armenia’s experience on implementing projects under the clean development mechanism

ARMENIA’S EXPERIENCE ON IMPLEMENTING ARMENIA’S EXPERIENCE ON IMPLEMENTING PROJECTS UNDER THE PROJECTS UNDER THE

CLEAN DEVELOPMENT MECHANISMCLEAN DEVELOPMENT MECHANISM

Aram GabrielyanMinistry of Nature Protection of Armenia

Regional Workshop on Legal, Institutional and Financial Regional Workshop on Legal, Institutional and Financial

Aspects of Carbon Finance ProjectsAspects of Carbon Finance ProjectsIstanbul, Turkey, January 21-22, 2008Istanbul, Turkey, January 21-22, 2008

Diana Harutyunyan

UNDP/GEF “Enabling Activities for the Preparation of Armenia’s Second National Communication to the UNFCCC” Project

Ministry of Nature Protection of the Republic of Armenia

Background and measures for the Background and measures for the implementation of CDM projects in Armeniaimplementation of CDM projects in Armenia

Armenia ratified the UN Framework Convention on Climate Change in May 1993 and the Kyoto Protocol in December 2002.

Ministry of Nature Protection of Armenia was designated as the National Authority (DNA) for the Kyoto Protocol’s Clean Development Mechanism (CDM) in 2003.

DNADNA Contact Contact PPerson:erson: Dr. Aram Gabrielyan . Aram Gabrielyan Head of Environmental Protection Department of MoNP of RA Head of Environmental Protection Department of MoNP of RA UNFCCC National Focal PointUNFCCC National Focal Point

On July 19, 2006, the Government of the Republic of Armenia adopted Decision N-974 on “Implementation of Projects within the framework of Clean Development Mechanism under UNFCCC”. The document outlines the main functions of the Ministry of Nature Protection of RA acting as the DNA.

Advantages of the choused model of the DNA - minimal administrative procedures and costs; existing professional potential and awareness on Kyoto Protocol; the key role of the ministry on the issues of sustainable development in the country, etc.


Legislative FrameworkLegislative Framework

Under the technical assistance provided by UNDP/GEF for preparation of the First National Communication and technology transfer needs assessment the following activities were performed:

- Development of GHG inventory, 1990 and 1995;

- Development of GHG abatement strategy and forecast of GHG emissions until 2010;

- Identification and evaluation of sectors with the sizable potential for GHG mitigation, analysis of barriers for technology transfer

The Law of RA on Renewable Energy and Energy Saving (2004); Establishment of promotional tariffs and procedures for guarantied

purchase of electricity produced by small HPPs, biogas and wind power plants and cogeneration units (Public Services Regulatory Commission of Armenia – 2003, 2004, 2005, 2007.


Memorandum of understanding (MoU) is signed between the Government of Denmark and the Government of Armenia on cooperation for the implementation of the Kyoto Protocol (entered into force on March 17, 2005).

Memorandum of understanding (MoU) on bi-lateral cooperation between the Ministry of Nature Protection (MoNP) of Armenia and the Federal Ministry for Agricullture, Forestry, Environment and Water Management of Austria is being prepared for signature.

Memorandum of understanding (MoU) on bi-lateral cooperation between the Ministry of Nature Protection (MoNP) of Armenia and the the Federal Ministry for the Environment, Nature Conservation and Nuclear Safety of German Federal Republic

Negotiations are under way for the signature of memorandum with the UNDP MDG Carbon Facility.

Legislative FrameworkLegislative Framework


Environmental Protection Department of the Ministry of Nature Protection is responsible for coordination of CDM projects evaluation and approval process.

Establishment of good relationship with the key partners, such as: Ministry of Energy, Ministry of Trade and Economic Development, Ministry of Agriculture, Public Services Regulatory Commission.

Support to the DNA provided under the EC and UNDP/GEF projects.

Climate change experts group performs functions of the DNA Secretariat providing technical support and consultations.

Institutional and Organizational FrameworkInstitutional and Organizational Framework


Main functions of DNA for CDM in Armenia

Endorsement and approval of CDM projects based on evaluation of conformity of the projects with the country sustainable development objectives as well as confirmation of voluntary participation of the involved parties (Letter of Endorsement, Letter of Approval) – 6 LoA, 1 LoE;

Hold consultations with the key ministries and agencies on specific projects to determine the level of their compliance with the principles of sustainable development of the country – according to the work procedure and established rules.

Authorize participation in CDM project activities for private and state-owned companies from Armenia – 6 companies are already authorized.

Organization and development of CDM projects public hearings institute – the DNA was actively involved in 5 hearings on 4 projects.

Provision of efficient international cooperation under the Kyoto Protocol – participation in negotiations and talks, DNA Forums.


CDM Projects Revision and Approval Scheme

Ministry of Nature Protection (DNA)

Ministry of Trade and Economic Development

Ministry of Labor and Social Security

DNA SecretariatTechnical committee

(Expert group)

Project evaluation:• Environmental impact assessment (EIA)

• Compliance to standards

Stakeholders• Ministries• Agencies and institutions • Local self governing bodies• NGOs and SNCOs• Private companies etc.

Owner / CDM project developer

• Private company• State company• NGO etc.

Investor / CERs buyers • Carbon founds• Banks and other IFIs• Private / state organizations and companies etc.

CDM Project participants

Recommendations on the project Decision on the project

Decisions on the projectApproval / Refusal

Project submission (PIN / PDD) Consultations on project


CDM CDM PProjects rojects RevisionRevision PProcedurerocedure

Submission of Project Idea Note (PIN)

Revision and approval of the Project Idea – 15 days

Signing and issuance of the Letter of Endorsement

Voluntary Procedure

Submission of PDDs and other related documents

PDDs revision and approval – 30 days (including consultations with the Ministry of Trade and Economic Development and

the Ministry of Labor and Social Security as well as with stakeholders)

Signing and issuance of the Letter of Approval

Mandatory Procedure


DNA requirements for reporting on project DNA requirements for reporting on project contribution to the country’s SD criteriacontribution to the country’s SD criteria

Environmental criteria Improvement of air and water quality Efficient land use Biodiversity protection (ichthyofauna etc.)

Economic criteria Attraction of foreign investments Employment generation Sustainable technology transfer

Social criteria Full participation of stakeholders Service quality improvement Capacity development


Consultations with stakeholders on development of project documents – more then 14 seminars were been organized, database of national partners was

developed.

Assistance in identification of potential partners (project participants) for implementation of CDM projects – presentations of potential CDM projects at carbon forums (Moscow, 2006 and Tashkent, 2007) and CTI seminars (Leipzig, 2006 and 2007).

Information exchange and support to establishment of contacts between project participants and buyers of carbon credits (2 emission reduction purchase agreements (ERPA) were signed between the Armenian companies and carbon buyers); two publications on CDM were developed (CDM Handbook for Armenia and CDM Overview in Armenia).

National capacity development – trainings of national experts as well as specialists from key ministries and agencies.

Identification of barriers (e.g. legal) and development of proposals for improvement of national legislation.

Additional functions of DNA for CDM in Armenia


Status (legal title) of CERs (goods, security, intangible assets) is not defined by the national legislation. Actual issue for the ongoing projects.

Ownership of CERs: state, private sector, local government?

Taxation of CDM projects.

Sustainable operation of the DNA:

- financing, also as a share of generated CERs (e.g. agreement under Nubarashen Landfill CDM project);

- possibility of qualified expert evaluation of CDM projects;

- post-approval monitoring of CDM projects (conformity with sustainable development objectives)

Identified Problems


Potential sectors for implementation of CDM Potential sectors for implementation of CDM projects in Armeniaprojects in Armenia

Energy Efficiency Industry (cement production, chemical and metal

industry) Communal sector (heat and water supply)

Renewable Energy Hydro (small HPPs) Wind Solar (water heaters) Biogas

Waste Management Gas Supply System Industrial Processes Waste Water Treatment Afforestation and reforestation


CDM Projects in ArmeniaCDM Projects in Armenia

ProjectNumber of projects

GHG reduction, tCO2e/annual

Total investments

mln USDStatus

Landfill gas capture and power generation 1 135 000 6 Registered by

CDM EB

Biogas capture and combustion from poultry manure

1 62 832 4.5 Registered by CDM EB

Optimization of technological cement production processes

1 114 700 4 Draft PDD

Afforestation & Reforestation 1 8 000 N/A Draft PDD

Small Hydropower 6 52 530 29.1 Approved or under revision

Restoration of the Heat and Hot Water Supply 2 74 900 40 PIN

TOTAL 12 448 000 83.7


Small HPPs CDM Project in ArmeniaSmall HPPs CDM Project in Armenia

N ProjectInstalled

Capacity MW

Annual Generation mln. kWh

CAPEX

mln. USD

1 Gegharot SHPP 2.49 10.61 3

2 Eghvard-2 SHPP 9.31 18.21 9

3 Yeghegis SHPP 3.16 5.8 1.6

4 Argichi SHPP 8.56 29.1 5.5

5 Jradzor SHPP 4.0 14 2.8

6 10 Small Scale Bundled HPPs 14.839 69.459 7.7

TOTAL 42.36 147.2 29.1


Registered CDM Projects Under ImplementationRegistered CDM Projects Under Implementation

Nubarashen Landfill Gas Capture and Power Generation Project

Lusakert Biogas Plant

Yeghegis Small Hydro Power Plant


Nubarashen Landfill Gas Capture and Power Nubarashen Landfill Gas Capture and Power Generation Project in YerevanGeneration Project in Yerevan

Project Objective:

To collect landfill gas from Nubarashen landfill site in Yerevan and to burn methane, a combustible gas contained in LFG in a gas engine generator (GEG) with

a view to generating electricity. Produced electricity will be soled to the national grid. CAPEX – 6 mln. USD Crediting Period – 16 years Total GHG emissions reduction – 2.16 mln. tCO2e


Project BenchmarksProject Benchmarks

2001 - 2002 Prefeasibility study. NEDO, Shimizu Corp.

2004 CDM-PDD development, consultation with stakeholders

21 Jan. 2005 Official submission of PDD to Host Country DNA

16 Feb. 2005 Project approval by the Designated National Authority

23 Feb. 2005 Project approval by the Government of Japan

31 Mar. 2005 Project validation (conducted by JQA)

23 May 2005 Submission of the PDD to the EB for registration

28 Nov. 2005 Project registration on the EB 22nd meeting

11 May 2006 Signing of Protocol of Understanding

June 2006 Field investigations on the territory of the landfill

1 June 2007Signing of Memorandum on Co-ordination of the Main Provisions of the Agreement on the Project Implementation

1 Jan. 2008 Construction works and import of equipment


Analysis of Surface GasAnalysis of Surface Gas Evaluation of actual volume of disposed waste

Extraction of Sample Landfill GasExtraction of Sample Landfill Gas


Addressing of the following issues is vital for the further materialization of the project activity:

VAT payment: transfer of fixed assets from Shimizu Corporation to balance of the Yerevan Municipality;

CERs taxation (profit tax payment at CERs transfer);

Local authorized party as a state body of territorial administration is not flexible enough to ensure efficient participation in the project.

Status of the Project and Identified problemsStatus of the Project and Identified problems


Lusakert Biogas PlantLusakert Biogas Plant

The purpose of the project is to mitigate Lusakert Pedigree Poultry

Plant's animal effluent related GHG emissions, by improving the farm's

Animal Waste Management System practices.

Crediting Period – 21 year (3 x 7); CAPEX – 3.4 mln EURO; Annual GHG emission reduction for the first crediting period – 63000 tCO2e; Designed dayli capacity of the plant – 8500 n. M3 methane; Designed capacity of CHP – 1 MW


Project OutcomesProject Outcomes

Hight-quality organic fertilizers Heat and electricity

Generated heat will be utilized to ensure required thermal conditions in the digester and for other technical purposes.

Electricity will be supplied to the grid.

Baseline conditionBaseline condition Autumn 2007Autumn 2007


Digester under constructionDigester under construction

LBP CJSC CO-FOUNDERSLBP CJSC CO-FOUNDERSLusakert Pedigree Poultry Plant LLC (Armenia)Lusakert Pedigree Poultry Plant LLC (Armenia)Vekst Project Financing Facility AS (Norway)Vekst Project Financing Facility AS (Norway)Bigadan A/S (Denmark)Bigadan A/S (Denmark)Industrialization Fund for Developing CountriesIndustrialization Fund for Developing Countries – IFU (Denmark)– IFU (Denmark)


Project BenchmarksProject Benchmarks

07.04.2005 Official submission of PIN to Host Country DNA

16.05.2005 PIN endorsement

07.11.2005 Public hearings on the project

08.12.2005 Validation of the project

22.12.2005 Project approval by the DNA of Denmark

28.04.2006 Official submission of PDD to Host Country DNA

05.05.2006 Project approval by the Designated National Authority

15.07.2006 Submission of the PDD to the EB for registration

11.09.2006 Project registration by the CDM Executive Board

2006 Signing of ERPA

01.08.2007 Project construction works


Yeghegis Small HPP

Crediting Period – 21 year (3 x 7) CAPEX 1,1 mln. EURO Annual GHG emission reduction for the first crediting period – 3166 tCO2e Installed Capacity - 3.16 MW Annual Generation - 5.8 GWh Project is under construction


The technology implementation is based on the use of anaerobic digester treatment as the first step before a lagoon system. Produced effluent from the biogas plant will be routed to the existing lagoons. The captured gas will be used in a gas engine generator to produce heat and electricity. The heat from the cogeneration plant is used for heating the digester, in order to optimize operation and increase the speed of decomposition of the organic matter of effluents.

The operational income will derive from sale of electrical energy to the distribution grid as well as realization of a fertilizer from the biogas production.

Project ObjectiveProject Objective

Current situationCurrent situation


CDM Project Under DevelopmentCDM Project Under Development

AVAN Project

Area - 1.5 km2;

Elevation - 1250 m;

Population – 37000;

Number of residential

buildings – 218;

Number of apartments – 10 172

Number of public buildings– 32

Heat demand – 78,5 MW

Restoration of the Heat and Hot Water Supply for the Avan and Restoration of the Heat and Hot Water Supply for the Avan and Davidashen Districts in Yerevan, ArmeniaDavidashen Districts in Yerevan, Armenia


The project envisages reconstruction of entire centralized DH system from heat supply source to the end-user. The cogeneration unit will be installed to generate electricity to the grid, the total efficiency of system will be improved.

Complete modernization of heat supply sources with introduction of cogeneration technology (cogeneration units with total installed capacity of 12.3 MW); Installation of efficient heat only boilers for covering heat peak demand

(60 MW); Rehabilitation of heat supply mains and heat distribution systems; 100% replacement of old primary and secondary network pipes; Introduction of new calculation and payment system base on actual heat consumption.

Project ObjectiveProject Objective


Expected cost of project implementation: 33 mln. USD;

Annual GHG emission reduction – 36.924 tCO2e;

Estimated revenues from sale of emission reductions: from € 185,000 to € 370,000 annually;

Expected scheme of financing the project:

Project financing structure will include a combination of debt and equity financing in proportion 80% to 20%.

Internal Rate of Return (without CERs) – 10,5%;

Internal Rate of Return (with CERs) – 12%

Payback Period – 8 years

Project Project Financial Data Financial Data


THANK YOU!THANK YOU!

MINISTRY OF NATURE PROTECTION OF THE REPUBLIC OF ARMENIAGovernmental Building #3, room # 533, Yerevan, Armenia

Tel.: (+37410) 583920, Fax: (+37410) 583933

armenia’s experience on implementing projects under the clean development mechanism

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