PRESENTATION ON CARBON CREDITS AND

KYOTO PROTOCOL
in
Birla Institute of Management Technology
on
16th October 2008
J K Dadoo
Secretary (Environment)-cum-Chairman (DPCC)
Govt. of NCT of Delhi
1

CLIMATE CHANGE
According to the World Bank Economist Mr.
Stern, the effect of climate change could be
worse than the two World Wars.
A famous ecologist says that 20 billion tonnes of
carbon dioxide is generated by humanity, every
year and absorbed by Nature. This tolerance of
Nature could be reversed, if the carbon dioxide
levels increase unabatedly.
Prof. James Lovlock, USA believes that the 90
% of mankind may be wiped out if the planet
heats up.
2

GLOBAL CLIMATE CHANGE

SCENARIO
To combat these changes globally, Kyoto
Protocol was created and has been ratified
by 170 countries so far, committing
themselves to reduce Green House Gas
Emissions and improve Energy Efficiency.
The Kyoto Protocol envisages reduction of
Green House Gases by 5.2% in the period
2008-12.
3

CLEAN DEVELOPMENT
MECHANISM (CDM)
The CDM is supervised by the CDM Executive
Board (CDM EB) and is under the guidance of
the Conference of the Parties (COP/MOP) of
the UNFCCC
Certified
Emission
Reductions
(CERs)
commonly known as carbon credits, where
each unit is equivalent to the reduction of one
metric tonne of CO2e
The value of one CER in Indian Rupees is
about Rs. 1600/4

TYPE OF GREENHOUSE GASES

S.
No.

Greenhouse Gas

Global Warming
Potential (GWP)

1
2
3
4

Carbon dioxide
Methane
Nitrous oxide
Hydrofluoro
carbons
Perfluoro carbons

1
21
310
140-1170

Sulphur
hexafluoride

23900

5
6

6500-9200

WHY CITIES MATTER ?

In 1800, 2% of worlds population lived in cities.
Currently, it is 50% and heading towards 60% by
2030. Urban populations are expected to grow by
2 billion people within 30 years.
Cities in developing countries are expected to
absorb 95 percent of this increase.
Over, 1 billion people live in urban slums. In the
least developed nations, slums house 70% of the
urban population.
Droughts and floods in rural areas have increased
migration to cities. By 2030, if nothing is done,
6
slum population will reach 2 billion.

KEELING CURVE

380

REDUCING EMISSIONS REQUIRES

ACTION ACROSS MANY SECTORS
ENERGY
EMISSIONS

Industry
14%

Power
24%

Other Energy
related
5%
Waste
3%

Agriculture
14%

Transport
14%
Buildings
8%

Landuse
18%

NON-ENERGY
EMISSIONS

Total emissions in 2000 42 GtCO2e

CO2 TOTAL EMISSIONS 1990 - 2005

7000

5817

6000

5050

4852

4000

1990
2005

3000

2358
1937

2000

1544
1214
1048

1000

1147

968

591

813
421 549

569

530

397

454
236

449

a
Ko
re

Ita
ly

UK

ad
a
Ca
n

an
y
er
m
G

In
di
a

Ja
pa
n

sia
Ru
s

Ch
in
a

US

Mt of CO2

5000

CO2 EMISSIONS PER CAPITA BY

GROUPS
12

11.25

10

Mt of CO2

Series1

4.81

4.2

1.23

10

Anex-I

AGA

BGA

World Average

AGGREGATED PICTURE
Per capita CO2 emissions of different groups of countries (2005)
Group CO2
emissions

Total

Total CO2
emissions

Population

Per Capita

(Mt of CO2)
Annex-I
Countries

38

14,183

1,261

11.25

Non Annex I
countries

99

11,938

4,952

2.41

AGA

27

7,868

1,636

4.81

BGA

72

4,070

3,317

1.23

Global
Average

137

26,121

6,213

4.2

Source: IEA,2007.http://data.iea.org/iea.org/ieastore/statislisting.asp

11

Equity Principle Comparison

Total and per capita emissions of group A & B
Group-B

Total
(Mt)

Per Capita

Group-A

Total
(Mt)

Per
Capita

Saudi Arabia 320

13.83

Italy

454

7.76

Korea

449

9.3

Spain

342

7.87

South Africa

330

7.04

France

388

6.19

Iran

407

5.96

Switzerland

45

Malaysia

138

5.45

Sweden

51

5.64

Venezuela

142

5.35

Portugal

63

5.97

$Some NAC have higher total and higher or similar per capita emissions
$Yet, these countries have no obligations!
$Transition mechanism is needed.

12

CARBON DIOXIDE EMISSION

PROJECTIONS
EIA Reference Case , MtCO2 (From Energy ) 2002-2025

Country

2002

2025

Avg. Annual Growth

Total Growth

World

24410

38791

2.00%

58.9%

Annex-I

14169

18258

1.10%

28.9%

Non Annex-I

10241

20533

3.10%

100.5%

United State
of America

5752

7980

1.4%

38.7%

Western
Europe

3550

3953

0.5%

11.4%

China

3323

8134

4.00%

144.8%

India

1026

1993

2.90%

94.3%

Brazil

341

678

3.0%

98.9%

Source : Climate Analysis Indicators Tool (CAIT) Version 4.0

Washington DC, World Resource Institute, 2007

13

CDM PROCESS
9 to 14 months process
Prepare
Project
Design
Document
(PDD)

CDM
Process
Letter of
Approval
(LOA) by
Host
Country

Verification
Issuance of
Validation Registration
and
CERs
Certification

Indias Designated
National Authority
National CDM
Authority (NCDMA)

14

HOW?
Exchanges

Auctions

Largely used for EUAs

Few auctions held for CERs/VERs

Not much activity in CERs

CERs are not a commoditized

product many features cause
differences in price

VER exchange in place (CCX)

but commands lower prices
than OTC market

Sellers credit, project type etc

Direct Sale

Intermediaries

Avoid Commission

Market professionals matching

buyers and sellers

No Guarantee of market price

(narrow lens on buyer market)
Must deal with market risk and
complexity

Develop optimal transaction

structures
Incentive structure to deliver the
15
highest price to the seller

WHEN ?
Project Development Process
Pre-PDD
PDD
Validation
Registered
Issued

Why Sell Early?

Certainty of revenue
May be necessary for project finance.

Certainty of price.
Why Sell Later?
Delivery risk decreases.
Therefore price of credit increases.

Guaranteed
16

STATUS OF THE CDM MEASURING SUCCESS

An explosion of activities
3500
3000

2900

3000

2600

2500
2000
Registered Project Activities
Project in the Pipe line

1500
1183
1000

1000

750

937

685

471

500
0

826

114

May-05

183
39

Dec-- May-05
06

May-07

Oct-07

Feb-08

Oct-08

17

GENERAL OVERVIEW OF THE CDM

To date :
1183 registered CDM (639 LS + 544 SSC) projects
1.33 billion CERs expected to the end of 2012

In Pipeline :
3000 projects
2.7 billion CERs expected
to 2012

18

PROJECT PIPELINE GLOBAL

Host Country

China: 976 (>1000)

India: 983
Mexico: 180
Brazil: 171
Malaysia: 36
Philippines: 27
Indonesia: 24
Israel: 22
South Africa: 18

Investor Country
UK: 486
190 mn Euro
Japan: 256
CER acquisition
Sweden: 93
budget 2008
Spain: 67
Germany: 59
Japanese
power
utilities to
buy 120 mn
19

STATUS OF THE CDM REGISTRATION

Region

Number of
projects

NAI-Africa

27

NAI-Asia and
the Pacific

773

NAI-Other

NAI-Latin
America
and the
Caribbean

375

20

STATUS OF THE CDM | ISSUANCE

Country

CER Issued

India

31,122,524

China

120,105,788

Republic of
Korea

14,599,555

Brazil

19,433,547
21

STATUS OF THE CDM METHODOLOGIES

Scope

No . of
Methodolo
gies

Energy
industries 39
(renewable - / nonrenewable sources) (1)

23

Manufacturing
industries (4)
Afforestation
reforestation (14)

and

Chemical industries (5)

Waste handling
disposal (13)

15
14

and 12 22

HOST COUNTRY APPROVED

PROJECTS IN INDIA
AP
Chattisgarh
Gujarat
HP
Rajasthan
Jharkhand
Karnataka
WB

100
63
98
39
58
15
113
47

Maharashtra
142
MP
28
Orissa
51
Punjab
54
TN
120
UP
93
Utarranchal
20
Goa/Pondicherry 23
23

POTENTIAL IN RENEWABLES
Technology

Potential

Wind Power

45000 MW

Cum. Installation
upto March 31,
2003
1870 MW

Small Hydropower
(< 25 MW)
Biomass

15000 MW

1509 MW

19500 MW

484 MW

Energy from Waste

1700 MW

26 MW

Solar photovoltaic

121 MWp
24

INVESTMENT IN CDM PROJECTS

Investment in Rs. Crores vs Years
80000

Investment in Rs. Crores

70000

68691

71703

60000
50000
40000

36451

30000
20000

15933
10000
0

358
2003

1794
2004

2005
Year

2006

2007

2008

25

Historical CER Prices over the Last 4 years

Structure

Euro/CER Price
2004 2005

2006

2007

Remarks

Fixed Forward 4
until 2012
(without
recourse to the
company

5-7

7-10

8-11

Price firm irrespective of the market

fluctuations.
Current Fixed Forward Price
a) 8 for the project planning
stage.
b) 10 for registered projects.
c) 12 for Registered projects and
in operation

Spot

NA

10-24

12-17

Price dependent on the EUA Price

Current spot price : 15-17

12-17

Price dependent on the EUA price.

Current price : 15-17

NA

Fixed Forward until 2012 (with

recourse to the
company)

26

GLOBAL CLIMATE CHANGE SCENARIO

5 outreach countries Brazil, China, India, Mexico
and South Africa have challenged G-8 countries to
reduce their GHG emissions by more than 80% by
2050 and by 25 40% by 2020.
Switzerland wants a carbon tax imposed on
emissions of all countries above a certain level of
per capita emissions.
Stern Committee had recommended a carbon tax
on all coal, natural gas and oil based industries so
that social cost of carbon production could be
countered by using this fund for developing
renewable energy.
Sweden has a carbon tax since 1991 on power
generating plants and aviation fuel used in air
27
27
travel.

 India wants the issues of technology

transfer, expanded trade in carbon credits
and a strong adaptation fund to be put in
place at Copenhagen in 2009.
Britain wants to start a carbon ration card
to sensitize each adult about the carbon
dioxide allowance given to him annually.
Those in excess pay for it to those who
show savings.
Recent estimates show that uncontrolled
carbon emissions cost the Global
economy $200 Billion annually.
28
28

INDIAS POSITION
India wants not only promotion of sustainable
production processes but also sustainable
lifestyles across the Globe.
India wants the developed world to fulfill its
commitments for reduction of Green House
Gases, transfer new and additional financial
resources and climate friendly technology to
support adaptation and mitigation measures in
developing countries.
India wants to protect the vulnerable sectors of
Society in its sustainable development strategy.
In its Action Plan 8 National Missions have been
29
29
listed namely


National Solar Mission to increase the share of

this energy for decentralized distribution and to
create affordable and convenient solar power
systems.

National Mission for Enhanced Energy
Efficiency to introduce cost effectiveness and
shift to energy efficient appliances.

National Mission of Sustainable Habitats to
optimize energy application in large building and
efficient urban waste management.

National Water Mission to conserve water and
ensure equitable distribution between States
and areas.
30
30


National Mission for Sustaining the Himalayan

Eco System by safeguarding the Himalayan
Glacier.

National Mission for Green India by undertaking
afforestation of 6 million hectares to reach the
National target of 33% green cover.

National Mission for Sustainable Agriculture by
developing thermal resistance crops and
supported by Bio-technology, geo-spatial
technology and IT

National Mission on Strategic Knowledge to
fund high quality and focused research on
climate change.
31
31

CDM MARKET
Fastest growing financial market rose 80% in 2007
to reach nearly $ 60 billion - expected to be $ 1 trillion
by 200910.
2007 carbon market shows Chinas share at 61% and
India at 12%. In terms of total CERs issued of 166
million, India has 43 million or 26%.
In 2008, Chinas share at 23% and India at 30% in
terms of no of projects and 36% and 25% in terms of
no of CERs issued respectively. (13.10.08)
An Indian firm, J.S.W Steel won the largest single
CER of 5.4 million in 2 projects.
Multi-commodity exchange has traded CERs of
Rs.1000 crores so far with participation by 85
32
32
members and 91 clients.

START OF CDM ACTIVITY IN DELHI

GOVERNMENT
Government of Delhi in February 2007, initiated
the idea of adoption of CDM concepts in all infrastructural agencies in a meeting taken with the
World Bank officials with Chief Secretary.
Subsequently in March 2007, a seminar with
experts from World Bank, Japan Industrial
Development Co-operation, IIM Banglore,TERI
,Clinton Foundation was organized in which all
the developmental agencies made their project
presentation and experts highlighted potential
CDM avenues.This was inaugurated by Pr Secy(
Finance)
33
33

Similarly in June,2007 another round table Conference was

organized which was inaugurated by Honble Chief Minister of
Delhi, wherein interaction with the experts from Bureau of
Energy Efficiency (BEE), MOEF ,GTZ, World Bank and
Central Electricity Authority(CEA) was organized for all the 10
infrastructural agencies.
In August,2007 interaction with noted CDM Consultants
namely IL&FS Ecosmart, PriceWaterhouse Coopers Pvt.Ltd.,
Ernest & Young, ONGC and ICF International was organized
wherein modalities , formulation and submission of CDM
projects were discussed with the Infrastructural Agencies.
Again in April & August 2008, interactions with the
infrastructural agencies were organized with experts form
MOEF, MNRE, MCX, NCDEX, FICCI etc.
The objective was to sensitize the infra structural agencies
about the procedures and formalities required for preparation
34
34
of CDM projects.

The Infrastructural Agencies in general agreed

to adopt the following concepts in making CDM
projects:
1)
2)
3)
4)
5)
6)
7)
8)
9)

Energy Conservation
Use of CFL and Electric Chokes
Solar Water Heating Systems
Efficient Street-lighting
Efficient use of water pumps.
Energy efficient buildings
Promotion of LEDs
Solar Air-conditioning, etc.
Afforestation

35
35

Department of Env. & Forest and

Wildlife.
PDD ready for small-scale afforestation and
reforestation projects activities in Dera Mandi
and Bhatti Mines
Another PDD is under development for Asola
Wild Life Sanctuary.
Project proposals under consideration in the
area of Energy efficiency:
- CFL replacement (3 million households) expected
volume of CERs will be approx 12 million per annum
- solar water heating systems (5 lakh households)
expected volume of CERs will be approx 0.65 million
per annum.
36
36

PWD

i.
ii.
iii.
iv.
v.

a)
b)
c)
d)

PWD proposes to adopt following initiatives in all its

projects:
Sustainable site planning and adoption of Green
Building concept.
Optimum Energy efficiency
Use of renewable forms of Energy
Water and waste Management Strategies
Use of fly ash bricks.
Projects proposed based on the above practices are:
500 bedded new ward Block of GTB Hospital
500 bedded Dwaraka Hospital
Thyagaraja Sports Complex.
Delhi Institute of Pharmaceutical Sciences
37

DIAL
 Has CDM potential in the following areas:
Green Buildings
Energy efficiency in lighting, heating operations
Energy efficiency in water and wastewater
treatment by setting up STP, and reuse of water
for air-conditioning and horticultural purposes.
M/S PWC has been appointed as consultant for
CDM in September,2008
For adopting Green Building certification, M/S L
&T has been appointed as consultant.
38

NDMC
NDMC has potential for CDM projects in the
following activities:
Development, Construction, Operation and
maintenance of an integrated Municipal
waste Processing at Okhla
Integrated multilevel parking facilitiesSarojini Nagar, B.K.S Marg & K.G Marg
proposed under PPP mode
Up gradation of Street Lighting
General energy conservation measures for
reduction of demand for energy by 1500
KW by 2009.
39

MCD
 MCD is in process of developing a methane extraction
project under CDM, with World Bank, for the existing
three land filed sites.
 MCD is also working with M/S ILFS in other waste to
energy and compost projects and it is envisaged that
carbon credits @0.2 per Mt. Ton of garbage shall be
earned.
 Civic Centre built up in an area of 1.16 Lac Sq. Mts., is
designed on the Green Building Concept and is likely
to be registered under TERIs GRIHA rating scheme.
 LED based Street lighting as well as automation
control & dimmer based system for getting energy
savings and earning Carbon Credits.
 Mechanized/Automated Car Parking: The work at
Kamala Nagar (Capacity 863 ECUs) is in full swing.
40

DJB
 Energy
Efficiency Improvement Programme in
water supply, wastewater treatment and methane
recovery.
 Rithala STP alone is estimated to provide CERs
worth of 7.88 Cr annually.
 STPs at Kondli and Yamuna Vihar are good
contenders for getting carbon credits.
M/s FICCI, has been appointed as Due Diligence
consultant for evaluating the CDM potential of DJB
For methane recovery Project from Kondli & Yamuna
Vihar, RFP will be issued shortly
41

DMRC
 Energy conservation through regenerative
breaking system.
 Ernst and Young (E&Y) is engaged.
 CDM clearance of 4 lakhs CERs has been
granted.
 Another project on GHG Emission Reduction
due to Modal shift in transportation has
already been submitted to the Meth panel for
approval.
 The shift from the use of private vehicles to the
Public Transport is expected to generate CERs
worth of 4 lakh US Dollars annually.
42

NDPL
 Rithala, 108 MW Combined Cycle Power Project
at Rohini has been taken as a CDM Project.
Other potential projects are:
 LED Lighting projects.
 CFL distribution & Lighting projects under
Bachat Lamp Yojana of BEE.
 Technical loss reduction projects.

43

DTC
CDM potential exists in the:
 Introduction of low floor buses, which are fuel
efficient and carry more passengers per trip
 491 Non AC & 25 AC Low Floor CNG Buses have
been procured. 134 non AC LF buses are likely to
be inducted by Oct.2008. Order for purchasing of
additional 2500 low floor buses is in progress.
 EOIs has been invited
and received from
following firms-M/s Ernst and Young Pvt. Ltd,
Asian carbon and ICF international for appointing
a CDM consultant.
 New Pan Delhi Mega Carpool Scheme has been
proposed, estimated potential of 8 lakh CERs
(initially for 4 lakh car members).
44
 Likely to appointment a consultant shortly

Tapping Delhis CDM Potential

It has been estimated that several plan schemes
have the potential of generated carbon credits, if
adequate capacity is built in each department for
recognizing such projects and preparing the
necessary documentation for the same.
All departments are being requested to attend
the workshops regularly conducted by the
Department of Environment to expose few Nodal
Officers for this purpose.
If the numbers are large, training programmes
could also be organized with the help of expert
Faculty at the Directorate of Training.
45
45

 Some Departments have requested for creating

a base line Consultant in the Department of
Environment, who can advise all the
Departments. We are initiating this process
soon.
CDM is a bonus, which must be understood and
acted upon accordingly. It can provide ARM and
make certain unviable projects viable. In this
sprit, if the the departments approach this issue,
a large inflow of additional funds is possible.
With the help of Finance Department, a circular
is being issued to all HODs to keep CDM
perspective in mind, in all infrastructure based
46
46
projects.

 On the lines of the Customs Department,

Environment Department may move a
Cabinet proposal for providing 1% of the
revenue earned by the carbon credits to
the
concerned
Department,
who
formulates the project and generates this
additional revenue.

47
47

48