Maxwell Session21 2008
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ASIA CLEAN ENERGY FORUM China CDM Fund – An Innovative Approach to Supporting Clean Energy
The views expressed in this presentation are the views of the ADB mission members and DO NOT necessarily reflect the views or policies of the Asian Development Bank, its Board of Director or the Governments they represent.
Background ¾ Clean Development Mechanism (CDM) established under the Kyoto Protocol ¾ Managed by UNFCCC ¾ PRC ratified Kyoto in 2002 ¾ CDM trades Carbon Emission Reductions (CERs) ¾ CDM promotes transfer of project financing and technology to developing countries
CDM as a Mechanism to Promote Clean Energy 1. CDM is a market mechanism for transfer of financing and technology to clean energy projects. 2. CDM Fund is a separate entity established in PRC, with contributions through levy on CERs
¾ Specifically designed to use levy to ‘support domestic climate change-related activities’
Background ¾ Two concerns related to CER transactions under the CDM: ¾ certain CDM projects (e.g., HFC) have a high CER value but low development impact ¾ high CER market values could serve as a perverse incentive, stimulating operation of and further investment in polluting industries.
¾ 12 October 2005 “Measures on Operation and Management of Clean Development Mechanism Projects” (Decree 37).
CDM Fund ¾ Decree 37 introduced a levy on the CER revenues generated by various CDM projects ¾ Funded from levy on CERs ¾65% from HFC/PFC projects ¾30% from nitrous oxide projects ¾ 2% from other projects (EE, RE, CMM/CBM, small scale reforestation)
CER Background ¾ Asia currently dominates CER generation (home to 75% projects and 80% of CER generation to 2012) ¾ PRC is currently home to 35% of all approved CDM projects (next biggest is India at 27%) ¾ Based on approved projects, PRC will generate 54% of all CERs by 2012
HFC ¾ HFC projects are small in number (19 to date, 11 in PRC) but have high greenhouse impact (11,700 times CO2) ¾ 77% of HFC CERs are from PRC ¾ HFC is 28% of PRC estimated CER generation ¾ CER generation in PRC to 2012 from HFC alone is 3 times total CER generation from Africa/Middle East and same as Central/South America ¾ HFC projects constitute 15% all CERs approved to date
CDM Fund Design ¾ Decree 37 established the CDM Fund to manage the levy collected from CDM projects. ¾ Objective to ‘support domestic climate change-related activities’ ¾ Used to promote domestic CDM projects and other climate change-related mitigation and adaptation projects and activities ¾ Will support technical assistance, grants and loan financing. ¾ Sector focus will include clean energy
CDM Fund Design ¾ CDM Fund established under Ministry of Finance ¾ Governing Board comprising ¾NDRC ¾MOF ¾Ministry of Science and Technology ¾Ministry of Foreign Affairs, ¾Ministry of Environmental Protection ¾China Meteorological Bureau ¾Ministry of Agriculture
Fund Design ¾ Non-profit, government fund ¾ Size will depend on CDM projects, could be up to $3 billion; the value of the fund capital will be maintained and only the return from investments will be used in the form of financial products ¾ Currently under internal discussion ¾ % of fund used for project investments ¾ % used for project grant assistance ¾ % used for capacity building of ministries that lead PRC’s climate change-related activities, and the development of project pipeline
¾ Have not commenced support for projects or technical assistance
Replicability ¾ Unique rationale because of the large share of HFC projects ¾ Government levy on CERs probably not replicable ¾ If financial products developed by the CDM Fund are later assessed to be successful, may be replicable as a government-funded support for climate change activities
External Assistance ¾ ¾
The World Bank supported draft operational strategy, and advance payment from Prototype Carbon Fund. ADB TA 4812-PRC Support for Establishing a CDM Fund ($800,000), June 2006, to be completed in 2008 1. 2. 3. 4.
¾
CDM Fee Collection Mechanism Governance Structure and Capacity Building Operations Manual Information Dissemination
Proposed TA China Clean Development Mechanism Fund Capacity Building ($ 800,000), waiting fund allocation
Thankyou Anthony Maxwell Environment Specialist Energy Division Asian Development Bank [email protected] +63 2 6326391
The views expressed in this presentation are the views of the ADB mission members and DO NOT necessarily reflect the views or policies of the Asian Development Bank, its Board of Director or the Governments they represent.
Background ¾ Clean Development Mechanism (CDM) established under the Kyoto Protocol ¾ Managed by UNFCCC ¾ PRC ratified Kyoto in 2002 ¾ CDM trades Carbon Emission Reductions (CERs) ¾ CDM promotes transfer of project financing and technology to developing countries
CDM as a Mechanism to Promote Clean Energy 1. CDM is a market mechanism for transfer of financing and technology to clean energy projects. 2. CDM Fund is a separate entity established in PRC, with contributions through levy on CERs
¾ Specifically designed to use levy to ‘support domestic climate change-related activities’
Background ¾ Two concerns related to CER transactions under the CDM: ¾ certain CDM projects (e.g., HFC) have a high CER value but low development impact ¾ high CER market values could serve as a perverse incentive, stimulating operation of and further investment in polluting industries.
¾ 12 October 2005 “Measures on Operation and Management of Clean Development Mechanism Projects” (Decree 37).
CDM Fund ¾ Decree 37 introduced a levy on the CER revenues generated by various CDM projects ¾ Funded from levy on CERs ¾65% from HFC/PFC projects ¾30% from nitrous oxide projects ¾ 2% from other projects (EE, RE, CMM/CBM, small scale reforestation)
CER Background ¾ Asia currently dominates CER generation (home to 75% projects and 80% of CER generation to 2012) ¾ PRC is currently home to 35% of all approved CDM projects (next biggest is India at 27%) ¾ Based on approved projects, PRC will generate 54% of all CERs by 2012
HFC ¾ HFC projects are small in number (19 to date, 11 in PRC) but have high greenhouse impact (11,700 times CO2) ¾ 77% of HFC CERs are from PRC ¾ HFC is 28% of PRC estimated CER generation ¾ CER generation in PRC to 2012 from HFC alone is 3 times total CER generation from Africa/Middle East and same as Central/South America ¾ HFC projects constitute 15% all CERs approved to date
CDM Fund Design ¾ Decree 37 established the CDM Fund to manage the levy collected from CDM projects. ¾ Objective to ‘support domestic climate change-related activities’ ¾ Used to promote domestic CDM projects and other climate change-related mitigation and adaptation projects and activities ¾ Will support technical assistance, grants and loan financing. ¾ Sector focus will include clean energy
CDM Fund Design ¾ CDM Fund established under Ministry of Finance ¾ Governing Board comprising ¾NDRC ¾MOF ¾Ministry of Science and Technology ¾Ministry of Foreign Affairs, ¾Ministry of Environmental Protection ¾China Meteorological Bureau ¾Ministry of Agriculture
Fund Design ¾ Non-profit, government fund ¾ Size will depend on CDM projects, could be up to $3 billion; the value of the fund capital will be maintained and only the return from investments will be used in the form of financial products ¾ Currently under internal discussion ¾ % of fund used for project investments ¾ % used for project grant assistance ¾ % used for capacity building of ministries that lead PRC’s climate change-related activities, and the development of project pipeline
¾ Have not commenced support for projects or technical assistance
Replicability ¾ Unique rationale because of the large share of HFC projects ¾ Government levy on CERs probably not replicable ¾ If financial products developed by the CDM Fund are later assessed to be successful, may be replicable as a government-funded support for climate change activities
External Assistance ¾ ¾
The World Bank supported draft operational strategy, and advance payment from Prototype Carbon Fund. ADB TA 4812-PRC Support for Establishing a CDM Fund ($800,000), June 2006, to be completed in 2008 1. 2. 3. 4.
¾
CDM Fee Collection Mechanism Governance Structure and Capacity Building Operations Manual Information Dissemination
Proposed TA China Clean Development Mechanism Fund Capacity Building ($ 800,000), waiting fund allocation
Thankyou Anthony Maxwell Environment Specialist Energy Division Asian Development Bank [email protected] +63 2 6326391
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