Carbon trading

Why trade with carbon?

Role of developing countries?

Outline

• Background of carbon trading /Clean Development Mechanism (CDM)

• CDM in Malaysia

• CDM in China

• Conclusion

Climate Change

• Predicted temperature rise by 2100: 1.1-6.4 °C (IPCC report 2007)

• Very likely that emitted GHG are responsible

• Substantial effects: – rising sea levels – submerging land– reduced food security– Homelessness– Large and unpredictable economic impacts

Carbon trading under Kyoto

• International Emission Trading

• Joint Implementation

• The Clean Development Mechanism (CDM)

The CDM – how it works

Source:http://cdm.greentechmalaysia.my/what-is-cdm/intro.aspx

The CDM - objectives

Contribute to the overall goal ofstabilizing world GHG concentrations

Support for Annex I countries to achieve their emission reduction targets

Assist non Annex I countries in achieving sustainable development (technology transfer, finanze)

Threefold

Source: Danish Management Group

Malaysia and the CDM• Fast growing nation/ high

energy demand

• 2nd largest Palm oil producer – Many CDM projects:

Conversion of Palm oil waste (biomass and biogas) into energy, composting

– But also: EE and RE projects

• Malaysian PM in Cop 2009: reduction of GHG emissions by 40% by 2020 with the help of developed countries

Number of CDM projects in Asia by country, Dec 2012by UNEP, http://www.cdmpipeline.org/cdm-projects-region.htm

Malaysia – legal CDM criteria

• Support and direct benefits for sustainable development (economic, environmental & social)

• CER-buyer: party from Annex I country• Technology transfer or improvement of existing

technology• Fulfilment of CDM EB criteria at international

level• Applicant must show ability to implement the

project

CDM in ChinaIn 1th Janunary, 2009, 579 CDM projects were registered

Copyright © 2011 John Wiley & Sons, Ltd and ERP Environment

project type % of total project Anuual emission reduction

% of total reduction

hydroelectricpower

69.4% 63 154 453 35.0%

wind 21.9% 56 195 023 31.1%

Waste gas/heat utilization 11.1% 20 938 625 11.6%

Actors involved in China's CDM project

Developers: the domestic companies that initiat

e and implementprojects

Participants:

the foreign firms involved in the projects.

participant countries

numbers of projects

% of total projects

UK 191 33%

The Netherlands 112 19.3%

Japan 86 14.9%

Policy regulation of CDM in China

CDM Measures in China One notable aspect of CDM projects in China is that, under Art.24 of the CD

M Measures:• resource of emission reductions are owned by the Chinese Government:• CERs produced from a particular CDM project are owned by the Chinese pro

ject owner;• proceeds from sale of CERs are owned jointly by the Chinese Government a

nd the Chinese project owner.

It should also be noted that under the CDM Measures, the Chinese Government is entitled to:

• 65 per cent of the sale price of CERs from hydrofluorocarbon and perfluorocarbon projects;

• 30 per cent of the sale price of CERs from nitrous oxide projects;• 2 per cent of the sale price of CERs from new and renewable energy projects

, or to recover and utilise coal bed methane (all of which are considered priority projects).

Benefits of CDM implemention for China

Reduce carbon emission-environmental benefit

2012

1997

Economic benefits

1. Reduce government expenditure

● Less finance for technology and science

● Less finance to increase job opportunities

China had created 28million jobs as a result and that wouldrise to 40million.

2. Enhance revenue

●Enhance tax revenue for government

17% VAT for power sale 5% business tax for project implementation 25% income tax for employees

●Many revenues from CERs

China :CERS issued ≈0.67 billionThe lowest price per CERs= €3.28 (lowest price in China in 2012)The revenue≈0.6 7× 3.28≈ €2.20 billion

Unit: t

Problems of CDM implemention for China

►Long CDM registration time

1. For 2 registered AWMS biogas CDM projects need to 1year.

2. Shangdong Minhe biogas project is waiting for over 2 years since it started validation and it is still under correction right now.

►Technical failure

Mengniu Aoya biogas project stopped CDM procedure

Focus on agricultural biogas projects

Conlusion

• Malaysia: high growth potential for CDM; government focuses on supporting RE and EE projects

• China: Althought there are some problems with CDM in China,

In terms of the measures, the income from CERs and tax, the government also can get lots of profit,

CDM projects can bring a large amount of revenue to developing countries

References

● “Global Warming & Climate Change (Doha Talks, 2012) http://topics.nytimes.com/top/news/science/topics/globalwarming/index.html#

● Anon, 2008. Carbon Trading, Climate Change, and the Kyoto Protocol: New Report Discovers Carbon Trading to Be Win-Win Proposition for Poor Villagers, Big Business, and for Slowing Climate Change.

● Wei, C., J. Ni, and L. Du. 2011. “Regional Allocation of Carbon Dioxide Abatement in China.” China Economic Review.

● Wu, Q. 2011. “Policy and Politics of a Carbon Market in China.” In J. Peetermans, ed. Greenhouse Gas Market Report 2011: Asia and Beyond: the Roadmap to Global Carbon & Energy Markets. Yi, W.J., L.L. Zou, J. Guo, K. Wang, and Y.M. Wei. 2011. “How Can

● China Reach Its CO2 Intensity Reduction Targets by 2020? A Regional Allocation Based on Equity and Development.” Energy Policy.

● Chang, Y.C., and N. Wang. 2010. “Environmental Regulations and Emissions Trading in China.” Energy Policy 38 (7): 3356–3364.

● Olivier, JGJ, G. Janssens-Maenhout, J. Peters, and J. Wilson. 2011. Long-term Trend in Global CO2 Emissions: 2011 Report.

● State Council. 2011. Outline of the 12th Five Year Plan for National Economic and Social Development.

● Zhu, C., F. Huang, and A. Jiang. 2010. “Study on Construction of Chinese Carbon Trading System in Post-CDM Era.” In Industrial Engineering and Engineering Management (IE&EM), 2010 IEEE 17Th International Conference On, 1851–1855.

● "CDM Benefits " http://cdm.unfccc.int/about/dev_ben/index.html

Group members:

Stefanie HakeLixian Fu Jing GuanHaiyan Liu