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C A R B O N C R E D I T S — O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N

Clean Development MechanismClean Development Mechanism

EcoSecurities Indonesia



Monday, October 30, 2006 2


Climate change: a serious globalenvironmental problem

Concentrations of climate change-inducing greenhouse gases continue toincrease;

If not mitigated, impacts will bedevastating:

Sea level rise;Severed production of food andavailability of water;

Increased incidence of malaria,dengue, and diarrhoea;

IPCC suggests a reduction of 60 – 80percent below 1990 levels.





Kyoto Protocol

Greenhouse gas emissions reduction in the industrialized countriesat 5 percent below 1990 levels by 2008 – 2012; Quantitative emissions limitation and reduction commitments by

industrialized countries; EU, 8 %

US, 7 % (later on pulled out!) Japan, 6 % Russia and other ET, 0 % Norway, Australia, and Iceland, increase by 1 %, 8 %, and 10

%, respectively. Can be undertaken individually or jointly with other countriesthrough “flexibility mechanisms”: Emissions Trading; Joint Implementation;

Clean Development Mechanism;





Kyoto P rotocol: a globalsolution

Commitments of the industrialized

countries to reduce GHG emissionsat 5 percent below 1990 levels by2008 – 2012;

Can be undertaken individually

Domestic Action

OR jointly with other countriesthrough “flexibility mechanisms”:

Emissions Trading;

Joint Implementation;

Clean Development

Mechanism;

Current level

Emission level in2012 without KP

Assigned amounts

Annex I

- 5%

1990 level

Jointimplementation

Domestic actions

CDM

Emission trading

Emission level in2012 without KP


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Clean DevelopmentMechanism

Objectives

To assist developingcountries to supportsustainable development

and to contribute to theobjective of the UNFCCC;

To assist industrializedcountries to fulfill their

emission reductioncommitments;

The sustainable development criteria and indicators

for assessing a proposed CDM project are categorized into:environmental, economic, social and technological sustainability

Developingcountries

Industrializedcountries

Certified EmissionReduction

Certified EmissionReductionLevel ‘90

Targetlevel

- 5%




Political initiatives

1989 Establishment by the UNGA of the IntergovernmentalNegotiating Committee (INC)

1992 UN Framework Convention on Climate Change (UNFCCC)signed in Rio de Janeiro, Brazil

1992 Indonesia signed the UNFCCC

1994 Indonesia ratified the UNFCCC

1998 Indonesia signed the Kyoto Protocol

2004 Indonesia ratified the Kyoto Protocol, UU 17/2004

February 16,2005

Kyoto Protocol entered into force

1994 UNFCCC entered into force

1995 First Conference of the Parties (COP1) to the UNFCCC.

1997 Kyoto Protocol adopted at COP3 in Kyoto, Japan.

July 2005 Indonesia established the National CDM Authority




Concepts and terms

Baseline: Emissions that occurwith the absence of the CDMproject.

Methane that will be releasedby the landfills.

Carbon-dioxide that will bereleased from fossil-basedelectricity generation.

Additionality: Proof thatemissions are reduced from whatwould occur without project.

CERs: Certified EmissionsReduction due to the CDM projectimplementation.

Without CDM(Baseline)

With CDM

CER




CDM Projects Potential inIndonesia

Fuel Switching from fossil fuel to:

Jatropha based Biodiesel

Palm based Biodiesel

Sugarcane based Ethanol

Energy

Energy efficiency from process / raw material

Hydropower / Geothermal / Wind / Solar Cell /

Biomass Waste

Solid waste EcoMethane

Liquid waste (organic) Anaerobic Digestion




Jatropha curcas based

Current petro-dieselconsumption: 22 billion liters.

Emissions of more than 70million tons per year

Current poor people: 43 millionpeople.

Current critical land: more than20 million hectares (ha).

biodiesel




Poverty in Indonesiabiodiesel




Critical landsbiodiesel




CDM potential in biodiesel development

For every 1,000 hectares (ha):

About 2,500 – 5,000 thousand liters biodiesel, directlyreplacing petrodiesel.

Avoiding emissions of 8,000 – 16,000 tons per year out of petrodiesel.

Assuming $5 per ton of emissions, income from CDM is about$40.000 - $80,000.

For 800.000 ha target by the end of 2006:

Reduction of 6.4 – 12.8 million tons per year, with $32 – 64

million additional income from CDM. For 10 million ha target by 2010:

Reduction of 80 – 160 million tons per year, with $400 – 800million additional income from CDM.

biodiesel




The role of CDM in financing biodiesel (foreach 1,000 ha), 2007 - 2012

Investment Revenues

Planting $750K Biodiesel $12.5MProcessing $1,250K CDM $375K

Total $2M (3 % of revenue, or

18 percent of investmentcosts)

Total $12.875M

biodiesel




Target 2009: Benefits to thecommunity

10 million ha critical lands rehabilitated.

10 million poor people obtains additional $5 billionincome per year.

40 billion liters of biodiesel produced, replacing petro-diesel.

140 million tons carbon-dioxide emissions reducedper year.

“making profits while doing something good for the country”

biodiesel





Indonesian electricity situation and thepotential for renewable energy

Type Potential InstalledCapacity

(MW)

Utilization(% )

Geothermal 20,000 812 4.06

Microhydro 459 54 11.76

Solar 4.8 kWh/m2 /h 5

Wind 448 0.5

Biomass 50,000 302 0.60

Total 1,173.5

energy





Methodologies

ACM0002 – Consolidated grid connected electricity

ACM0006 – Consolidated biomass

Small-Scale Methodologies I.A – I.D

AM0005 – Small grid connected electricity

AM0007 – Biomass cogeneration

AM0014 – Natural gas based cogeneration

AM0017 – Steam efficiency

AM0018 – Steam optimization

energy





What is Anaerobic Digestion

? ‘Anaerobic Digestion’ refers to the breakdown of organic matter by specialized

bacteria in theabsence of oxygen; this is a natural process with four primary steps:

? Hydrolysis: The breakdown of complex organic molecules into simpler sugars,

AA’s, and Fatty Acids

? Acidogenesis: Further breakdown of simple sugars into ammonia, CO2 andH2S!!

? Acetagenesis: Breakdown of acidogenesi s products to produce CO2, hydrogen,

and acetates

? Methanogenesis: Production of methane (CH4), CO2 and H20

? Anaerobic Digestion is a basic component of wastewater treatment all over the world.

? Ideal conditions for this process are between 15 and 40 degrees C, greater than 1 met

of depth in the lagoon, and 6.8-7.2 pH

waste

C A R B O N C R E D I T S O R I G I N A T I O N T O C O M M E R C I A L I Z A T I O N





Methodologies

There are currently five ADmethodologies:

• AM0006, Manure Management

•AM0013, Forced Methane Extraction

•AM0016, Manure Management

•AM0022, Wastewater-to-energy

•SSC IIID, Methane Capture

waste






Steps to develop a

CDM project

1 Feasibility andDue Diligence

2Documentation

7Implementation

3Publicconsultation

4Validation byDOE

5Approval byDNA

8 Verification byDOE

9 Issuance of CERs by EB

10 Transaction of CERs

2 Methodologicalapproval 6Registration byExecutive Board






Financial needs of the CDM

Feasibility and Due Diligence $5,000 - $10,000

Public consultation About $2,000 – 10,000

Approval by the NationalAuthority

At present: free.

Monitoring Depending on the project

Registration by Executive

Board

$5,000 - $30,000

(depending on the project)

Documentation (PDD) US$ 20,000 – $50,000, up to$100,000 with new methodology

Validation $8,000 - $15,000

Underlying investment Depending on the project

Project implementation Depending on the project

Verification $5,000 – $10,000






Speed is key

IF NO Decision; No Incentive beyond 2012,

No Investment, Market Development Stalled

2007 20082006 2012

CDM project 1

CDM project 2

= Start Construction

= Crediting Period






Risks and ConsiderationsTo Your Project

Speed is key

This type of project takes time, so the sooner the project starts theless TIME DECAY (lost revenues) there is

Regulations

If the local or national governments were to impose mandatory

emissions reduction regulations, this project value would be ZERO

Business Conditions

Changes in your capacity will effect your future CER allocation

Forward Selling / Performance

Sellers guarantee the performance of its operations through 2012when selling the future flow of CERs coming from this project

Careful thinking and good advisory is required to strategize yoursales and risk management options





Non-Financial Project Benefits

Happier communities Cleaner air Good public relations, better company brand value

Industry and country leadership Be strategically ahead of your competitors Facilitate your nation’s position in greenhouse gas project development

and know-how

Preparation for a time when you become a compliant nationof Kyoto or similar treaty

Chance to put some of the CER revenue stream into local social and/orrenewable projects Those giving project validation and certification like to see this as part of

your plan





Summary – Key Points

Start early and do you research

Get an idea of how your project should look Get comfortable with the equipment options and how it fits your situation Identify the methodology you wish to use This will take time so the sooner you start, the better

Avoid mistakes Choose a proven and experienced partner to help you through the

validation and certification process One mistake can kill your project!

Maximize your carbon credit marketing options Build different options into your selling strategy





Thank you

“Start something, start from you, start now”

Gina Sy. LisdianiEcoSecurities Indonesia

Graha Niaga 17th FloorJalan Jenderal Sudirman Kav. 58Jakarta 12190Tel: (62-21) 250-5707Fax: (62-21) 250-5708Email: [email protected]

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