THE KYOTO PROTOCOL & CDM
MUHAMMAD REHAN & MUHAMMAD FARHAN
Aug 6 - 12, 2012
During the last century the amount and concentration of green house gasses (GHG) has increased significantly and that this is attributable to human activities, such as energy use, transport and agriculture. Rising levels of greenhouse gases are already changing the climate. There is ample evidence that the average temperature in the atmosphere and in the oceans has increased over the past 100 years. The increase correlates very well with the increased concentrations of greenhouse gases in the atmosphere. Climate models predict the global temperature will rise by about 1 to 5 degrees by 2100. The global climate system has a long response time, which is why all models predict increasing temperatures even if all emissions were cut immediately.
The one ton of green house gasses emitted in Pakistan has the same impact on environment if same amount released in Australia or USA. That is why this is a global issue and requires a global solution. Climate change is likely to have a significant impact on the global environment. Climate change is estimated to have far reaching consequences including increased sea levels inundating large land areas, reduced food productivity in many regions, increased range of tropical diseases, reduced access to fresh water, and increased frequency of storms and extreme weather events.
The Kyoto protocol is a first and important step in this direction, but is still only a very small step. The need to take drastic measures to reduce greenhouse gas emissions remain. There is a need for a new, more far reaching global accord on how to tackle the climate change issue. The Greenhouse gases covered by the Kyoto Protocol are Ccarbon dioxide, Methane, Nitrous Oxide, Sulphur hexafluoride, per fluorocarbons and Hydro fluorocarbons
Each GHG has its own Global Warming Potential. The Global Warming Potential (GWP) is the warming effect that one unit of a GHG has as compared to the same unit of the GHG carbon dioxide (CO2). 1 Kg of methane (CH4) has for example the same warming potential as 23 Kg of CO2. In order to have only one unit to refer to when talking about GHG, the amount of GHG is measured as "CO2 equivalents". It means that instead of saying that we have emitted 1 kg of CH4, we say that we have emitted 23 kg of CO2 equivalents (of CH4).
Following are the ratio of global warming, from one unit mass of a GHG to that of one unit mass of CO2:
* Carbon dioxide (CO2) 1 [baseline]
* Methane (CH4) 23
* Nitrous oxide (N2O) 296
* SF6 23,900
United Nations Frame work Convention on Climate Change (UNFCCC) was launched at the occasion of the United Nations Conference on Environment and Development in Rio de Janeiro in 1992 and entered into force on 21 March 1994. It sets an overall framework for intergovernmental efforts to tackle the challenge posed by climate change. It also recognizes that the climate system is a shared resource whose stability can be affected by industrial and other emissions of carbon dioxide and other greenhouse gases
The Kyoto protocol is part of the Convention and specifies emission reduction goals for (some) countries, and provides supporting financial mechanisms to achieve those goals. While the Kyoto Protocol is part of UNFCCC it is also a much more demanding agreement than UNFCCC itself. For this reason, not every country that has signed UNFCCC has also signed the Kyoto protocol and USA is an example of it.
Recognizing that the provisions of UNFCCC itself was not far-reaching enough to actually achieve the goals to limit the climate change effect to harmless levels, the parties to UNFCCC adopted in 1997 the Kyoto Protocol. The key features of the Kyoto Protocol are that it commits developed countries that have signed the protocol to limit their emissions to specific levels as compared to their emissions in 1990.
Following are the some key points of the Kyoto Protocol:
* Covers six greenhouse gas emissions: CO2, CH4, N2O, PFCs, HFCs, SF6
* Sets binding targets on developed nations to reduce overall GHG emissions by 5.2% below 1990 levels over the period 2008-2012.
* Developing nations have no binding targets but must report in general terms on their actions.
* Developed countries can achieve targets through domestic policies and three market mechanisms.
* Developing nations can participate through the Clean Development Mechanism to facilitate sustainable development.
Following are the three market mechanisms that can be adopted by developed countries to achieve their goals:
ET - EMISSIONS TRADING: The Protocol allows countries that have emission reduction commitments and that have emissions units to spare, as compared to their commitments, to sell this excess capacity to other developed countries that are over their targets. This is called "carbon market" because carbon dioxide is the most widely produced greenhouse gas, and because emissions of other greenhouse gases will be recorded and counted in terms of their "carbon dioxide equivalents".
JI - JOINT IMPLEMENTATION: Allows developed countries to meet part of their commitments by paying for projects that reduce emissions in other developed countries.
CDM - CLEAN DEVELOPMENT MECHANISM: It is similar to Joint Implementation projects, but CDM allows developed countries to undertake projects in developing countries that result in a net GHG emission reduction. While the developing country benefits from the investment, technology transfer and know-how brought with the project. The developed country can use the emission reductions achieved to count as emission reductions in their own country, thereby contributing to achieving the national emission commitments. For example if a company of Germany has to reduce 50,000 tons of CO2 and they undertake a project in Pakistan to reduce the same amount of CO2, this will count to their emission reduction target. More over companies in developing countries can also carry out their projects and sell their CO2 savings in international carbon markets.
Now we will move to CDM project participants and project cycle. Following are the participants of the CDM project:
* Project developer / operator: The following types of organizations can develop and operate CDM projects: governmental bodies/departments, municipalities, foundations, financial institutions, private sector companies, and NGOs.
* CDM investors / CER purchasers: An investor is an entity that purchases Certified Emission Reductions (CERs) from a CDM project. The investor is usually from a developed country and can be a corporation, a government body or non-governmental organization.
* Host government and Designated National Authority (DNA): In order to participate in the CDM, a country needs to be a Party to the Kyoto Protocol. CDM host countries also have to specify a domestic institutional body, a "designated national authority" (DNA) for approving CDM projects and ensuring that projects conform to national sustainable development criteria.
* Designated Operational Entities (DOE): These can be domestic or international legal entities that have been accredited by the CDM Executive Board. Their responsibilities include:
* Validating CDM activities at the outset of the project
* Making CDM project design documents (PDDs) publicly available
* Receiving public comments on the CDM documents and incorporating comments
* Verifying and certifying CERs during the operation of the project
* The same DOE may carry out both the validation and verification
* The CDM Executive Board (CDM-EB): The CDM Executive Board supervises the CDM and reports directly to the Meeting of Parties to the Kyoto Protocol. The Executive Board has ten members representing both developed and developing countries. The CDM EB is responsible for reviewing project validation and verification reports and issuing verified CERs.
* Other stakeholders: The CDM process cycle calls for two rounds of stakeholder comments. Developers must invite local stakeholders who will be affected by a project to comment on the Project Design Document before it is submitted for host country approval. Following project approval, the PDD must be posted for 30 days to allow interested parties at the local, national or international level to comment on it.
Following are the steps of the CDM project cycle:
* STEP-1: PROJECT PREPARATION:
* Identification of project is the first step; a project developer identifies a project as a potential CDM project, usually by comparing potential projects against the list of already approved methodologies.
* Pre-screening of CDM-applicability: The developer makes an initial assessment as to whether the project is eligible for the CDM by assessing it against a number of criteria. The CDM Pre-screen Tool can be used to complete this step.
* Development of feasibility study: The developer is advised to carry out a technical and economic feasibility study of the project. This is not a requirement for the CDM project application, but it helps to prove the additionality of the project and gives clear information of Return on Investment with and without CDM.
* STEP-2: DEVELOPMENT OF PROJECT IDEA NOTE (PIN)
* If the results of the pre-screen and feasibility study are positive, the developer or their advisors should develop a Project Idea Note (PIN). It helps to inform the DNA of the host country about the project and obtain feedback about the country's specific sustainability requirements. The PIN also can be used to get feedback from potential carbon credit buyers in the marketplace about their level of interest, prior to going through the entire CDM process. The PIN will subsequently be screened by the recipient entities against the CDM rules and their investment criteria.
* STEP-3: PROJECT DESIGN DOCUMENT (PDD)
* The project design document (PDD) is the key documentation in the CDM cycle, and completing it is a complex process. The PDD is mandatory and is submitted to a DOE for validation, and subsequently to the CDM Executive Board for registration before CERs are issued. The PDD can also be a sales tool for potential investors.
* STEP-4: SUBMISSION OF PDD AND HOST COUNTRY APPROVAL TO VALIDATOR
* The completed PDD along with the required reports has to be submitted to the DNA in the host country for approval. Host country approval of CDM projects is essential to ensure that governments retain sovereignty over their natural resources and their ability to mitigate emissions.
* The DNA's responsibility is to review and approve the proposed project under CDM and to confirm whether the project meets the host country's sustainable development criteria.
* The PDD and host country approval documents are submitted to an accredited DOE for review and validation.
* STEP-5: PUBLIC COMMENTS: Making the PDD publicly available for 30 days for comments by parties, stakeholders and UNFCCC accredited observers.
* STEP-6: VALIDATION: The DOE undertakes a validation process of the CDM project. This involves evaluating the PDD and associated documents against the requirements for CDM to confirm that all the information and assumptions made are accurate and reasonable.
* STEP-7: REGISTRATION OF CDM PROJECT: The DOE submits the PDD, host country approval, and validation report to the CDM-EB for registration of the project. It is recommended that the project developer requests the DOE for a copy or confirmation of the request for registration.
* STEP-8: PROJECT IMPLEMENTATION AND MONITORING: As soon as the project is implemented, the project developer needs to monitor the project's performance according to the procedures laid out in the validated monitoring plan of the PDD.
* STEP-9: YEARLY VERIFICATION:
* The project developer is responsible for contracting an accredited DOE to carry out the verification process on an annual basis. Verification is the periodic review and ex-post determination of the monitored GHG emission reductions that have occurred as a result of the CDM project. The DOE verifies that the data collected by the developer are accurate and complete and have been collected in accordance with the monitoring plan.
* Verified GHG emission reductions from the CDM project form the basis for CERs. CERs are based on actual reductions during the specific time period for which the monitoring results are provided, which is usually one year. CERs can only be issued after verification of the monitored data
* STEP-10: CERTIFICATION: The CDM EB approves the issuance of CERs on an annual basis. Subsequently, the CDM registry administrator of the EB forwards the CERs into the appropriate accounts
How are CERs sold? Carbon funds are available through:
* International tenders for CDM projects
* Voluntary corporate initiatives
* Multilateral Funds
* EU commitments for carbon purchase
* Bilateral negotiations with the consortium of buyers
By the knowledge of requirement and process of CDM projects, our industries can also get more return on their green initiatives.
Muhammad Rehan is an MBA & LLB, working for a law company and managing corporate & banking cases. & Muhammad Farhan is an MBA and Chemical Engineer, working for an IPP as Performance Engineer.