Ecuador facing the global carbon market

CD4CDM Project development assessment in Ecuador

Marcos Castro R.CORDELIM – CDM Promotion Office

Third Regional Workshop of the UNEP/Risoe Centre Project CD4CDMAugust 19-20, 2004Santa Cruz de la Sierra, Bolivia

National institutional setting for the CDM

Regulation Promotion

Project assessment& approval

National registry &Project reporting Technical & commercial

assistance

Capacity building

Informationdissemination

Policy - making

Strategic research & studies

Priority projectportfolio

CDM NationalAuthority (DNA)

Ministry for Environment

CDM Promotion Officeseparate public-private entity

presided by Ministry for Environment

CD4CDM in Ecuador – Overall goals

Consolidation of DNA

CD4CDM in EC

Methodological issues:additionality &

baselines

Barriers related to carbon finance &transaction costs

Climate regime negotiation process

National workshops & int’l CD events

Knowledge dissemination& promotion tools

Assistance for project pipeline development

Ecuadorian CDM National Authority / DNA

Evaluation & approval system

DNA

National registry &follow-up

National carbon offset policy

National legal framefor carbon trading

Ecuadorian DNA

The Ministry for Environment is Ecuador’s Designated National Authority for the CDM (as per resolution of the National Climate Change Committee). The DNA technical coordination has been assigned to the Ministry’s Climate Change Unit.

The DNA adopted the ‘procedures for national approval of CDM project proposals’ (emissions reduction projects), as per Ministerial Accord of April 2003.

• As well, it has adopted complementary procedures for (i) approval of small-scale CDM project proposals and for (ii) endorsement of CDM project ideas (emissions reduction & carbon removal projects).

Additional tools, including project submission guide (for project participants) and project assessment guide (for DNA evaluators) are being prepared. Ongoing internal discussion of draft versions.

Policy note on ‘sector priorities for CDM project implementation’ has been drafted and is also being discussed at the MoE (prior discussion & adoption by NCCC).

• Focus: power generation, waste management, transportation sector.• Notwithstanding, it just encompasses cross-references to broad policy goals

established in existing frame of relevant laws and sector plans.

Other ongoing activities ( see next workshop presentation)

Ecuadorian DNA: ongoing policy-making processes

By means of participatory processes with relevant decision-making entities, the DNA is currently assessing further key topics aiming at enhancing local environment for CDM implementation:

Policy note on ‘sector priorities for CDM project implementation’ has been drafted and is also being discussed at the MoE (prior discussion & adoption by NCCC).

• Focus: power generation, waste management, transportation sector.• Notwithstanding, it just encompasses cross-references to broad policy

goals established in existing frame of relevant laws and sector plans.

Clarification of applicable legal frame for CERs transactions and CDM/carbon offset project investments

• bearing in mind the need to warrant underlying long-term commitments and to provide risk mitigation support for project participants.

Relevant national decisions for carbon sequestration projects, once the UNFCCC Rules & Modalities for CDM forestry projects have been adopted.

National CDM Promotion Office - CORDELIM

Support to project development

CORDELIM

Capacity building activities

Information & knowledge dissemination

Technical & commercial assistance

Advise to policy-makers

Role of the CDM Promotion Office

Overall key function: facilitate network of specialists/institutions & provide a local resource platform, in order to develop the carbon market in EC.

National CDM National CDM Office / Office /

CORDELIMCORDELIM

Specialists/ consultants: carbon

management

Specialists/ consultants

: project developme

nt

Banks / development agencies for finance

Accredited operational

entities: validators / verificators

Project hosts /

participants

Markets & information

sites

others

CERs buyers & brokers

(governments, industries,

others)

Knowledge dissemination & promotion tools

CORDELIM has managed to position itself as a local resource centre on carbon offset trading.

Basic implementation of CORDELIM’s website: general information; key documents on carbon market & CDM issues; indicative project portfolio; online requests. Other online services yet to be implemented.

Systematization of ‘electronic document centre’ ( CDM guides, carbon market intelligence, PDD case studies, etc). Conventional modalities for dissemination of information.

Simplified project development guides drafted (power generation, reforestation, waste management), but final technical review pending.

Installed tools & skills for organization of basic workshops on request of local institutions. As well, conferences & presentations in diverse local events are permanently arranged.

Overall, daily business involves attention to general requests of a broad range of diverse stakeholders

Methodological issues: additionality & baselines

Technical notes on additionality & baseline issues

Analytical follow-up of CDM-EB & Meth Panel working plan on methodologies• Meth Panel member & Desk reviewer are directly involved in CORDELIM

Participation in discussions on sector baseline development:• Power generation sector: baseline development by CFB/BM• LULUCF sector: facilitation of working group

Consolidated methodologies (currently proposed by Meth Panel)• Preliminary assessment of their application in the Ecuadorian context

Guidance for application of simplified meths for small-scale projects: • Recommendations on barrier assessment matrix• Recommendations on ex-ante emission factors

Overall: direct assistance to project developers on meth issues

Barriers related to carbon finance & transaction costs

Establishment of institutional alliances

National workshops & int’l CD events

Milestones: 1st half-year 2004

National Workshop on Enabling Activities for the CDM (Quito, February 10th-12th)• DNA procedures ↔ SD evaluation• Enabling legal framework (national scope)• Barriers for project finance & carbon finance• Need for local capacity in ‘carbon management services’

CDM Project Development Course: bioenergy & reforestation (Quito, March 1st-5th)

• CORDELIM & PROFAFOR, with support of Ministry for the Environment, CD4CDM, ENCOFOR, IAI, GTZ, InterCooperation.

• 40 participants; energy & forestry sector.

Latin American CDM Offices Workshop (Lima, May 5th-7th)• Andean CDM Offices, with support of PLAC/CAF.• Informal establishment of LA CDM Offices Network

Technical mission at CarbonExpo 2004 (Koeln, June 8th-11th)• Preparation, participation, follow-up: country profile & project portfolio.

Others: local workshops, regional events on CC, FCCC negotiating process.

Assistance for project pipeline development

PIN CORDELIM submission of projects On request of project sponsors & developers, provision of assistance along

early stages of the ‘carbon upgrading’ project cycle.

Technical tutorials on CDM project cycle and related issues, provision of updated information on carbon funds/brokers, drafting of project concept notes, review of ToR, others.

Consolidation of network of demand-side actors

Handling of Indicative CDM Project Portfolio: updated profiles/PINs of projects and project initiatives (primarily, power generation sector and land-use & forestry sector), that are seeking incorporation of carbon finance component.

Ground laying activities targeting (public) developers of project activities in other eligible sectors (waste management, transportation), since awareness on carbon finance opportunities (& challenges) still incipient.

Renewable energy projectsAt least final technical design in progress & PDD being developed:

•15MW < x < 50MW: 3 hydro; total capacity 43 MW; estimated emission reductions: 307.000 tonCO2eq/year.

•Small-scale (<15MW): 1 hydro, 1 wind; total capacity 25,3 MW; estimated ER: 89.600 tonCO2/year.

At least feasibility study concluded & ER potential assessed:

•15MW < x < 50MW : 2 hydro, 1 wind, 1 bagasse (sugar cane); total capacity 88 MW.

•Small-scale (<15MW): 7 hydro, 1 hybrid eolic/diesel, 1 LFG. total capacity 67 MW.

Other project initiatives that look forward to ‘carbon-upgrading’

Indicative Project Portfolio: power generation

Reforestation/afforestation projects ( CDM eligible activities):

• Projects with specific carbon sequestration assessment: 4 projects; overall 24.000 hectares

• Additionally, some project initiatives are assessing carbon management feasibility (PINs).

Other forestry projects ( ‘parallel’ market, non-Kyoto compliant).

• with specific carbon conservation assessment: 2 projects; overall 30.000 endangered hectares

• Additionally, some project initiatives are assessing carbon management feasibility (PINs).

2 AIJ forestry projects have been implemented and verified; relevant experienced acquired.

Indicative Project Portfolio: land-use change & forestry

Waste management projects:

Project being designed & interest in incorporating carbon offset component

Project being reengineered, but ER potential not yet addressed

Transportation projects:

Project being designed & interest in incorporating carbon offset component

Project being developed, but ER potential not yet addressed

Carbon offset opportunities: urban development

Issues…

• Large work load: due to its nature, National CDM Promotion Office has to address permanent tasks/functions and emerging requests from a broad range of local and international stakeholders, which go by far beyond elaboration of specific target products.

• Long processing times: due to necessary coordination with decision-maker and administrative levels at Ministry for Environment.

• Weak critical mass for straight-forward development of more specific tasks/issues: despite existence of significant overall knowledge on carbon market opportunities (and partially oversized expectations).

• Project developers/sponsors and other national stakeholders seek assistance from the CDM Promotion Office on aspects regarding project finance (as distinct from carbon finance) and project marketing, rather than on aspects related to technical and methodological issues of carbon component development.

• Analytical work on methodologies should be focused on application/adjustment of already approved meths and other existing methodological guidance of the CDM Executive Board (as distinct of development of innovative conceptual & methodological approaches).

More information…

• National CDM Promotion Office (CORDELIM) www.cordelim.net , e-mail: info@cordelim.net

• CDM Designated National Authority: www.ambiente.gov.ec/cdm-dna (to be

launched)