 reported back giving summaries of the discussions from the small working groups. After that, panelists provided perspectives on opportunities for the CDM as a basis of carbon market mechanisms, and the possible framework and linkage for the fragmented carbon market in the Asia Pacific region.

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