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Southeast Asia:
Lessons learnt from CDM experience
in the region
Oxford Fellowships
Oxford, August 28, 2006
Axel Michaelowa, Perspectives GmbH
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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: Cambodia, Indonesia, Lao PDR,
Malaysia, Philippines, Singapore, Thailand and Vietnam
Involved Institutions:
• Hamburg Institute of International Economics (HWWI)
• PT Pelangi Energi Abadi Citra Enviro (Peace Reasearch
and Advisory)
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Structure of presentation
• Theoretical CDM potential in ASEAN
 Theoretical scope of emission reductions
 Country business climate
 Country CDM institutions and CDM project experience
• 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
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Potential supply
Cambodia and Lao PDR:
• 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 far from sustainable development practices
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Country investment climate
FDI Inflows
• Cambodia: heavily reliant on foreign assistance, impossibility
to attract FDI (unreliable local government)
• Laos: totally dependent on foreign aid, extremely difficult to
attract FDI (poor investment climate, primitive infrastructure),
but FDI in sector for hydropower schemes likely
• Vietnam: high ability to attract/utilise relatively large amounts
of FDI and ODA, but obstacles remain (inadequate infrastructure,
slow privatisation process, lack of administrative capacity...)
Analogy FDI inflows – CDM investment?
Prerequisites that drive the flows of traditional FDI are likely to
be dynamic driving factors for distribution of CDM
 Unfavourable outlook for Cambodia and Laos, much better for
Vietnam
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CDM institutions
Host country CDM institutions
• Malaysia, Vietnam: DNA formally operational for several
years but number of approvals limited compared to CDM
leaders (India, Brazil, China)
• Cambodia, Indonesia, Philippines: DNA only formally set up
recently, no experience how efficiently it works
• Laos: 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)
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CDM project experience
Registration and submission for registration
• Most active country: Malaysia with 12 projects (5 registered, 4
renewable energy, 1 manufacturing ind; 3 under review, 4
submitted – all )
• Vietnam: 2 registered (1 renewable, 1 gas flaring reduction), 4
submitted (3 renewable energy, 1 energy efficiency, 1 gas
capture)
• Indonesia: 2 registered projects (energy industry), 2
submitted ones (energy industry, waste mgmt.)
• Cambodia: 1 registered project (renewable electricity)
• 2 projects (1 renewable electricity, waste mgt) submitted from
the Philippines
• Lao, Singapore, Thailand: no projects submitted yet
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Country CDM competitiveness ranking
Country
Overall
CDM capacity
CDM institutions &
CDM project
experience
Investment
environment
Vietnam
B
B
B+
CCC
Cambodia
CC
C
B
C+
Lao PDR
C- /D
C
C-
C-
Competitive
AAA
A
extremely highly competitive
competitive
AA
BBB
very competitive
somewhat competitive
Regarded as risk elements
BB
CCC
C
not totally competitive
not so competitive
unlikely that investments in this
country will be successful
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B
CC
D
a slightly higher chance to be successful
than to fail
reasonably unlikely that investments in this
country will be successful
no competitive/unsuitable for CDM
investments
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Share of CDM projects submitted to the UNFCCC
ASEAN
10.0%
Other Asia
3,0%
European
0,5%
Other Latin
America
17,1%
Total:
695 projects
China
9,9%
Brazil
16,5%
Africa
2,6%
India
40,4%
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Share in CERs generated until 2012
of submitted project activities
Total:
613 Million CERs
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ASEAN CDM projects submitted
to the UNFCCC by country
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ASEAN CDM potential
On global scale, ASEAN CDM projects are
increasing, nevertheless...
• ... Their share is still rather 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”
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DNA structures: Strengths & Weaknesses
High number of ministries involved, dominating role of governments
Strengths
Relatively strong unanimous
endorsement of CDM mgmt.
activities + proposed projects
Low risk of blocking of projects
due to conflicts of interest
Core budget secured by
higher number of ministries
Efficiency inside DNA board rises
with position of host ministry in the
governmental politic system
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Weaknesses
Poor involvement
of other stakeholders
Bureaucratic, less flexible to adapt
to changes in CDM procedure/markets
Staff less motivated than in mixed
governmental-NGO model
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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
assess a project’s contribution to sustainable development
• No standardised criteria or indicators
Other criteria
• DNA‘s activities in improving the competitiveness of the
host country and mobilising CDM capital flow into the
country
• Information dissemination and outreach
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Duration of approval process
Indonesia
• Theoretically fastest DNA with 30 days, but rounds
Cambodia, Laos and Vietnam
• 1.5 months (latter has only 3 rounds per year!)
Philippines and Thailand
• About 2 months
• 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
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Assessment of criteria for Sustainable
Development - Cambodia (I)
Economic development
• Use of local businesses
• Reduction of import of fossil fuels
• Poverty alleviation
Social development
• Creation of jobs
• Sound stakeholder consultation
• Reduction of pollution
Environmental sustainability
• Biodiversity conservation
• Sustainable use of resources
Technological development
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• Transfer of technology
• Capacity Building
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Assessment of criteria for Sustainable
Development - Cambodia (II)
Development criteria and indicators based on SouthSouth-North/Gold Standard Approval Process
Each indicator is scored from -3 to +3 (with -3 stating serious
negative impact, 0 no impact)
Dilemma
• Very modest CDM potential in combination with
comprehensive list of sustainable development criteria
• If used in a relaxed manner, low quality CDM projects can
get be approved
• If used very strictly, only a few high quality projects can be
realised
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Assessment of criteria for Sustainable
Development – Other countries
Indonesia
• list of criteria includes environmental, economic, social,
and technological sustainability (project-based
indicators)
Philippines and Thailand
• No information on sustainability criteria available
General problems
• Lack of project-specific assessment/methodologies to
evaluate project’s contribution to Sustainable
Development
• Criteria not “translated” into sectoral indicators or
specific quantitative standards
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DNA assessment: Summary
CDM is about projects
• 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 de-facto deadline of CDM projects for 2008-12 is gone
More assistance needed
...in specific issues (legal and financial) and strengthening
involvement of private, consulting sectors
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Examples of Capacity Building Programmes (I)
ID
IGES ICS-CDM
√
EAEF/Asia Pro-Eco
√
MY
√
SG
√
TH
PH
√
√
√
√
CD4CDM
√
Germany (GTZ)
√
Denmark (Danida)
√
The Netherlands
√
UNIDO
√
South-South-North
√
√
√
√
√
√
World Bank Carbon Finance Assist
World Bank Global Gas Flaring
Reduction Initiative
√
ID: Indonesia, MY: Malaysia, SG: Singapore, TH: Thailand, and PH: the Philippines
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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
Indonesia
•Objective: Functional DNA
• Target group: Ministry of Environment
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Capacity Building Tools
• Workshops and stakeholder dialogue
• Deemed useful by 64% (UNITAR survey)
• Common feature of all programmes
• Problem: skimming of attendance fees by ever the same
government officials (Indonesia)
• General public training
• Also popular with governmental audiences
• Relatively high costs
• Background papers
• 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
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Lessons learned
• Avoid replication in scope and content
• 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 sectoral level for information
on CDM potential and “state of the art“ technologies for
project developers
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Current distribution of CDM activities
300
260
223
250
200
133
150
100
50
9
17
Least
developed
countries
Other low
income
countries
12
0
India
Low er middle
income
countries
More
advanced
countries
Upper middle
income
countries
Data source: CD4CDM, Jun. 2006
LDCs and LICs account for a very minor share – only 4% of
total projects developed (5.6 % of total expected CERs)
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Types of CDM projects developed in the LICs
9
8
7
6
5
4
3
2
1
0
8
5
3
2
1
Fugitive
emissions
Renewable
electricity for
grid
Renewable
energy for
user
Energy
efficiency
Industrial
gases
Data source: UNFCCC website as of June 2006
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Current trend of CDM investment flows (I)
Vicious circle
Developing (middle-income) countries with high CDM
potential
 attract more and more CDM projects
 accumulate more experience by project implementation
 strengthen their competitiveness
 likely attract more investment
…at disadvantage of LICs
• Investors look for low marginal costs and low project risk
• 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
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Mobilising CDM investment
into the LICs (I)
Key principles that drive the success of the CDM market
Result in agreed sustainable development that meets national
objectives for the host country and not just CERs for the recipient
country;
Key decisive factors from the host
countries’ perspective
SD criteria
Need of an effective DNA in host countries
DNA operation, eligibility criteria for
is over-riding factorproject proposals and experts to
develop PIN/PDD
for facilitating CDM activities
Help maximize the generation or supply of cost-effective CERs
Provide reliable information and secure access for the buyers of
CERs
DNA
Provide legal recourse for both buyers and sellers of CER’s
DNA
Main challenges for effectiveness and CDM
sustainability
of DNAs
endowment
human resources
Provide a real incentive for a broad base of for
investors
to investperiod
in
CDM endowment and investment
a long
Meet the needs of a wide spectrum of potentially diverse project
types and proponents
are shortage of finance and
CDM projects and not just attract a limited band of “green”
investors
environment
Result in CDM projects that are additional to defined baselines
CDM endowment and experts to
develop PIN/PDD
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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 (avoid
concentration on non-attractive areas, address additionality
issues proactively)
• Support reliable local consultants (reduces the transaction
costs, minimises consulting fees flowing to international
consultants)
• Promote proactive industrial associations and private sectors
to find viable CDM ideas
• Promote local DOE offices (reduce transaction costs for
developing CDM projects)
 LIC opportunity: Expeditious registration of small-scale
projects and support for bundled projects with high
sustainability value
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