Regional Cooperation in Promotion and Sustaining CDM Initiatives

A Case of ASEAN

WEERAWAT CHANTANAKOME, Ph. D.

Executive Director ASEAN Centre for Energy (ACE) Jakarta, Indonesia

* A paper presented at the

Asian Regional Workshop on “Capacity Development for the Clean Development Mechanism (CD4CDM), October 19-21, 2005, AIT, Bangkok, Thailand - “Exploring Cooperation in CDM Implementation in ASEAN” 1

OUTLINE OF PRESENTATION

        Introduction to ASEAN and ACE CO2 Emission & Reduction: ASEAN Profile Status of Climate Change Treaties and CDM PROJECTS in ASEAN countries CDM Investment Structures Forecast CO2 Emission and Reduction / Market Value and Investment Opportunities ASEAN CDM Host Country & Institutional Arrangements: CDM Institutional Capacity Building Way forwards for Cooperation

2

Geography

The ASEAN PACIFIC OCEAN INDIAN OCEAN 3

INTRODUCTION



ASEAN

, one of the most dynamic economic regions of the world,



A

heterogeneous mix

of economies with greatly varying energy resource endowment and energy development situation.



In spite of these differences, the ten (10) ASEAN countries have common aspirations in achieving the Goals of

Sustainable Energy Development

and

Utilization

.

4

ABOUT ACE

 Established on January 1, 1999 as an

governmental Governing

organization that is guided by a

Council

composed of the

Senior Officials on Energy

countries.

inter-

(SOE Leaders) of the ASEAN  Took over all the commitments, responsibilities, liabilities, and assets of the 10-year long ASEAN-EC Energy Management Training and Research Centre (AEEMTRC).



Core funding

of the is provided by an

Energy Endowment Fund

established from equal contributions of the ten Member Countries and managed by a

fund manager ASEAN Secretariat

.

5

Charter of ACE

 ACE is envisioned to be a

catalyst

for the economic growth and development of the ASEAN region by initiating, coordinating and facilitating regional as well as joint and collective activities on energy .

 To realize this vision, the Centre will accelerate the integration of energy strategies within ASEAN by providing relevant

information

, state-of-the-art

technology

, and

expertise

to ensure that over the long term, necessary energy development policies and programs are in

harmony

with the economic growth and the environmental

sustainability

of the region.

6

Organizations in the ASEAN Energy Sector

ASEAN HEADS OF STATE/GOVERNMENT OTHER MINISTERIAL MEETINGS A S C A M M S O M AMMST COST LEGEND

:

AEBF

: ASEAN Energy Business Forum

AEM

: ASEAN Economic Ministers

AFOC

: ASEAN Forum on Coal

AMEM

: ASEAN Ministers of Energy Meeting

AMM

: ASEAN Ministerial Meeting

AMMST

: ASEAN Ministerial Meeting on Science & Technology

ASC

: ASEAN Standing Committee

ASCOPE

: ASEAN Council on Petroleum

COST

: Committee on Science & Technology

EE&C SSN

: Energy Efficiency and Conservation Subsectoral Network

HAPUA

: Heads of ASEAN Power Utilities/Authorities

NRSE SSN

: New & Renewable Sources of Energy Subsectoral Network

SCNCER

: Sub-Committee on Non-Conventional Energy Research

S G

: Secretary General

SOM

: Senior Officials Meeting

SOME

: Senior Officials Meeting on Energy

REPP-SSN:

Regional Energy Policy and Planning – Sub Sector Network

SCNCER ASEAN S G NRSE SSN ASEAN SECRETARIAT A E M ASEAN CENTRE FOR ENERGY (ACE) EE & C SSN A M E M S O M E HAPUA ASCOPE AEBF OTHER MINISTERIAL MEETINGS AFOC REPP SSN 7

ASEAN Vision 2020

…."establish interconnecting arrangements in the field of energy utilities for electricity, natural gas and water within ASEAN through the ASEAN Power Grid and Trans-ASEAN Gas Pipeline, and promote cooperation in

energy efficiency and conservation

, as well as the development of new and

renewable energy resources

." 5

8

Brunei Cambodia Indonesia Lao, PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam

ASEAN

China Japan Korea

Three ASEAN+3

Economic Profile

Selected Economic Indicators for ASEAN+3 Countries, 2002 Population,

millions 0.4

13.5

231.3

5.5

24.5

48.9

80.5

4.2

61.6

80.6

551.0

1,284.5

127.7

47.6

1,460 2,011 Population,

share of ASEAN+3 0.0% 0.7% 11.5% 0.3% 1.2% 2.4% 4.0% 0.2% 3.1% 4.0%

27.4% GDP,

current, million US$ 4,040 3,667 185,899 1,841 94,889 8,559 78,900 87,727 122,555 34,507

622,584

63.9% 6.4% 2.4%

72.6% 100.0%

1,236,690 3,997,042 472,501

5,706,232 6,328,816 GDP,

share of ASEAN+3 0.1% 0.1% 2.9% 0.0% 1.5% 0.1% 1.2% 1.4% 1.9% 0.5%

9.8%

19.5% 63.2% 7.5%

90.2% 100.0% Real GDP,

growth 3.2% 4.5% 3.7% 5.8% 4.1% 5.0% 4.4% 2.2% 5.3% 6.8%

4.1%

8.0% 0.2% 6.3%

2.4% 2.5% GDPPC,

US$/head 11,509 272 804 333 3,868 175 980 20,887 1,990 428

1,130

963 31,300 9,918

3,909 3,147 GDPPC,

Rank of 10 8 1 4 7 2 6 10 3 12 9 11 5 13

Economic Profile

 ASEAN registering a 6.2 per cent GDP growth rate in 2004.

 Projections for the 2005

year-end

are also positive: ADB forecasts a 5.7 per cent GDP growth for Southeast Asia and 6.6 per cent for Asia in 2005-06 on the back of

export growth

and

FDI expansion

, including continued growth of

China

and

India

.

10

Economic Profile



An additional US$ 10 increase in oil prices would restrain GDP growth by 0.6 per cent on the average. In ASEAN, many countries recently trimmed their growth, citing rising fuel costs

11

CO2 Emission & Reduction: ASEAN Profile

CO 2 EMISSION FROM FUEL COMBUSTION 1990-2001 Country Brunei Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam ASEAN Total CO 2 Emissions (1990) 3.20

n.d

141.55

n.d.

47.40

3.95

36.03

34.76

80.20

17.96

365.05

Source: IEA, 2000; IEA – 2003 (IPCC) Total CO 2 Emissions (1998) 4.91

n.d.

226.46

n.d.

92.40

7.84

61.99

43.46

148.10

32.87

618.03

Total CO 2 Emissions (2001) 5.12

n.d.

283.50

n.d.

108.77

6.74

67.62

45.93

156.40

45.75

719.56

12

ENERGY POLICY ISSUES:

ENVIRONMENT

CO 2 Emissions Based on Electricity Demand Forecast 2020 (BAU) vs. Kyoto Protocol (KP) Conditions Year Business As Usual (BAU) in million tons CO 2 1 2000 96.66

2005 141.00

2010 200.00

2015 280.00

2020 358.00

Kyoto Protocol (KP) in million tons CO 2 43.02

43.02

43.02

43.02

43.02

308.95

Emission Reduction from BAU to KP in million tons CO 2 2 53.64

98.06

157.37

236.89

Value of Emission Reduction from BAU to KP in million US Dollars 3 295.04

539.31

865.53

1 Business As Usual (BAU) is CO 2 Emission based on electricity demand forecast 2020.

2 Agreed worldwide CO 2 reductions under Kyoto Protocol is 5.2% of 1990 CO 2 emission levels.

3 Dollar value of CO 2 emission reduction is 5.5 USD/MT CO 2 as in recent transactions.

1302.87

1,699.24

13

ENERGY POLICY ISSUES:

ENVIRONMENT

Graph Showing CO 2 Emission Based on Electricity Demand Forecast 2020 (BAU vs. Kyoto Protocol) 14

ENERGY POLICY ISSUES:

ENVIRONMENT

Total CO 2 Reduction Plans from RE and EE&C in 2020 in Mil. T CO 2 Energy Efficiency & Conservation Renewable Energy Total Brunei Cambodia Indonesia Lao P.D.R

Malaysia Myanmar Philippines Singapore Thailand Vietnam Total 0.09

0.09

4.36

0.06

2.73

0.06

3.53

0.15

3.93

4.24

19.26

0.22

1.94

12.59

1.29

9.03

1.47

5.80

0.11

14.34

20.72

67.54

0.31

2.03

16.95

1.35

11.76

1.53

9.33

0.26

18.27

24.96

86.80

15

ENERGY POLICY ISSUES: ENVIRONMENT CO 2 Reduction from RE and EE&C Plans in 2020 ASEAN Countries vs. KP with BAU as Baseline of Country Brunei Cambodia in Million Tons CO 2 Total CO2 Reduction from EE&C and RE Plans Kyoto Protocol with BAU as baseline (b) (a) 0.31

2.03

1.00

0.42

Difference (b-a) 0.69

-1.61

Indonesia Lao P.D.R

Malaysia Myanmar Philippines Singapore Thailand Vietnam Total 16.95

1.35

11.76

1.53

9.33

0.26

18.27

24.96

86.80

77.39

-0.12

60.87

-0.28

54.99

14.70

60.50

39.50

308.95

60.44

-1.47

49.11

-1.81

45.66

14.44

42.23

14.54

222.22

16

ENERGY POLICY ISSUES

:

ENVIRONMENT Comparison of CO 2 Emission on Three Scenarios: BAU, RE & EE&C Plans and KP 17

Status of Climate Change Treaties in the ASEAN

Country Brunei Cambodia Indonesia Lao PDR Malaysia Myanmar Philippines Singapore Thailand Vietnam Signature UNFCC Status of Ratification As of 17 February 2003 05/06/92 09/06/93 11/06/92 12/06/92 13/06/92 12/06/92 11/06/92 Ratification Accession 18/12/95 (Ac) 23/08/94 (R) 04/01/95 (Ac) 13/07/94 (R) 25/11/94 (R) 02/08/94 (R) 29/05/97 (R) 28/12/94 (R) 16/11/94 (R) Entry into force 17/03/96 21/11/94 04/04/95 11/10/94 23/02/95 31/10/94 27/08/97 28/03/95 14/02/95 Kyoto Protocol Status of Ratification As of 14 August 2003 Signature 13/07/98 12/03/99 12/08/03 15/04/98 02/02/99 02/12/98 Ratification Accession 22/08/02 (Ac) (OK) 06/02/03 (Ac) 04/09/02 (R) /10/03 (R) 28/08/02 (R) 25/09/02 (R) 18

CDM PROJECTS IN ASEAN COUNTRIES

Source: www.cdmwatch.org

Country Brunei Cambodia Indonesia Lao PDR Malaysia Myanmar Philippine Thailand Singapore Vietnam CDM Project Not signatory to UNFCC and Kyoto Protocol Studies by PREGA, UNEP and NEDO

-

Micro-hydro project

-

Unocal’s Sarulla geothermal project

-

Unocal’s Wayan Windu geothermal project

-

Palm oil west power plant

-

Utilization of plantation waste and forest segmentation for fuel switching project

-

Indocement energy efficiency project

-

Kansai wood waste recycling plant

-

Yogyakarta urban bus project

-

East Kalimantan plantation project -

-

Biomass power generation project

-

Bumibiopower biomass power plant

-

Air Hitam landfill gas capture project

-

Palm oil plant gas capture project

-

Felda Lepar Hilir Palm Oil Mill biogas project Studies by NEDO PV/LPG and biomass project

-

Rice husk power plant project

-

AT Biopower rice husk power project

-

Yala rubber wood waste plant project

-

Mitr Phol’s Dan Chang Cogeneration project

-

Bangkok Landfill gas project Not signatory to Kyoto Protocol

-

Thongly landfill gas project

-

Rang Dong gas planning project

-

Tree planting 19

CDM Investment Structures

    Unilateral model  developing country would itself undertake actions to reduce emissions and then subsequently trade the CERs (certificate of emissions reductions) produced through such action on the international market .

Bilateral model  countries or themselves. Together, they would set criteria and rules for crediting.

private entities

would negotiate agreements among Multilateral model  countries would offer projects for emission reductions to the CDM, to be picked up by the implementation.

highest bidder in Annex 1 countries

projects and seek financial and technical support for their . Interested developing countries could each present a portfolio of Hybrid model  Combines features of

unilateral

and

multilateral

models.

20

Unilateral CDM

1. Project Development, Design and Financing Ideas Capacity Financing 2. Validation of Project Design Host Operational Entities/ Executive Board 3. Monitoring by Project Operators CERs 4. Verification and Certification 21

Unilateral CDM

   Attractive to countries with sufficient capacity and resources to select, develop, finance, and operate sustainable development Ensures that projects are closely knit with national sustainable development plans Can promote wider international CDM participation

22

Bilateral CDM

1. Project Development, Design and Financing Ideas Capacity Financing 2. Validation of Project Design ANNEX 1 Investors Host 3. Monitoring by Project Operators CERs Operational Entities/ Executive Board 4. Verification and Certification 23

Bilateral CDM

    Consistent with conventional modes of foreign direct investment (FDI) Provides most flexibility to project developers Consistent with the

existing

practices development assistance Concerns :   Large majority of FDI is concentrated in a small set of countries (China, Mexico, Brazil – 50 %) – will not deliver a geographic distribution of project Bilateral approach favors large capital intensive infrastructure project – small renewable and energy efficiency projects may be rendered non competitive.

24

Multilateral CDM

ANNEX 1 Investors $ CERs 1. Project Development, Design and Financing Ideas Capacity Financing CDM Fund Host 2. Validation of Project Design 3. Monitoring by Project Operators CERs Operational Entities/ Executive Board 4. Verification and Certification 25

Multilateral CDM

   May increase bargaining power to developing countries – dealing with fund managers whose mandate is compatible with their interests Help shelve investors for the risks of individual project failures Possible arrangements   Single supplier – give the greatest control over CDM investment flows

but

could slow the market development and create large inefficiencies Multiple fund – variety of institutions operate, competing and co-existing CDM funds

26

Hybrid CDM

Annex 1 Private Investors $ Other Multilateral CDM Funds CERs CERs $ CERs 1. Project Development, Design and Financing Ideas Capacity Financing National CDM Fund 2. Validation of Project Design Domestic Investment $ 3. Monitoring by Project Operators CERs Operational Entities/ Executive Board 4. Verification and Certification 27

Forecast CO2 Emission and Emission Reduction from Energy Sector for the (2001-2010) ASEAN Countries Scenario Business-as-usual Emission reduction on fossil fuels Emission reduction on RE & EE programs Emission reduction by Kyoto Protocol (5.2% of 1990)

* Using business-as-usual (BAU) as baseline

Emission (in million tons CO 2 ) 7,610 2,519 Emission Reduction (in million tons CO 2 ) 879 512 5,091 28

Market Value of Emission Reductions * 2001-2010 in ASEAN : Investment Opportunities

Scenario Emission Reduction from fossil fuels Emission Reduction from RE and EE Programs Emission Reduction by Kyoto Protocol Standard Value in Mill. US Dollar 4,836 2,815 28,000

* Using business-as-usual as baseline - Assuming USD 5.5 per ton CO 2

29

Summary of Markets/ Investment Opportunities from Clean Energy Initiatives

in ASEAN (in million US Dollars)

MARKET Renewable Energy Energy Efficiency and Conservation Clean Development Mechanism (CDM) Total INVESTMENT OPPORTUNITIES 2001-2010 Low High 19,476 17,054 27,467 29,672 7,651 28,000 44,181 85,139 30

Conclusion



The Clean Energy Development Market and Business Opportunities in the ASEAN Region during 2001-2010 range between

44 Billion USD

and

85 Billion USD



Taking the proper gears for the RESCOs , the ESCOS and the CDM Promotion Companies should be a way to prosper in this market.

31

ASEAN CDM Host Country

   The large ASEAN countries have a varied and considerable CDM potential, particularly regarding bio-energy and geothermal .

The most attractive ASEAN CDM host country at the moment is likely to be Indonesia . Vietnam and Malaysia have institutions in place and thus fulfill the necessary conditions.

Thailand and the Philippines still have to clarify their approval procedures, but already have a considerable project pipeline.

32

Institutional Arrangements for CDM in ASEAN countries

 Cambodia, Laos, Malaysia, Thailand Vietnam have notified their DNA and  Indonesia is likely to notify its DNA after the recent ratification of the Kyoto Protocol.

 The Philippines the DNA. (?) are in the process of setting up  Brunei, Myanmar and Singapore started preparations. (?) have not yet

33

CDM Institutional Capacity Building in ASEAN

   ASEAN have experience in developing CDM policies , setting up institutional arrangements CDM procedures .

and implementing Local capacity and experience countries. Within the region, therefore, the exchange of experience and co-ordination is still limited in some can support the implementation of CDM.

Needs for capacity building in ASEAN are:

- Operational skills of DNA - Technical CDM project assessment - Establishment local Operational Entities - Awareness raising in longer term - Project development: * CDM life cycle or preparing proposals * Financing or transactions

34

        

Ongoing Capacity Building Projects

in the ASEAN region

CDM-ASEAN (

ASEAN region

) - Energy sector, institutional Japan IGES-MOE (Indonesia, Cambodia, Thailand, Vietnam, Philippines) - all levels of capacity building WB/ESCAP (Northeast, Southeast and South Asia) - all levels of capacity building CD4CDM/UNEP (Vietnam, Cambodia, Philippines) - Awareness building, project development, institutional GTZ project on CDM institution building (Indonesia / Cambodia - Vietnam) - Procedures, DNA, project clearing house Danish CDM capacity building (Thailand / Malaysia) - DNA, procedures, project development, awareness UNDP (Philippines) - Institutional, project development, awareness SouthSouthNorth (Indonesia) - Project development, sustainability criteria Asia Pro-Eco (Cambodia, Laos, Vietnam)

35

Problems & Recommendations

 Most projects are successful.

Some problems

, however, have been identified which limit the effectiveness of the projects: – Some overlap exist in scope and content – Projects do not sufficiently build on results of previous projects – The target group is sometimes not specific enough – Capacity building should start by raising awareness on the general issue on climate change since most people have very limited knowledge on the issue, then relate it to the more specific CDM issues.

– The project activities are often limited to workshops and do not involve (on-the-job) training .

– The

role of local government

in CDM is not clear and not adequately targeted in the capacity building projects Ref: Pelangi, 2004, Jakarta, Indonesia

36

Recommendations



Several recommendations

have been made to increase the effectiveness of capacity building: – Improved evaluation of past projects – Stricter assessment of proposals by the recipient country and organisations beforehand – Capacity building should not be limited to transfer of knowledge but also include

transfer of skills

(on-the-job training) – Improved

coordination

of activities. This is mainly the responsibility of the recipient (host) country.

– Better exchange of information or results between projects

37

ASEAN Existing Body for Cooperation: Way Forwards…

      Roles of

ASEAN Secretariat, ASEAN Centre for Energy (ACE), ASEAN CCI

, complementary to the activities on the national level.

A future

ASEAN Climate Change Initiative

facilitate the transfer of best practice and the exchange experiences within ASEAN.

could The ongoing

CDM-ASEAN Project (ACE/EAEF)

seen as a first step (or pilot) towards establishing a regional framework for exchange of experience.

can be The possibility of the establishment of an

ASEAN CDM Fund

to fund CDM projects

ASEAN Senior Official Meeting on Energy (SOME) ASEAN MINISTERS ON ENERGY MEETING (AMEM) 38

A Commitment….

“… However, the ASEAN people are becoming aware that the climate is actually changing… and their awareness may be the key to future change …”

39

THANK YOU

www.aseanenergy.org

40