Clean Development Mechanism [email protected]@lehmanlaw.com June 23 th 2008Lehman Lee &...

Clean Development Mechanism

[email protected] [email protected]

June 23th

2008Lehman Lee & Xu’s Beijing office

Aldo Settimio Boni de Nobili Associate - China desk - Beijing

22

GLOBAL WARMING

Increase in the temperature of Earth’s surface and oceans

1990-2100 = 1.4° C – 5.8° C

EFFECTS

Sea level

Precipitations and extreme weather eventsAgriculture

Glaciers

Species extinctions

Established in 1998 by WMO and UNEP

TASK:evaluate the risk of climate change

ACTIVITY:reports about UNFCCC

implementation

IPCC

DOING BUSINESS IN CHINAClean Development Mechanism

3

•UNCED Rio de Janeiro 1992•Signed in 1992 by 154 nations•Parties = 192 countries•1994 entered into force•COP

•report annual emissions and sinks•submit annual inventories

Provide financial resources to Non-annex 1

Non-annex 1

Annex 1Developed countries

Developing countries

NO RESTRICTIONS

•Aim: stabilizing GHG to prevent dangerous interference with the climate system•“Common but differentiated responsibilities”•Non-binding

Annex 2OECD


4

•COP3 Kyoto 11 Dec 1993 •In force 16 Feb 2005•June 2008: 182 parties•36 Annex 1 + EU = reduce GHG (61.6%)

•Cyprus, Malta and Kazakhstan intend to participate•137 Non-annex 1 ratified: no obligation •US not ratified

1° committment period = 2008-12

reduce national emissions 5.2% below 1990 baseline

Industrial entities

other parties

brokers

carbon projects developers

exchanges

Governments

Buy creditsBuy credits

$60

billi

on in

2007

•1.3 emission allowances in 2nd commitment period for every ton of GHG exceeding•suspension from transfers of credits

4


Emissions cap

Actual emissions

Credits

GAINING CREDITS BY UNDER-POLLUTING

5

CO2 emissions cap

Emissions allowed

Emissions exceeding

Carbon credits

OFFSET

JI CDM

ET

5


6

Emissions Trading (ET)

Joint Implementation (JI)

Clean Development Mechanism (CDM)

• Article 12 Kyoto Protocol • Annex 1 – Non Annex 1

• Article 6 Kyoto Protocol • Annex 1 – Annex 1

• Article 17 Kyoto Protocol • Annex 1 – Annex 1

6


777

Competitive labour and facilities costs

50% of CERs

2-8 bln US$ per year

WORLD BANK SAYS:

WHY

POTENTIALITIES

CURRENT STATUS

1197 projects nationally approved (April 2008): +400% 2006210 projects internationally registered: + 500% 20061449 projects are being nationally approved

625 approved hydro projects: 50% of the total approved projects

INTENDED CERs BUYERS

PROJECT TYPES


8

INTERNATIONAL LEVEL NATIONAL LEVEL8


9

Host governments + Designated National Authorities (DNA)

Designated Operational Entities (DOE)

CDM Executive Board (EB)

• national approval

•validation (outset)•making publicly available the PDD•receiving public comments and stakeholders’ comments•verification and certification of CERs (operation)

•recommendations to the COP/MOP•approve new methodologies•DOEs accrediting and suspending•reviewing accreditation procedures•make publicly available CDM activities and procedures•CDM project registry•reviewing CR and VR•issuing CERs.

9

DNA

NDRC

NDRC - MOST

National CDM Project Board

National Coordination Committee on Climate Change

(NCCCC)

MOFA

SEPA – CMA – MF - MA

NDRC

Chair

Co-Chairs

Vice Chair

Board


•reviewing national CDM policies, rules and standard

•approving Board’s members

•examination and approval

•reporting to NCCCC on progress in CDM activities

•making reccomendations on the amendments of the CDM Measures

•accepting applications•final approval

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•China’s legal system, sustainable development strategies and policies•not introduce new obligations•promote the transfer of environmentally sound technology

PROJECTFunding for CDM projects from the developed countries shall be additional to their current official development assistance and their financial obligations under the Convention.

Additionality

(Marrakech Accords)

“Chinese funded or Chinese-holding enterprises within the territory of China are eligible to conduct CDM projects with foreign partners” (art. 11 CDM Measures)

•100% Chinese•51% Chinese (at least)

•FIEs?•Hong Kong / Macau?

10

PROJECT OWNER


11

CERs purchaser

Domestic company

Foreign investor

Broker

Government

Company

Private companyGovernmental bodyFinancial institutionNGO

1111

CERs

RMB/tCO2

100% ChineseFIE 51% Chinese (at least)

CDM Project

Project owner

RMB/tCO2

TAXES

2%(Priority areas)

65% (HFC – PFC)

30%(N2O)

Other chinese taxes


12

Energy efficiency

Methane recovery

Agriculture

Industrial process changes

Cogeneration

Transports

Afforestation and reforestation

Renewable energy

priority

areas PRC

12


13

Approval

Validation

Registration

Implementation and monitoring

Verification

Certification and issuance

National level

International level

DNA + N Board

DOE

EB

PIN

PDD

Project owner

Project owner

DOE

Project owner

EB

•LOA

•DOE ‘s designation•consultation•validation report

•stakeholders

•filing of VR and LOA•8 weeks (potential review)•EB files decision to PO•PO files decision to NDRC •object•modality: monitoring plan PDD•submitting reports to NDRC and DOE•DOE’s designation•Verification Report•Certification Report•CERs: 15 days after reports•send to participants’ accounts at request

NDRC

Documents:--application form--PDD--enterprise status--general

information--project financing

DOE’s designation

Project reviewValidation

Report to the EB

Expert review procedure (30 days)

LOA (20-30 days)

Decision from National CDM Board


14Aldo Settimio Boni de Nobili Associate - China desk - Beijing

[email protected] [email protected]

THANK YOU FOR YOUR ATTENTION

June 23th

2008Lehman Lee & Xu’s Beijing office

Clean Development Mechanism

Clean Development Mechanism [email protected]@lehmanlaw.com June 23 th 2008Lehman Lee &...

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