Joint Crediting Mechanism Development in Indonesia

Indonesia JCM Secretariat

1. Indonesia strategy on climate change mitigation

2. The JCM concept3. The current development of the

Joint Crediting Mechanism in Indonesia

4. The JCM and Indonesia business sector

5. The way forward for JCM

Presentation Structure

It’s all started from climate change issues

Emission Reduction Targets

Source: DNPI, 2011• Economic growth increases with GHG emission

• 7 years to achieve national commitment of GHG emissions reduction by 26% under BAU level in 2020 (up to 41% with international support).

• Emission reduction is not compromising growth (26/7 vision).

Sector Unilateral SupportedForestry and Peat 0.672 1.039Waste 0.048 0.078Energy and Transport 0.038 0.056Agriculture 0.008 0.011Industry 0.001 0.005

Total 0.767 1.189

(in GtCO2e) Source: DNPI/2011

Lesson learned:• Carbon market instruments such as CDM proved to be effective to spur emissions

reduction by industries: 215 projects approved by DNA, 141 projects registered, 34 projects issued CERs (9.4 million tCO2)

• Increasing interest and opportunity from voluntary carbon markets, currently 9 projects are already delivered more than 8 million tons.

How to finance climate change mitigation in Indonesia?

• Indonesia has commited to reduce national emission up to 26% by business as usual scenario by 2020.

• Indonesia climate change mitigation activities need market- and non market-based financial system.

Mitigation

market based mechanism

carbon market another market

government budget

central and local government

private investment

public private partnership and purely private

FDI

foreign private and government

investment

Why using carbon market instruments?

• Offer greater certainty and visibility in achieving the objectives of emissions reduction.

• Internalize external costs.

• Greater flexibility for business to meet their objectives lower compliance costs.

• Incentivize business to invest in innovation to reduce their impact on the environment.

• Support employment when used in the context of green fiscal reform.

• Promotes competitiveness without imposing an undue burden on consumers.

Source: Commission of the European Communities, 2007

• Japan and Indonesia have their own national target on emission reduction to be achieved.

• Both countries also need to increase their economic development as well as develop more opportunities for their private sectors to grow.

Indonesia highly considers further utilization of market instruments.

Multilateral carbon market

Bilateral and regional carbon market

Domestic carbon market

• 215 CDM projects have been developed, 33 of it have delivered 9.4 million tons of CERs

• 11 VCS are developed that delivered more than 2 million tons of VERs (not including the REDD+ projects)

• Indonesia also join the WB initiatives on PMR• Actively involved in the UNFCCC negotiation

• Between Indonesia and developing countries, e.g. JCM with Japan

• Could be an international carbon offset scheme• Indonesia open its position to work together with

other countries to develop bilateral and regional carbon market

• Start from facilitating voluntary offset (the NCS) • Developed and traded in Indonesia• Simple yet robust• Could be linked to other mechanisms• The NCS now is being developed under the

management of the National Council on Climate Change of Indonesia

Indonesia strategy on carbon market development

What is joint crediting mechanism (JCM)?

Basic concept of the JCM

• Facilitating diffusion of leading low carbon technologies products systems technologies, products, systems, services, and infrastructure as well as implementation of mitigation actions, and contributing to sustainable development of developing countries.

• Appropriately evaluating contributions to GHG emission reductions or removals from Japan in a quantitative manner, by applying measurement, reporting and verification (MRV) methodologies, and use them to achieve Japan’s emission reduction target.

• Contributing to the ultimate objective of the UNFCCC by facilitating global actions for GHG emission reductions or removals, complementing the CDM.

The complete mechanism of the JCM

Indonesia JCM current development

JCM Demonstration Projects (by the Ministry of Energy, Trade and Industry)1. Energy Saving by Optimum Operation at Oil Refinery (Yokogawa and Pertamina) 2. Utility Facility Operation Optimization Technology (Azbil and Pertamina)3. Demonstration Project on Remote Auto-Monitoring System for Thin-Film Solar Power Plant in Indonesia (Sharp Corporation and PLN) .

JCM Model Projects (by the Ministry of Environment)1. Energy saving by double bundle-type heat pump at beverage plant (Toyota Tsusho Corporation and PT. Hokkan Indonesia) 2. Energy saving for air-conditioning at textile factory (Ebara Refrigeration Equipment & Systems and PT. Argo Pantes Tbk.) 3. Energy Savings at Convenience Store (Lawson and PT. Midi Utama Indonesia Tbk) 4. Energy Efficient Refrigerants to Cold Chain Industry (Mayekawa Manufacturing Company and PT. Adib Global Food Supplies)5. Energy Saving for Air-Conditioning and Process Cooling at Textile Factory (Ebara Refrigeration Equipment&Systems Co., Ltd., Nippon

Koei Co., Ltd., and PT. Primatexco).

JCM Current Condition1. 75 feasibility studies have been done from 2010-2013 fiscal years2. The bilateral agreement has been signed and the Joint Commitee has been formed in 20133. As a decision from the first Joint Commitee meeting, the Indonesia JCM Secretariat was established to support the Joint Commitee

activities as well as to do the the JCM daily works4. Some technical instruments are being developed by both countries to speed up implementation.

New Development FY2014, 5 Model Projects

Project Title Entities Estimated Emission Reduction (tCO2/year) Location

Power generation by waste heat recovery in cement industry

JFE Engineering Corporation

PT Semen Indonesia (Persero) Tbk. 122,000 PT. Semen Indonesia Tuban

Plant, Tuban, East Java

Palm waste biomass power generation project Shimizu Corporation PTPN (Persero)Ⅲ 28,128

Sei Mangkei SpecialEconomic Zone in North Sumatra province

Solar power hybrid System installation to existing base transceiver stations in off-grid area

ITOCHU Corporation PT. Telekomunikasi Selular 2,786 (50 BTS) Kalimantan

Energy saving through introduction of regenerative burners to the aluminum holding furnace of the automotive components manufacturer

Toyotsu Machinery Corp., Hokuriku Techno Co. Ltd

PT. Toyota Tsusho IndonesiaPT. Yamaha Motor Parts Manufacturing IndonesiaPT. Hokuriku Techno IndonesiaPT. Matahari Wasiso Tama

855.6 KIIC Industrial Area, Karawang, West Java

Energy saving for textile factory facility cooling by high efficiency centrifugal chiller

Ebara Refrigeration Equipment & Systems Co., Ltd

PT. Nikawa Textile IndustryPT. Ebara IndonesiaMitsubishi UFJ Lease Finance Indonesia

104 Karawang, West Java

JCM sectoral scope, 75 feasibility studies that have been done

Sectoral Scope 2010-2011 2011-2012 2012-2013 2013-2014 Total1 Energy industries (renewable- / non-renewable sources); 3 9 11 4 272 Energy distribution; 1 13 Energy demand; 1 1 2 3 74 Manufacturing industries; 2 2 2 65 Chemical industry; 6 Construction; 7 Transport; 2 2 0 48 Mining/Mineral production; 9 Metal production;

10 Fugitive emissions from fuels (solid, oil and gas);

11 Fugitive emissions from production and consumption of halocarbons and sulphur hexafluoride;

12 Solvents use; 13 Waste handling and disposal; 1 2 314 REDD and REDD+ 1 6 7 5 1915 Agriculture. 1 1 1 0 3

Program 1 1 Carbon Capture and Storage 1 1 1 1 4 8 23 26 18 75

Financial scheme of JCM

Project Scheme by MOEJapan

International consortiums

(which include Japanese entities)

Finance part of an investment cost: up to the half

Demonstration Scheme by METIJapan

Finance part of an investment cost: Based on negotiation

Sharp – PLN = 85%; 15%Yokogawa – Pertamina = 100%; 0%Azbil – Pertamina = 100%; 0%

International consortiums

(which include Japanese entities)

New Support Program Enabling “Leapfrog” Development (Fund/ADB) by MOE

MOEJ

JICA, other

Fund for expansion of low-carbon technologies

(Budget for FY 2014: approx USD42million)

ADB Trust Fund(Budget for FY 2014: approx USD

18 million)

Supported by JICA, etc.

JCM Project

Advanced Low Carbon Technologies

ADB Project

• Waste to Energy plant• Renewable Energies• Water Supply and

Sewage Systems• Transportation

Financial assistance/financial investments for overseas and lending

Subsidy

Contribution

Finance

Finance

GHGEmission

Reduction

JCM project cycle is simplification of the CDM

• More simple than any other carbon market mechanism

• Still using international standards in its implementation

• Both government have very significant roles

• The private sectors will be the main actors of the mechanism.

How “green” is your project?

Aspect Normal Projects JCM ProjectsFoundation Economic issues as the biggest

considerationClimate change issues as basis

Legal basis Business to business partnership or foreign direct investment

Indonesia-Japan Cooperation on Low Carbon Partnership

Emission Reduction Business as usual, do not necessarily consider emission reduction

Must deliver real emission reduction

Methodology Does not have to follow any agreed, rigid methodology

Must follow agreed methodology(ies)

Procedure Internal and partnership regulation Project cycle procedure to be followed

Reporting Internal and as required by governmental regulation

Regular report to the Indonesia-Japan JCM Joint Committee

Technology transfer and capacity building

No obligation A must

Sustainable development criteria in the JCM projects

• Every JCM project must deliver real and measurable sustainability that will be evaluated by the government of Indonesia.

• If a project fails to fulfil the criteria, the project will be suspended until the criteria achieved.

• We are now developing those criteria based on national and international commitment and local condition and situation.

Sustainable Development Criteria (draft)• Conservation or diversification of natural resource use• Safety and health of local community• Local community’s welfare• Community participation • Social integrity• Transfer of technology.

What are Indonesian private sectors opportunities in JCM?

Become Third Party Entities1. There are no third party entities (TPE) registered yet.2. TPE should be accredited by the Japan or Indonesia

National Standard Bureau, certified ISO 14065 or former CDM DOE

3. JCM Indonesia-Japan aims to involve Indonesian individual TPEs.

Conduct Feasibility Studies1. FS are planned together by the two governments in

yearly basis .2. Project Idea Note should be sent to the two

governments.

Become project participant

1. Must establish cooperation with at least 1 Japan private companies/institution.

2. Should apply and submit Project Idea Note to the Government of Indonesia and Japan.

3. Must develop Project Design Document (PDD) to be submitted and approved by the Joint Committee of the both countries.

Grab opportunities for financial institution

Indonesian financial institutions will be needed to work together with Japanese and other financial institutions to support full projects implementation.

Learn from JCM Best Practice1. Most of the projects will use the most

sophisticated technologies in low carbon development.

2. Indonesian private sectors can copy or learn from the JCM project results.

3. Every JCM project must build the capacity of related stakeholders.

Indonesia JCM secretariat main tasks

JCM secretariat(s) may jointly: Prepare draft methodologies; Receive new initiatives from JCM projects participant candidates; Monitor development of JCM programs, project implementation,

sustainable development criteria and environmental integrity fulfillment.

Each side may separately or otherwise decided: Develop environmental and sustainable development criteria and

capacity building needed; Monitor the development of JCM Feasibility Studies; Facilitate project participants in project-based capacity building; Establishes and maintains a registry, as developed by the Joint

Committee; Issue the notified amount of credits to the registry.

Indonesia JCM Secretariat

• Located in Jakarta• Support Indonesia Joint

Committee and JCM related stakeholders

• Clearing house and information center for JCM implementation

• Work closely with other stakeholders to ensure fulfilment of cooperation objectives

• Our website: www.jcmindonesia.com

The coordination between parties in JCM

Government of Japan

Joint Committee Japan

Japan JCM Secretariat

Joint Committee

Indonesia

Indonesia JCM Secretariat

JCM Joint Committee

Communication

Government of Indonesia

Japanese Project Participant

Indonesian Partner

JCM Projects in Indonesia

New project proposal

Indonesian Project Participant Candidate

JC Meeting 1 JC Meeting 2

Adoption of 1st JCM Rules & Guidelines Amendments of 1st JCM Rules & Guidelines (TPE and Rules of Implementation)

Agreement on emissions guideline: - emission reduction- reference emission- net emission reduction

Adoption of methodology: PM_001 Power Generation by Waste Heat Recovery in Cement IndustryAdoption of methodology postponed: PM_002 Energy Saving by Introduction of High Efficiency Centrifugal Chiller.

Sectoral scope "Afforestation/Reforestation” changed into REDD-plus Designation of 7 TPE: JCI, JQA, LRQA, JACO CDM, JMA, TUV SUD, Deloitte-TECO

Establishment of Japan and Indonesia Secretariats

Indonesian proposal for TPE Partnership involving Indonesian expert added into Rules&Guidelines: 8. Other : “The TPE to conduct validation/verification of JCM projects in Indonesia should include Indonesian personnel as their team members.”

Capacity Building Requirements on program, FS, and project level Amendment of Rules and Guidelines for PIN postponed

Indonesian proposal for TPE Partnership involving Indonesian expert into Project Cycle or Guidelines

Sustainable Development Criteria introduced to Japanese side and to be tested on projects in FY2014

Indonesian proposal for Project Idea Note (PIN) from Indonesian side into Project Cycle or Guidelines PerMenLH 15/2013 introduced to Japanese side

Indonesian side requests 1 umbrella Project MoU for JCM for each ministry.

Result of the Joint Committee Meeting

Indonesia JCM main programs in 2014

1. Feasibility Study Projectsa. Normal feasibility studyb. Leapfrog feasibility study

2. Implementation Projectsa. Model projectb. Demonstration projectc. Leapfrog project

3. Supporting Programsa. JCM instruments developmentb. Consultation between 2 countriesc. Dissemination

JCM full implementation in

2015

The Indonesia JCM Secretariat 2014 main activities

1. To support all of the Joint Committee decision making processes as well as other related stakeholders

2. To develop the technical instruments of the JCM implementations3. To disseminate the JCM among related stakeholders4. To monitor and evaluate the implementation of the JCM, from the

feasibility study to the real implementation5. To support the Government of Indonesia negotiation processes,

particularly that related to the Framework on Various Approaches and New Market Mechanism.

Visit our website at www.jcmindonesia.com

Indonesia JCM SecretariatBUMN Building 18th floor, Jl. Medan Merdeka Selatan 13, JakartaWebsite: www.jcmindonesia.com Email: info@jcmindonesia.com

Terima kasih!Thank you!