energy efficiency roles in current and future … council on climate change of indonesia energy...

National Council on Climate Change of Indonesia

Energy Efficiency Roles in Current and Future Indonesia Carbon Market

Dicky Edwin HindartoCoordinator of Carbon Trading Mechanism Division and Indonesia Lead Negotiator at UNFCCC

Head of DNA Secretariat

National Council on Climate Change of IndonesiaJakarta, October 18, 2011


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1. Indonesia mitigation strategy

2. Indonesia carbon market current condition

3. Energy efficiencies in carbon market

4. Moving forward

Structure of Presentation


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“We are devising an energy mix policy including

LULUCF (Land Use, Land Use Change, and Forestry)

that will reduce our emissions by 26 percent by 2020

from BAU (Business As Usual). With international

support, we are confident that we can reduce

emissions by as much as 41 percent”

- President Yudhoyono’s commitment

at the Pittsburgh G-20 Leaders Summit

-160

-140

-120

20

80

60

Ø

2

-80

-60

40

-40

-260

-240

-20

-220

Reduction cost2

USD per tCO2e

-100

0

Reduction potential2

MtCO2e per year

800600

-200

400 2,2002,000200 1,8001,6001,4001,2001,0000

-180

Geothermal

Fire

prevention

High efficiency appliances

Internal combustion engine

improvements in passenger cars

Switching to LEDs

REDD –

smallholder

agricultureLarge

hydro

REDD –

timber

extraction

REDD –

timber

plantation

Sustainable

Forest

Management

Peat land

rehab.

Net Costs

Net Savings

1 Societal perspective implies utilizing a 4% discount rate

2 The width of each bar represents the volume of potential reduction. The height

of each bar represents the cost to capture each reduction initiative

Source: Indonesia GHG Abatement Cost Curve

Societal perspective1, 2030

Indonesia mitigation objectives and role of market instrument(s)


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MarketCompliance market

(CDM)

Voluntary market (VCM)

Future carbon markets

Non-marketNational budget

Private investment

Foreign public funding

Policies (e.g fiscal, banking incentives and disincentives)

Philanthropic contribution (companies, NGOs)

Indonesia emission reduction strategies

Market and non-market approaches to climate change mitigation

Where are the energy efficiencies projects?


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Energy policies implementation in some major countries


6

Clean energy investment in some major countries


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Indonesia CDM current condition: the projects

166 Indonesian projects are in UNFCCC pipeline 70 Projects are Registered

Registration requested, 0

Registered, 70

At Validation, 61

Request Review, 2

Rejected, 2

Validation Negative, 6

Validation Terminated, 25

Biomass energy, 27

Cement, 1

EE households, 1

EE Industry, 6

EE supply side, 4

EE own generation, 3

Fossil fuel switch, 10

Fugitive, 4

Geothermal, 8Hydro, 15Landfill gas, 10

Methane avoidance, 71

N2O, 1

PFCs and SF6, 2Solar, 1

Afforestation, 1

Reforestation, 1

Energy efficiency

Some of energy efficiencies projects are fail to prove their addittionalities


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Indonesia CDM current condition: registered projects

CER percentage of registered projects Total CER expected until 2012: 27,386,113 CERs; mostly from geothermal Energy efficiencies projects only has a very small amount of CERs

Biomass energy, 11

Cement, 1

EE households, 0

EE Industry, 2

EE supply side, 2

EE own generation, 0

Fossil fuel switch, 3

Fugitive, 1

Geothermal, 4

Hydro, 4Landfill gas, 7

Methane avoidance, 32

N2O, 1

PFCs and SF6, 1

Solar, 1 Afforestation, 0

Reforestation, 0

Biomass energy19.0%

Cement12.2%

EE households0.0%

EE Industry0.3%

EE supply side1.2%

EE own generation

0.0%

Fossil fuel switch3.1%

Fugitive7.0%

Geothermal22.9%

Hydro6.3%

Landfill gas6.1%

Methane avoidance

20.2%

N2O0.9%

PFCs and SF60.7%

Solar0.1%

Afforestation0.0%

Reforestation0.0%


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Indonesia CDM current condition: issued CER


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Indonesia CDM current condition

-/y

• VCM (voluntary carbon market) is a carbon market not constituted by compliance to reduce emission but by the voluntary intention of the buyer to reduce its carbon footprint

• NCCC is conducting study to portray the voluntary carbon market situation in Indonesia• More than 20 Indonesian projects in VCM pipeline and all uses Voluntary Carbon Standard (VCS)

methodologies.• Total VER that already issued are more than 2,000,000 tVER.• Energy efficiencies are more easy to enter voluntary carbon market.

Indonesia voluntary carbon market condition


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3 possible scenarios post 2012 from climate negotiation

Scenarios 1 Scenarios 2 Scenarios 3

Ideal scenario Non ideal scenario Chaos scenario

KP2:

• Continuation of

CDM and JI

• Deep cut

• Linking between 1st

Commitment Period

and 2nd

Commitment Period

• No lack between 1st

and 2nd

commitment

LCA scenario:

• New market

mechanism based

on NAMA’s

crediting, REDD

• PoA the only CDM

that can be

continued

• Some possibilities

of linkages between

1st and 2nd

commitment

• 3-5 years of lack

between 1st and 2nd

commitment

• No commitment for

using the multilateral

market on the near

future

• The developed

country will used

bilateral and regional

market to fulfill their

target

• More than 5 years

lack for the

multilateral carbon

market


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What Indonesia will do? Indonesia finds that whatever the scenario will be, it is very important to

prepare market readiness. Indonesia will explore any relevant experiences as to carbon market

development initiatives, such as EU and New Zealand ETS, domestic market in Japan and Korea and in other countries.

Market readiness activities would go along with the UNFCCC progress especially on legally binding commitment of developed countries to reducing emissions and market mechanisms for mitigation.

However, no decisions are made yet as to the type of market mechanism Indonesia intends to prioritize.

At this point, strengthening carbon market fundamentals while participating in shaping the global market would best suit Indonesia.

Some carbon market initiatives that already done are:

Partnership for Market Readiness (10 donor countries with World bank as a coordinator/operator)

Carbon market regional initiatives (with Australia, Asia Pacific, Japan, etc)

Bilateral offset credit mechanism discussion (Japan proposal)

Capacity building for new possibilities carbon market (with IGES).


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Technical

Policy

Institutional/legal

Next Possible Carbon MarketsImplementation

Current Indonesia

Carbon Market

With PMR support Indonesia continues to prepare building blocks to develop readiness for next possible carbon markets.

PMR

Focus on energy, industry, and transportation sectors with an objective to prepare and strengthen carbon market fundamentals.

Building blocks of market-readiness at Indonesia (PMR proposal)

The proposal will comprise a series of activities covering readiness on technical, policy, and institutional/legal elements

The next possible carbon markets include domestic, regional, and global market under or outside UNFCCC mechanisms.

1 2

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Terima kasihThank you

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