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krey@perspectives perspectives

Southeast Asia: Lessons learnt from CDM experience in the region South East Asian Regional ECBI Workshop Dhaka, 8. August 2006 Matthias Krey, Perspectives GmbH krey@perspectives.cc. krey@perspectives.cc www.perspectives.cc. Background. Goals:

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krey@perspectives perspectives

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  1. Southeast Asia: Lessons learnt from CDM experience in the region South East Asian Regional ECBI Workshop Dhaka, 8. August 2006 Matthias Krey, Perspectives GmbH krey@perspectives.cc krey@perspectives.cc www.perspectives.cc

  2. Background • Goals: • Draw lessons from promotion of CDM outside the rapidly industrialising countries • Develop recommendations to enhance opportunities for poorer developing countries to benefit from the CDM • Surveyed countries: Lao, Cambodia, Vietnam, Thailand, Malaysia, Singapore, Phillipines and Indonesia • Involved Institutions: • Hamburg Institute of International Economics (HWWI) • PT Pelangi Energi Abadi Citra Enviro (Peace Reasearch and Advisory)

  3. Overview • Theoretical CDM potential in ASEAN • ASEAN‘s share in the CDM • Procedures, resources and outreach of DNAs in ASEAN • CDM Capacity Building in ASEAN • Recommendations for promoting CDM participation of low-income countries

  4. Theoretical CDM project potential in ASEAN krey@perspectives.cc www.perspectives.cc

  5. Methodology • Factors that influence a country’s CDM perspective • Theoretical scope of emission reductions • Country business climate • Country CDM institutions and CDM project experience • Result: Overall competitiveness level for each country

  6. Potential supply • Cambodia and Lao: • Potential for small scale CDM projects like mini- and micro hydro, small municipal and agricultural waste, as well as energy efficient appliances • Vietnam: • Only limited number of projects with high quality and quantity CERs (EE in industry, power and households as well as RE) • Indonesia, Malaysia, The Philippines, • Singapore and Thailand • High potential in energy and energy efficiency sector • Indonesia ranking first before Malaysia and Thailand • All countries except for Singapore are developing countries and are still distant to sustainable development practices

  7. Country investment climate – FDI Inflows • FDI Inflows • Cambodia: heavily reliant on foreign assistance, troubles attracting FDI (unreliabel local government) • Lao: totally dependent on foreign aid, extremely difficult to attract FDI (poor investment climate, primitive infrastrucutre), but FDI in sector for hydropower schemes likely • Vietnam: high ability to attract and utilise relatively large amounts of FDI and ODA, but obstacles remain (inadequate infrastructure, slow privatisation process, lack of administrative capactiy...) • Analogy FDI inflows – CDM investment? • Prerequisites that drive the flows of tranditional FDI to destinations are likely to be dynamic driving factors for distribution of CDM •  Unfavourable outlook for Cambodia and Lao, difficult for Vietnam

  8. Country investment climate Source: Annual IPS ASEAN 9+1 Competitiveness Ranking Indices

  9. Country CDM institutions and CDM project experience (I) • Host country CDM institutions • Cambodia, Vietnam, Indonesia, Malaysia and Philipines: Institutions meet necessary conditions to enter carbon market, not yet assessable how efficient systems work • Lao: Main functions and set-up of institutions are still under discussion (DNA not operating yet) • Thailand: Strong bureaucracy, decisions on a case-by-case basis at the cabinet level prohibit efficient approval • Singapore: Still premature process (no DNA)

  10. Country CDM institutions and CDM project experience (II) Climate project experience (as of June 2006) • 6 PDDs submitted from Vietnam (3 renewable energy, 1 energy efficiency, 1 gas capture, 1 mining methane capture), 1 PDD submitted from Cambodia (Renewable electricity) • Indonesia: 2 registered projects (energy industry), 2 PDDs submitted (energy industry, waste mgmt.) • Most active country: Malaysia with 8 projects (5 registered, thereof 4 energy industry, 1 manufacturing ind; 3 under review) • 1 renewable electricity project submitted from The Philippines • Lao, Singapore, Thailand: no projects submitted yet

  11. Country CDM competitiveness ranking

  12. Assessment of ASEAN‘s share in the CDM project pipeline krey@perspectives.cc www.perspectives.cc

  13. Number of project activities submitted Total: 695 projects Share of CDM projects submitted to the UNFCCC by regions

  14. CERs generated until 2012 of submitted project activities Total: 613 Million CERs Share of CER generated until 2012 by percentage

  15. ASEAN CDM project submitted to the UNFCCC by country

  16. Type of ASEAN CDM projects submitted

  17. Summary • On global scale, ASEAN CDM projects are increasing, • nevertheless... • ... Their share is still considerably low • ... They need to work on the establishment of favourable approval processes and consultancy sector, support project development • ... Real breakthrough for a considerable share on the CDM market not likely due to lack of large CDM potential • ASEAN likely to attract “niche investment” • ... But will not be able to play in “CDM Champions League”

  18. Assessment of the procedures, resources and outreach of DNAs in ASEAN krey@perspectives.cc www.perspectives.cc

  19. DNA assessment - structure • Background information on DNAs • Mandatory function: Assessing CDM projects at national level • Authority: Issuing Letter of Approval stating that the project assists the country in “achieving sustainable development” • Non-mandatory functions: Assessing technical aspects of projects, promotional activities (capacity building, marketing)...

  20. DNA structures: Strengths & Weaknesses High number of ministries involved, dominating role of governments Strenghts Weaknesses Relatively strong unanimous endorsement of CDM mgmt. activities + proposed projects Low risk of blocking of projects due to interest conflicts Poor involvement of other stakeholders Bureaucratic, less flexible to adapt to changes in CDM procedure/markets Core budget secured by higher number of ministries Staff less motivated than in mixed governmental-NGO model Efficiency inside DNA board rises with position of host ministry in the governmental politic system

  21. DNA assessment: Implementation and external affairs • Approval Process • Not specified in CDM rules, each country decides on its own set-up of process • Transparent & simple rules attract more investors • Criteria for Sustainable Development • Each country has total freedom of decision on how to appraise a project’s contribution to sustainable development • No standardised criteria or indicators • Other criteria • Include the DNA‘s activities in improving the competitiveness of the host country and mobilising CDM capital flow into the country • Information dissemination and outreach

  22. Duration of approval process • Indonesia • Theoretically fastest DNA with 30 days • Cambodia, Lao and Vietnam • 1.5 months • Philippines and Thailand • About 2 month • Philippines: Difficult to obtain approval due to emphasis in consultation and intervention of NGOs • Thailand: difficult process of approval • Malaysia • 2,5 months • Most active to produce LoA and most successful one to have projects registered with EB

  23. Assessment of criteria for Sustainable Development - Cambodia (I) • Use of local businesses • Reduction of import of fossil fuels Economic development • Poverty alleviation • Creation of jobs • Sound stakeholder consultation Social development • Reduction of pollution • Biodiversity conservation • Sustainable use of resources Environmental sustainability • Transfer of technology • Capacity Building Technological development

  24. Assessment of criteria for Sustainable Development - Cambodia (II) • Development criteria and indicators based on South-South-North/Gold Standard Approval Process • Each indicator is scored from -3 to +3 (with -3 stating serious negative impact, 0 no impact) • Vicious circle: • Very modest CDM potential in combination with comprehensive list of sustainable development criteria • If adapted in a relaxed manner, low quality CDM projects can get be approved • If adapted very strictly, only a few high quality projects can be realised

  25. Assessment of criteria for Sustainable Development – Other countries • Indonesia • list of criteria includes environmental, economic, social, and technological sustainability which is project-based indicators • Singapore, Philipines and Thailand • No information on sustainability criteria availble • General problems: • Lack of project-specific assessment or methodologies to evaluate project’s contribution to Sustainable Development • No criteria are “translated” into sectoral indicators or specific quantitative standards

  26. DNA assessment: Summary • CDM is about projects • Opportunities for CDM projects to materialise is essential for all further activities • Host country with modest CDM potential should establish a DNA in close contact with existing bodies dealing with climate change • Small and medium sized CDM countries: DNA should focus on mandatory tasks (leave judgement of feasibility and additionality to DOEs) and promotion • Not ideal models, but... • Cambodia and Vietnam DNAs are in place and improving • Lao PDR faces a critical year to finalise structure and operation before deadline for registration of CDM projects for first period is gone • More assistance needed • ...in specific issues (legal and financial) and strengthening involvement of private, consulting sectors

  27. Assessment of past and ongoing CDM Capacity Building in ASEAN krey@perspectives.cc www.perspectives.cc

  28. Examples of Capacity Building Programmes (I) ID: Indonesia, MY: Malaysia, SG: Singapore, TH: Thailand, and PH: the Philippines

  29. Examples of Capacity Building Programmes (II) • Cambodia: • Activities: Workshops, focus on waste mgmt., renewable energy, small scale projects • Target group:Public and private sector • Lao PDR: • Activities: Support establishment and full operation of DNA • Target group:Central and local government authorities • Vietnam: • Objective: Evaluation of CDM potential in industrial sector • Target group:Industrial sector

  30. Capacity Building Tools • Results from survey carried out by UNITAR • Workshops and stakeholder Dialogue • Deemed useful by 64% • Common feature of all programmes • General public training • Also popular with governmental audiences • Relatively high costs • Writing of studies • Widely used, but limited impact due to restricted dissemination, unadjusted material for different target groups • Booklets and brochures published: Cambodia (>10), Vietnam (>15), Lao (1) with basic information on UNFCCC, Kyoto and CDM modalities

  31. Summary • Cambodia and Vietnam: • Quite successfull in attracting international and bilateral donors for CDM Capactiy Building projects • Projects contributed significantly to establishment of DNA, and building capacity with project developers • LAO PDR: • Only one Capacity Building Programme but with an essential role of improving understanding of governmental authorities • DNA not operating yet • Capacity Building as continuous, progressive and iterative process • Further assistance needed!!

  32. Suggestions • Avoid replicates in scope and content already addressed • Link sufficiently with results of previous projects • Define specific target groups, focus on previously poorly involved groups like private and financial sector • Start programme with general information on climate change • Cut down on workshops aiming at general public awareness rising, but focus on on-the-job/sectoral trainings to transfer skills • Concentrate research on secoral level for information on CDM potential and „state of the art“ technologies for project developers

  33. Recommendations for promoting CDM participation of low-income countries krey@perspectives.cc www.perspectives.cc

  34. Current distribution of CDM activities Data source: CD4CDM, Jun. 2006 LDCs and LICs account for a very minor share – only 4% of total projects developed (and 5.6 % of total expected CERs) worldwide so far

  35. Types of CDM projects developed in the LICs Types of the projects submitted and registered by the LICs Data source:UNFCCC website as of June 2006 Projects types have high potential to deliver high levels of sustainable development benefits to host countries

  36. Current trend of CDM investment-flows (I) Unequal geographical distribution of CDM investment… Developing countries with high CDM potential  attract more and more CDM projects  accumulate more experience by implementation of projects  strengthen their competitiveness in the CDM world market  likely to attract more investment. …at disadvantage of LICs Flow of investment is skewed toward a small sub-set of developing countries, side-stepping those LICs that need it most for the purpose of sustainable development

  37. Current trend of CDM investment-flows (II) • Reasons for lack of investment flow into LICs • Investors look for low marginal incremental costs, low project risk, creation of a good image • Investors search for short-term rapid generation of CERs, but project types in LICs are mainly in renewables and A/R (lower emission reduction over a long time period) • Small projects imply higher transaction costs •  Projects are distributed through market mechanisms, which are not about fulfilling sustainable development criteria, nor about achieving a fair distribution of the projects and investments involved in them

  38. Mobilising CDM investment into the LICs (I) Need of an effective DNA in host countries is over-riding factor for facilitating CDM activities Main challenges for effectiveness and sustainability of DNAs are shortage of finance support and human resource for a long period

  39. Mobilising CDM investment into the LICs (II) • Establish transparent, quick approval processes, mainstreaming of CDM into other policies • Have a realistic view of abatement potential and costs in LICs (avoid concentration on non-attractive areas, address additionality issues proactively) • Support reliable local consultants (reduces the transaction costs, minimises consulting fee runs into the pocket of the international consultants) • Promote proactive industrial associations and private sectors to find viable CDM ideas • Long term, foster existence of competent domestic OEs (reduce transaction costs for developing CDM projects) •  LICs‘ opportunity: Expeditious registration of small-scale projects and support for bundled projects with high sustainability value

  40. THANK YOU! Matthias Krey Perspectives GmbH Bei der Apostelkirche 24 20257 Hamburg Germany Phone: +49 (0) 40 – 21979761 Mobile: +49 (0) 176 - 2460 4014 krey@perspectives.cc www.perspectives.cc

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