MPU, Alm.del - 2009-10 - Bilag 749: Redegørelse om Energistyrelsens samarbejde med United Plantations, fra klima- og energiministeren

Denmark’s public JI/CDM programme supports climate-related projects in Eastern Europe anddeveloping countries. Denmark initiated its JI programme in 2003 by redefining and building uponthe Danish support programme for environmental projects in Eastern Europe, which was phasedout as countries became members of the EU. The JI programme was administrated by the DanishEnvironmental Protection Agency. The CDM programme was initiated in 2004 with a focus on capacitybuilding of national CDM institutions as well as support for project development. A specific budgetwas allocated for entering into contractual agreements for purchasing CDM credits. As with the JIprogramme, the new CDM programme built on the environmental support programme for developingcountries with a focus on South-East Asia, and was administrated by the Ministry of Foreign Affairs.Since 2008, both programmes have been administered by the Danish Energy Agency.

The Cost Efficient Climate Strategy was adopted by the Danish parliament in 2003, setting out theoverall guidelines for prioritizing domestic versus international action to meet the Danish Kyoto targetof reducing emissions in 2012 to 21 per cent below their level in 1990. Initially, in 2003, funds wereallocated for Government procurement of JI credits, while CDM was included from 2004 and onwards.The quantity of credits to be purchased was set out in the national Allocation Plan defining the creditlimits both for ETS operators and the Danish state based on the Commissions interpretation of theprinciple of supplementarity. Following the allocation plan, a common strategy for implementing theJI/CDM programme was published in 2007 and relates to the first Kyoto commitment period 2008-12.The Danish JI/ CDM programme is based on the overall aim to make a cost-efficient contributionto fulfillment of Denmark’s Kyoto obligations, through acquisition of GHG emission reductionsfrom JI/CDM projects, combined with four strategic goals:•To contribute to global climate protection through sustainable climate-related projects in EasternEurope and developing countries•To promote sustainable development in developing countries and Eastern Europe via transfer oftechnology and capital, social development and capacity building•To compensate for CO2emissions related to COP-15 and government flights•To support Danish industry in the form of facilitating JI/CDM credit purchases by companies coveredby the EU ETS, and to promote the export of Danish technology and know-how to JI/CDM projects.The JI/CDM programme has been based on the government’s participation early on during projectdevelopment through a close cooperation with project participants, local and national authorities, etc.The Danish government has refrained from purchasing secondary credits in order to ensure compliancewith sustainability criteria for carbon credits and inclusion of Corporate Social Responsibility criteria inthe carbon contracts.

An important aspect of the Danish JI/CDM programme is to ensure long term environmental,social and financial benefits for communities hosting the projects. From the initial project screeningto the actual project implementation the programme aims at providing all-round solutions in theDanish tradition of social responsibility. The JI/CDM projects in the Government’s portfolio oftencreate positive spin-offs, such as reducing air pollution, new jobs, better land use, improved waterquality, improved health and safety and reliable, cost-effective energy supply. When engaging inprojects the Danish Energy Agency prioritises the long-term sustainability of JI/CDM projects, andmost activities are planned to last beyond the JI/CDM lifespan. In practice, this means that apartfrom the sales of CO2credits, additional forms of income are built into most of the projects.

Sourcing of new projects has changed significantly during the last 1-2 years, as we are closingin on 2012. Until recently, the DEA predominantly developed its own projects using consultantsfor the PDD work and based on the Danish Government’s extensive network in a number ofhost countries, as well as proposals received through tenders and an open door policy. Todayalmost all new projects are acquired through brokers and intermediaries who offer projects thathave been developed to a more advanced stage or by bidding on projects that are on offer in themarket. The reason for this shift is obvious: there is no longer time to develop new projects fromscratch if credits should be issued before 2012.However, it is still a prerequisite for DEA to be able to track the projects and perform owndue diligence before contract signing, checking that they are in compliance with importantportfolio criteria:•Projects must be consistent with UNFCCC guidelines, modalities and procedures and beconsistent with relevant national criteria and laws of the host country•Projects must be eligible under the EU ETS, which with one exception has excluded forestryprojects from the portfolio•Priority is given to projects in Asia, Africa and Eastern Europe• Preference is given to renewable energy and energy efficiency projects but projects are notlimited to these sectors•Projects must make use of proven technology. The use of Danish technology is not compulsory,but where Danish equipment or know-how can make a cost-effective difference to a project,DEA will advise on its use•Projects should meet standard viability criteria and adhere to the 10 principles of the UN GlobalCompact•Payments for ERUs/CERs are predominantly made against delivery in the Danish registry, withup-front payment to a maximum of 50 per cent being possible on a case by case basis andagainst a bank guarantee from a bank acceptable to DEA•Generally, DEA requires seniority on generated credits, the ERPAs include a sweeping clause,and DEA should have the option to buy any additional credits that may be generated from theprojects•Preference is given to projects that deliver above 100,000 pre-2012 creditsAlso the DEA programme does not include HFC and large hydro. N2O projects need to include agreening element demonstrating that the proceeds from sales of carbon credits are invested inenvironmental improvements at the industry. Also, DEA does not buy AAUs except if these arebacked by one to one verifiable emissions reductions in the form of early credits from JI projectsfrom which DEA also buys ERUs or in the stand-alone case of the New Zealand permanentforestry scheme.

The history of environmental support explains the geographical focus of the DEAprogramme, South-East Asia and Eastern Europe, which is atypical to the averageglobal distribution of projects. So far the DEA has had no presence in Latin America,a comparatively low presence in India, but a number of projects in China and relativelymany JI/European projects. This tendency is, however, changing as DEA is nowbuying mature projects from project developers; India is among the new focus areas.Almost 75 per cent of the JI /CDM projects in DEAs portfolio are from renewableenergy projects, especially wind, biomass and biogas reflecting Danish technologicalexpertise. Another 14 per cent of the projects are energy efficiency and fuel switchprojects. It should be noted that when looking at contracted volumes instead ofnumber of projects, only 68 per cent come from these three sectors, as the industrialgas projects are usually very large projects. This is also the case on a global scale.Via the JI/CDM programme, the Danish state offsets all air-travelling of governmentemployees. A credit amount corresponding to 130,000 tonnes CO2will be cancelledin order to compensate for the emissions from air-travelling in the period 2008-2011.Also the Danish state has decided to compensate the emissions caused by thetransport of COP15 delegates. This is done through a project in the Bangladeshibrick sector where new efficient and environmentally friendly brick kilns are build,and thereby replacing the traditional and highly polluting technology. The project willcut 100,000 tonnes of CO2emissions each year and improve air quality in one ofthe world’s most polluted cities. Also investments in fundsDEA participates in the Danish Carbon Fund (DCF) together with private investors.The fund is administrated by the World Bank. Funding criteria mitigate climate changeand promote sustainable development. A share of 3.8 per cent of the funds capitalis invested in the Community Development Carbon Fund (CDCF) with the aim ofsupporting carbon finance to projects in the poorer areas of the developing world thatcombine community development with emission reductions. Also the DEA participatesin the two Nordic funds run by NEFCO: the Testing Ground Facility focusing onprojects in Eastern Europe and Russia, and the NEFCO Carbon Fund with a broadergeographical scope.

The Danish Energy Agency is responsible for the implementation of the Danish creditprogramme under the authority of the Ministry of Climate and Energy. Currently, theprogramme employs team project managers in the Danish Energy Agency comprisingeconomists, legal experts and engineers supplemented by local project co-ordinatorsnormally based at the Danish embassies in the main host countries. This approachensures that DEA has a day-to-day contact with project owners, relevant authorities,validators and other stakeholders. The vast majority of time and responsibilities aredirectly related to procurement (from initial project development and ERPA signing,through validation to monitoring, verification and issuance of credits); howeverthe JI/CDM team in the DEA is also involved in policy development, service to theparliament, EU issues and international negotiations which have a direct link to thecarbon market and other related issues.