d1 maxim is ing carbon asset of the carbon projects through asia carbon

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Maximizing Carbon Asset of the Green ProjectsMaximizing Carbon Asset of the Green Projects

through ACADF & ACX through ACADF & ACX --ChangeChange

Biomass & Green Technology Financing Opportunities by Government Agencies & Financial Institutions

Capacity Building Programme 1

19th – 20th April 2011, PNB Darby Park, Kuala Lumpur

ASIA CARBON GLOBAL ASIA CARBON GLOBAL Asia Carbon Holdings Asia Carbon Holdings PtePte Ltd Ltd

Irfan L.Irfan L. Pawennei Pawennei

Senior Manager Senior Manager



Overview

• Asia Carbon Global

• Introduction of ACADF and ACX-Change

• Carbon Asset of the Green Projects

• Clean Development Mechanism

• Programme of Activities

• Carbon Price



Asia Carbon Global

• Group’s activities conceptualized, researched and developed since 2001

• Founded February 2003, two years ahead of Kyoto coming into force

• One stop shop services : Carbon Advisory through Carbon Trading

• Headquarter in Singapore

• Centre of Excellences: Singapore, India, Indonesia

• Rep Offices: Malaysia, Thailand, Vietnam, the Philippines, UAE

• Strategic Alliances: Japan, China, Korea, Bangladesh, Pakistan & Africa



ACG Business Model

Vertically Integrated to provide a one stop solution in

carbon advisory, carbon finance and carbon asset management

Carbon Asset Management

Carbon Advisory

Carbon & Project FinanceVertically Integrated

Business Model

AC-CE

ACADF™

ACXChange™



System Landscape – Carbon Services

TradingPlatform

Registry

Platform

ExternalTradingSystem

ProjectParticipant

CDMRegistry

ITL

NationalRegistry

ClearingHouse

Bank

Monitoring

Platform

InventoryManagement

Monitoringdatabase

Project Site

Device



Consultancy Services

• 110 emission reduction based projects in the pipeline

• Main type: Renewable Energy & Energy Efficiency projects

• Host Country: Singapore, India, Indonesia, Vietnam, Malaysia, China, UAE, Pakistan,

Sri Lanka

• Scope of Work

– Project Assessment on CDM/ PoA potential projects

– Development of Project Idea Note (PIN) and Project Design Document (PDD)

– Assistance on Host Country Approval, Validation, Registration, Verification, and Issuance

of the CDM/ PoA cycle

– Develop new methodology

– Climate change and energy audits



ACG CDM Type of Projects



ACG Registered Projects on the UNFCCC

• 21 MW RK Power Gen Biomass Project

• 7. 5 MW Chitra Biomass Project

• 8 MW VKG Steel WHR

• 4 MW Pushpit Steel Wind Project

• 7.2 MW MMCL Wind Project

• 6 MW TCP Biomass Project

• 5 MW Aarasi Biomass Project

• 2 x 2.5 MW Hydropower Project

• PoA Biomass Project



Programmatic CDM Projects

Biomass Boiler Programme3 Yrs – ~ 60 CPA

Registered PoA

Vapor Absorption Chiller Programme3 Yrs - ~ 20 CPAUnder Validation PoA



Capacity Building Project

10

Building cooperation channel between countries

by conducting seminar and workshop

- Energy Efficiency in Malaysia

- CDM in mining sector and biogas in Vietnam- Biomass and biogas in Thailand

Development ofDevelopment of

CDM projectsCDM projects

CDM Feasibility study

- 10 MW hydropower in Vietnam- 2MW POME project in Thailand- Biogas project in Vietnam

TechnologyTechnology

Demand SurveyDemand Survey

Infrastructure and technology demand survey

Joint technology demand survey report

- Building energy efficiency audit report in Malaysia

BuildingBuilding

CooperationCooperation

ChannelChannel



Asia Carbon Asset Development Facility

• ACADF to support CDM Projects with Carbon/ Project Finance

• Carbon Finance

– Developer/ Project Owner cover the CDM transaction cost and

consulting fee

→ Fixed consulting fee + Success fee

– Project Owner to share the transaction cost

→ Facilitation fee + Success fee

• Project Financing + Carbon Credit revenues



ACX-Change (carbon trading platform)

• Web-based, with built-in registry and trading facilities since 2005

• First online project based trading platform in the world to provide

a common platform for Sellers and Buyers of Carbon Assets

outside of EU Allowances

• Conducted out several online auctions and closed bid auctions

with total value of 60 million CERs transactions

• Launching ACX-Japan and ACX-Korea



ACX Platform Objectives

Transparency

Price Discovery

Level playing field

Document Standardization

Low procurement cost for buyer and seller

Rights of both buyer and seller – options in place

Proven platform technology building trustworthy



Carbon Trading Platform

ACX - CHANGE

ONLINE

AUCTION

CLOSED BID

AUCTION

BILATERAL/

DIRECT OTC



Online Auction Platform



ACX Buyer’s ProfileTotal more than 60 ACX Buyers

ACX Buyers Profile

Government

10%

Broker

9%

FI

7%

Carbon Fund

10%

Utility

26%

Trader

38%

ACX Buyers - Country

Czech Republic

2%Italy

3%

Netherlands

7%

Switzerland

5%

Austria

2%

Denmark

2%

Thailand

2%

Singapore

5%

Poland

2%

Portugal

2%

US

7%

Spain

8%

Australia

7%

Japan

12%

Germany10%

UK

22%India

3%

Finland

2%



Carbon Assets

• What are the different market mechanisms?

• What are the carbon asset commodities available?

• Where is the Supply & Demand?



Compliance & Voluntary based Market

Compliance Market

• Carbon transactions due to carbon

constraints on National and

International level• Carbon products:

– AAU

– CER

– ERU – EUA

Voluntary Market

• Carbon transactions due to limit

carbon footprint or CSR

commitments

• Carbon products:

– Verified Emission Reduction

– Voluntary Carbon Unit



Kyoto Protocol Flexible Mechanism

KYOTO

PROTOCOL

PROJECT BASED ALLOWANCEBASED

CLEAN DEVELOPMENT

MECHANISM (CDM)

JOINT

IMPLEMENTATION (JI)

INTERNATIONAL

EMISSION TRADING

CERTIFIEDEMISSION

REDUCTION (CER)

EMISSIONREDUCTION UNIT

(ERU)

ASSIGNEDAMOUNT UNIT

(AAU)



Supply & Demand

Sources: World Bank, Bloomberg New Energy Finance and Ecosystem Marketplace for data on the voluntary market



Malaysia – registered CDM projects



Malaysia – CER volume



Clean Development Mechanism



Traditional Project cycle – CDM

Feasibility Study/ Technical

Design/ Environmental Impact

Assessment/ Licenses

Construction stage

Project

Financing

CDM Documentation

(Due dilligence, PDD)

Operation stageVerification

CER Payment

Registration

Legend: : Expenses

: Income

Validation Host Country

Approval



What is Programmatic CDM?

• Programmatic CDM = Programme of Activities = PoA

• PoA is an extended version of CDM which allows more than one Project Activity

• One PoA could have several Project Activities

• Single Project Activity (called CPA – CDM Programme of Activities) can be added to

the PoA at anytime during the lifetime of the PoA

• Example type of PoA:

– Biomass based projects

– Micro hydro projects

– CFL/ LED bulbs replacement projects

– Chiller installation projects

– Solar based installation projects

– Small MSW projects

– Biogas plants

– Building energy efficiency projects



Why PoA?

• Some Limitations of a regular single CDM Project

– Multiple small sources

– High transaction costs

– Weak transmission of CDM incentive

• CDM not equipped to support investment programs, policies & measures

– Need for scaling up – Weak host country ownership of a single project

• Local/regional/national policy or standard cannot be considered as a CDM

project activity, but that project activities under a PoA can be registered asa single CPA



Characteristic of PoA

• One PoA, many CPAs, different methodology/ technologies, and different locations

• PoA should be proposed by a Coordinating Entity (private or public entity)

• PoA can be implemented across International boundaries (e.g. Malaysia-Singapore)

• Additionality should be shown at both CPA and PoA levels

• Same baseline and monitoring methodology should be applicable to all the CPAs

• PoA duration

– 28 years for non-forestry sector

– 60 years for forestry sector

– Baseline and methodology reviewed/updated every 7 years

– Starting date and crediting period can be different for different CPAs

– Each CPA crediting period either 10 or 21 years but limited to remaining life of

PoA

• CPA should not be a part of any other applied/ approved CDM/ VER project



CDM Cycle



PoA Cycle

Project Design Document

preparation

Host Country Approval

Project Validation

Project Registration

CPA Validation &

Project Monitoring

Project Verification &

Certification

Carbon Credit (CER)

Issuance

Pre-Project Implementation

(one time process)

P r o j e c t

I m

p l e m e n t a t i o n Post-Project Implementation

(on each CPA inclusion)



PoA in Malaysia

Programme of Activities

(PoA)

CPA

CPA

CPACPA

CPA

CPA CPA

CPA

CPA

CPA

CPACPA



Some Points on the PoA Cycle

DOE (Validators) has a liability clause

PoA has to be revalidated every time its baseline methodology is revised.

Given the high frequency of methodology revisions for conventional CDM

projects, this could lead to a significant workload for PoA coordinators,

validators and the CDM Executive Board.

CER’s issued to the name of Managing Entity and distributed among the

participants according to contract

If methodology put on hold or withdrawn, more CPAs cannot be added

Eligibility criteria for inclusion of CPA into a registered PoA to include

criteria for demonstration of CPA’s additionality



CDM vs PoA on the Development Cost

490,000Total Cost

€ 15,000Consultancy Verification (x5)

€ 50,000Consultancy Registration (x5)

€ 10,000CDM Verification (DOE) (x5)

€ 3,000CDM Registration (EB) (x5)

€ 20,000CDM Validation (DOE) (x5)

CostDescription

408,000Total Cost

€ 30,000Consultancy CPA (x5)

€ 80,000Consultancy PoA (x1)

€ 10,000CPA Verification (x5)

€ 15,000CPA Validation (x5)

€ 3,000PoA Registration (EB) (x1)

€ 50,000PoA Validation (DOE) (x 1)

CostDescription

5 sites of Biomass Projects in Malaysia as an example case



CDM vs PoA Cost

CDM vs PoA Development Cost

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

No. of projects

E u r o

CDM Development PoA Development



Key Steps to Successful PoA

• Identify Roles/ Responsibilities

• Identify Coordinating/ Managing Entity

• Agree on the Modalities of Communication (MoC)

• Unilateral PoA vs. partnering with a buyer through an ERPA• Define Project Boundary & Measurements

• Define Eligibility & Additionality criteria

• Contract with the DOE

• Find solutions on the liability issues for erroneous inclusion of CPAs

• Monitoring – Sampling of each CPA

Project Design Document

• CDM-PoA DD

• CDM-CPA-DD (generic)

• CDM-CPA-DD (specific)



Carbon Price

• What is the price drivers?

• What is the current price trend?

• What is the CER values of the CDM Project?

b i i



Carbon Price Driver

• Supply

– CER Volume in the market

– Additional Methodologies

– Effectiveness of the issuance bodies

– ERUs and AAUs are being traded

• Demand

– More trading schemes, competition to access carbon credits

– New Sectors. EU ETS on Aviation & Shipping industry

– Governments demand (i.e., Italy, Spain, Germany, Japan)

– Project diversification and Risk management

• Uncertainties

– International treaty Post 2012

C b P i D i ( )



Carbon Price Driver (cont.)

• Policies

– Limits on imports of KP credits

– Free and auctioning allowances on EU ETS

– Price caps and floors on a trading scheme

– Banking possibilities

• Change in Expected Emission & Market sentiment

– Fuel price, weather, industrial production, switching and power price

– Trustworthy scheme (e.g. re-cycled CER case)

• Growth in Renewables

– 20% target at the EU members

– 15% voluntary target by year 2020 in China

– 25% voluntary target in India

d f d



Mode of Trade

• Over the Counter (OTC)

• Exchange Market

– ECX, EEX

– CBEEX, TCX

• Auction

• Brokers

38

C b P i T d i t



Carbon Price Trend in recent years

Source: Point Carbon

C CER P i



Current CER Prices (1st week of April 2011)

• Spot CER : € 13.23

• ECX DEC 2011 CER : € 13.07

• Primary Kyoto CER

PIN & PDD stage : € 7.50 – 8.75

Validation : € 8.75 – 10.00

Registered (non-guaranteed) : € 10.00 – 11.30

Post Registered (guaranteed) : € 11.30 – 13.00

• Post 2012 : 70 – 80%

Revenue Optimization



Revenue Optimization

• Emission Reduction Purchase Agreement (ERPA)

• CER Price

– Fixed CER Price for the Kyoto Period

– Floating CER Price with Floor and Cap Price for the Post Kyoto Period

– Combination for Fixed & Floating CER Price

• CDM Cycle

– Sharing the CDM Cycle cost to be borne by the Buyer at early stage

– The Seller share the costs Post Registration to be recovered from the

CER revenues

• Mixed Financing schemes

Required Project Information



Required Project Information

Any documents related to:

• Feasibility report & Technical Design Document

• Environmental Impact Assessment

• Land & Construction permits/ licenses

• Operational permits/ licenses

• Financial of the Project including: financial calculation spreadsheet and contract

with banks/ investors

• Power Purchase Agreement/ Electricity Supply Agreement

• Equipments contracts

• Local Stakeholder consultation

• Project Owner Information (Certificate of incorporation, registration certificate,

annual report)

• Confirmed decision of the Project Owner to take into account the CDM

consideration



THANK YOU!

Irfan L. Pawennei

Senior Manager, Business Development

[email protected]

ASIA CARBON GLOBAL

Asia Carbon Holdings Pte Ltd

140 Cecil Street #06-01

065940 Singapore

Tel. +65-6225 1791

www.asiacarbon.com

d1 maxim is ing carbon asset of the carbon projects through asia carbon

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