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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Clean Development MechanismClean Development Mechanism
EcoSecurities Indonesia
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Climate change: a serious globalenvironmental problem
Concentrations of climate change-inducing greenhouse gases continue toincrease;
If not mitigated, impacts will bedevastating:
Sea level rise;Severed production of food andavailability of water;
Increased incidence of malaria,dengue, and diarrhoea;
IPCC suggests a reduction of 60 – 80percent below 1990 levels.
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Kyoto Protocol
Greenhouse gas emissions reduction in the industrialized countriesat 5 percent below 1990 levels by 2008 – 2012; Quantitative emissions limitation and reduction commitments by
industrialized countries; EU, 8 %
US, 7 % (later on pulled out!) Japan, 6 % Russia and other ET, 0 % Norway, Australia, and Iceland, increase by 1 %, 8 %, and 10
%, respectively. Can be undertaken individually or jointly with other countriesthrough “flexibility mechanisms”: Emissions Trading; Joint Implementation;
Clean Development Mechanism;
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Kyoto P rotocol: a globalsolution
Commitments of the industrialized
countries to reduce GHG emissionsat 5 percent below 1990 levels by2008 – 2012;
Can be undertaken individually
Domestic Action
OR jointly with other countriesthrough “flexibility mechanisms”:
Emissions Trading;
Joint Implementation;
Clean Development
Mechanism;
Current level
Emission level in2012 without KP
Assigned amounts
Annex I
- 5%
1990 level
Jointimplementation
Domestic actions
CDM
Emission trading
Emission level in2012 without KP
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Clean DevelopmentMechanism
Objectives
To assist developingcountries to supportsustainable development
and to contribute to theobjective of the UNFCCC;
To assist industrializedcountries to fulfill their
emission reductioncommitments;
The sustainable development criteria and indicators
for assessing a proposed CDM project are categorized into:environmental, economic, social and technological sustainability
Developingcountries
Industrializedcountries
Certified EmissionReduction
Certified EmissionReductionLevel ‘90
Targetlevel
- 5%
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Political initiatives
1989 Establishment by the UNGA of the IntergovernmentalNegotiating Committee (INC)
1992 UN Framework Convention on Climate Change (UNFCCC)signed in Rio de Janeiro, Brazil
1992 Indonesia signed the UNFCCC
1994 Indonesia ratified the UNFCCC
1998 Indonesia signed the Kyoto Protocol
2004 Indonesia ratified the Kyoto Protocol, UU 17/2004
February 16,2005
Kyoto Protocol entered into force
1994 UNFCCC entered into force
1995 First Conference of the Parties (COP1) to the UNFCCC.
1997 Kyoto Protocol adopted at COP3 in Kyoto, Japan.
July 2005 Indonesia established the National CDM Authority
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Concepts and terms
Baseline: Emissions that occurwith the absence of the CDMproject.
Methane that will be releasedby the landfills.
Carbon-dioxide that will bereleased from fossil-basedelectricity generation.
Additionality: Proof thatemissions are reduced from whatwould occur without project.
CERs: Certified EmissionsReduction due to the CDM projectimplementation.
Without CDM(Baseline)
With CDM
CER
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
CDM Projects Potential inIndonesia
Fuel Switching from fossil fuel to:
Jatropha based Biodiesel
Palm based Biodiesel
Sugarcane based Ethanol
Energy
Energy efficiency from process / raw material
Hydropower / Geothermal / Wind / Solar Cell /
Biomass Waste
Solid waste EcoMethane
Liquid waste (organic) Anaerobic Digestion
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Jatropha curcas based
Current petro-dieselconsumption: 22 billion liters.
Emissions of more than 70million tons per year
Current poor people: 43 millionpeople.
Current critical land: more than20 million hectares (ha).
biodiesel
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Poverty in Indonesiabiodiesel
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Critical landsbiodiesel
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
CDM potential in biodiesel development
For every 1,000 hectares (ha):
About 2,500 – 5,000 thousand liters biodiesel, directlyreplacing petrodiesel.
Avoiding emissions of 8,000 – 16,000 tons per year out of petrodiesel.
Assuming $5 per ton of emissions, income from CDM is about$40.000 - $80,000.
For 800.000 ha target by the end of 2006:
Reduction of 6.4 – 12.8 million tons per year, with $32 – 64
million additional income from CDM. For 10 million ha target by 2010:
Reduction of 80 – 160 million tons per year, with $400 – 800million additional income from CDM.
biodiesel
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
The role of CDM in financing biodiesel (foreach 1,000 ha), 2007 - 2012
Investment Revenues
Planting $750K Biodiesel $12.5MProcessing $1,250K CDM $375K
Total $2M (3 % of revenue, or
18 percent of investmentcosts)
Total $12.875M
biodiesel
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Target 2009: Benefits to thecommunity
10 million ha critical lands rehabilitated.
10 million poor people obtains additional $5 billionincome per year.
40 billion liters of biodiesel produced, replacing petro-diesel.
140 million tons carbon-dioxide emissions reducedper year.
“making profits while doing something good for the country”
biodiesel
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Indonesian electricity situation and thepotential for renewable energy
Type Potential InstalledCapacity
(MW)
Utilization(% )
Geothermal 20,000 812 4.06
Microhydro 459 54 11.76
Solar 4.8 kWh/m2 /h 5
Wind 448 0.5
Biomass 50,000 302 0.60
Total 1,173.5
energy
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Methodologies
ACM0002 – Consolidated grid connected electricity
ACM0006 – Consolidated biomass
Small-Scale Methodologies I.A – I.D
AM0005 – Small grid connected electricity
AM0007 – Biomass cogeneration
AM0014 – Natural gas based cogeneration
AM0017 – Steam efficiency
AM0018 – Steam optimization
energy
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
What is Anaerobic Digestion
? ‘Anaerobic Digestion’ refers to the breakdown of organic matter by specialized
bacteria in theabsence of oxygen; this is a natural process with four primary steps:
? Hydrolysis: The breakdown of complex organic molecules into simpler sugars,
AA’s, and Fatty Acids
? Acidogenesis: Further breakdown of simple sugars into ammonia, CO2 andH2S!!
? Acetagenesis: Breakdown of acidogenesi s products to produce CO2, hydrogen,
and acetates
? Methanogenesis: Production of methane (CH4), CO2 and H20
? Anaerobic Digestion is a basic component of wastewater treatment all over the world.
? Ideal conditions for this process are between 15 and 40 degrees C, greater than 1 met
of depth in the lagoon, and 6.8-7.2 pH
waste
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Methodologies
There are currently five ADmethodologies:
• AM0006, Manure Management
•AM0013, Forced Methane Extraction
•AM0016, Manure Management
•AM0022, Wastewater-to-energy
•SSC IIID, Methane Capture
waste
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Steps to develop a
CDM project
1 Feasibility andDue Diligence
2Documentation
7Implementation
3Publicconsultation
4Validation byDOE
5Approval byDNA
8 Verification byDOE
9 Issuance of CERs by EB
10 Transaction of CERs
2 Methodologicalapproval 6Registration byExecutive Board
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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Financial needs of the CDM
Feasibility and Due Diligence $5,000 - $10,000
Public consultation About $2,000 – 10,000
Approval by the NationalAuthority
At present: free.
Monitoring Depending on the project
Registration by Executive
Board
$5,000 - $30,000
(depending on the project)
Documentation (PDD) US$ 20,000 – $50,000, up to$100,000 with new methodology
Validation $8,000 - $15,000
Underlying investment Depending on the project
Project implementation Depending on the project
Verification $5,000 – $10,000
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C A R B O N C R E D I T S O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Speed is key
IF NO Decision; No Incentive beyond 2012,
No Investment, Market Development Stalled
2007 20082006 2012
CDM project 1
CDM project 2
= Start Construction
= Crediting Period
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C A R B O N C R E D I T S O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N
Risks and ConsiderationsTo Your Project
Speed is key
This type of project takes time, so the sooner the project starts theless TIME DECAY (lost revenues) there is
Regulations
If the local or national governments were to impose mandatory
emissions reduction regulations, this project value would be ZERO
Business Conditions
Changes in your capacity will effect your future CER allocation
Forward Selling / Performance
Sellers guarantee the performance of its operations through 2012when selling the future flow of CERs coming from this project
Careful thinking and good advisory is required to strategize yoursales and risk management options
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Non-Financial Project Benefits
Happier communities Cleaner air Good public relations, better company brand value
Industry and country leadership Be strategically ahead of your competitors Facilitate your nation’s position in greenhouse gas project development
and know-how
Preparation for a time when you become a compliant nationof Kyoto or similar treaty
Chance to put some of the CER revenue stream into local social and/orrenewable projects Those giving project validation and certification like to see this as part of
your plan
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Summary – Key Points
Start early and do you research
Get an idea of how your project should look Get comfortable with the equipment options and how it fits your situation Identify the methodology you wish to use This will take time so the sooner you start, the better
Avoid mistakes Choose a proven and experienced partner to help you through the
validation and certification process One mistake can kill your project!
Maximize your carbon credit marketing options Build different options into your selling strategy
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Thank you
“Start something, start from you, start now”
Gina Sy. LisdianiEcoSecurities Indonesia
Graha Niaga 17th FloorJalan Jenderal Sudirman Kav. 58Jakarta 12190Tel: (62-21) 250-5707Fax: (62-21) 250-5708Email: [email protected]