Challenges of CDM for Building Energy Efficiency

UNFCCC Workshop

Buildings under UNFCCC Flexible Mechanisms

Chia-Chin Cheng

UNEP-SBCIBeihang University

International Green Energy CenterBonn, GermanyMarch 24, 2011

Largest Potential for GHG Emission Reduction in Buildings

Source: IPCC 4th Assessment Report

Highest GHG reduction potential

Most cost effective

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Largest Potential Resides in Developing Countries

Source: IPCC 4th Assessment Report

Score Card for Building Projects in CDM

6 vs. 2700

2008

Score Card for Building Projects in CDM

31 vs. 5935

2011

2 vs. 80

Existing Building Related CDM Methodologies

AMS-II.E. Energy efficiency and fuel switching measures for buildings

31 2

AMS-III.AE Energy efficiency and renewable energy measures in new residential buildings

0 1

AMS-II.J. Demand-side activities for efficient lighting technologies (deemed savings)

41 5

AMS-II.K. Installation of co-generation or tri-generation systems supplying energy to commercial buildings

0 0

AMS-II.C Demand-side energy efficiency programmes for specific technologies

27 8

AM46 Distribution of efficient light bulbs to households 2 0

AM70 Manufacturing of energy efficient domestic refrigerators 1 0

AM71 Manufacturing and servicing of domestic refrigeration appliances using a low GWP refrigerant 0 0

Underlying causes for low CDM and EEB uptake Long-tail characteristics of the sector- small saving, big effort Fragmentation of sector / uncoordinated stakeholders Insufficient R&D and information for new EEB technologies Insufficient EEB expertise and tools High upfront and transaction costs for tech adoption in DC Lack financing mechanism and interests for EE investments Lack of awareness and general inertia restrict uptake

Source: Cheng, et al., 2008

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Old CDM’s Rules Add to Difficulties

Complex rules and procedures

High transaction costs, long lead time, not enough payback

Technology based methodologies are tedious to validate, monitor and verify carbon performance

Difficulty in establishing baselines for new buildings

Combination of different methodologies is not allowed for programmatic CDM

Soft measures (energy management measures) are not taken into account, and difficult to prove in the current verification scheme

Lack of mechanism to support low income sector

CDM does not support mandatory national standards

CDM’s Amazing Reform in Three Years Complex rules and procedures further simplify SSM Cancun decisions

High transaction costs, long lead time, not enough payback programmatic CDM and institutional reform

Technology based methodologies are tedious to validate, monitor and verify carbon performance new methodologies use whole building and simulation approach

Difficulty in establishing baselines for new buildings standardized baseline

Combination of different methodologies is not allowed for programmatic CDM addressed in EB 47

Soft measures (energy management measures) are not taken into account new methodology with whole building approach

Lack of mechanism to support low income sector new scenario allowed

CDM does not FULLY support national standards

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CDM has performed a substantial reform, but….For a large-scale uptake of building sector CDM CDM ALONE is NOT a sufficient incentive

The construction sector does not respond well to economic and voluntary incentives alone.

CDM ALMOST has to piggyback with other stronger and large- scale incentives Directly clash with additionality rules

Possible two larger scale incentives in building sector Government policies and standards are much stronger mechanisms to drive large-scale

actions Voluntary certification schemes started penetrating DC market

CDM needs to be ready to FULLY support government policies, building codes and NAMAs

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CDM’s Bottom-up Support for Long-Tail Building Projects

CDM’s bottom-up approach to overcome difficulties in small scale investment– with strong policy initiative in place

• Project and program based approach is especially suitable for long-tail projects

• individual mitigation opportunities are tackled one-by-one, project-by-project, CPA by CPA

Replicability makes scaling up of successful project modules easier• publicly available project documents and methodologies could facilitate

project replication

• programmatic CDM could potentially enable a large number of replications for small project activities

provide necessary means and resources to accelerate &deepen compliance

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CDM’s quality assurance mechanisms to induce change of practice• built-in quality control mechanisms and strict MRV requirements could

ensure long-term compliance

• induce change of business practices and internalization of energy saving behavior are the most important co-benefit of the CDM

adopting CDM is already additional maintain the benefit in simulation based methodology

Enhance private investment in EE buildings• reduce risks for small size projects by coordinated aggregation• CDM’s built-in quality control measures reduce risks of project default

and help to enhance project quality• enable life-cycle based financing

CDM revenue to pay for transaction and MRV & management costs

CDM’s Bottom-up Support for Long-Tail Building Projects

Short-term Challenge

• Establish facilitating methodologies based on industry and CDM’s good practices

Medium-term Challenge

• Develop standardized baselines and benchmarking for DC

Performance based- SBCI common carbon metrics

• Revisit additionality rules for buildings

building codes- no additionality

benchmarked additionality

The Avenue Forward…….

Long-term challenge

• CDM to fully support policy and NAMAs

Coming Up…

UNEP Risoe Working Paper

CDM, NAMAs and the Building Sector: a Two-Track Financing Mechanism for Post-2012

SBCI Common Metrics For More Information:

www.unepsbci.orgwww.uneprisoe.org