Geographic Distribution of Peruvian CDM Projects

LoretoAmazonas

Cajamarca

Piura

Tumbes

Lambayeque

La Libertad

SanMartin

Ancash

UcayaliHuánuco

Pasco

JunínLima

ApurímacAyacuchoIca

Arequipa

Puno

Moquegua

Tacna

EcuadorColombia

Brasil

Bolivia

PacificOcean

HuancavelicaCusco

Madre de Dios

Legend

Hydroelectric

Wind

Solid Waste

Transportation

Biomass

Fuel Switching

Transmission Line

Afforestation / Reforestation

Chile

Calle Hermanos Quinteros 103 Urb. La Castellana, Surco

Lima 33 - Perú

Telefax: (511) 449-6200

fonam@fonamperu.org

www.fonamperu.orgNATIONAL ENVIRONMENTAL FUND - PERU

CDM Promotion Office in Peru

Clean Development Mechanism:

A Business Opportunity In Peru

CDMin peru

NATIONAL ENVIRONMENTAL FUND - PERU

In 1992, the United Nations recognized the evidence showing that human activity was affecting the temperature of the planet, due to the increase of greenhouse gases (GHG) concentration in the atmosphere. In an attempt to control this problem, the United Nations Frame Convention of Climate Change (UNFCCC) was created. Peru is a member of this Convention.

In the Third Conference of Parties (CoP 3, 1997) the Kyoto Protocol (KP) was signed. In this document, developed countries and transition economies made the commitment to reduce, between 2008 and 2012, their GHG emissions in an average of 5,2% of the amount accounted for 1990. In order to accomplish this objective, financial mechanisms that diminish the implementation costs of the reduction measures were created. One of them is the Clean Development Mechanism (CDM), which allows countries with GHG emission reduction commitments to acquire these reductions from projects executed in developing countries. Peru has ratified the KP in 2002 hence, it is possible to be benefited from this mechanism.

To show that businesses and lucrative investments can be done through environment friendly projects. For new businesses. Peru has great potential in different sectors to develop projects that reduce GHG emissions. To promote investments with extraordinary incomes. CDM could be the last push to finance these new investments. At this moment, Peru has a 71 project portfolio, which represents estimated investments of around US$ 2,944.4 million.

To contribute to the sustainable development, implementing CDM projects that promote transference of technology, use of renewable energies, generation of job posts and the improvement of the quality of life for the society.

In this way, CDM becomes for our country an opportunity:

CDM in Peru

Peru has carried out a series of actions for the implementation, promotion and development of projects that could apply to the CDM. These had allowed us to be recognized as one of the most attractive countries in this market at a world-wide level.

In Peru, the actions related to the climate change, particularly to the Clean Development Mechanism (CDM), has been managed by two institutions: CONAM, as the National Environmental Authority, and FONAM, as the promoter of environmental investments.

CONAM is the institution that establishes the National Environmental Policy, the Focal Point of the UNFCCC and the Designated National Authority (DNA) for CDM. CONAM has developed and implemented the ISO P-34 procedure for a rapid assessment of CDM projects. Within 45 days the Project Participants obtain a declaration stating the approval or disapproval of the of the proposed project activity. This approval refers exclusively to the project contribution to the sustainable development of the country.

National Environmental Fund - FONAM

FONAM is an environmental fund created by congress bill, but ruled under the private law. It is a non-profit institution of public and social interests, with the objective of promote and support the financing of public and private investment in environmental projects, as well as support the financing of the Environmental Policy and Environmental Management of the country.

FONAM is the official CDM Promotion Office. It works directly with the private and public sector, offering counselling in the development of CDM projects, supporting the process of fundraising and financing with national and international financial organisms, and undertaking the international promotion of the Peruvian projects in front of potential buyers and investors. FONAM, is also the Focal Point of the World Bank's Carbon Finance in Peru.

National Environmental Council - CONAM

Peru Achievements in the Clean Development Mechanism (CDM)

Peru is a member of the UNFCCC and have ratified the Kyoto Protocol. We count with agile Institutions for CDM with high technical capacity. We have a 45 day-process for the assessment and approval of CDM projects. We are recognized as one of the 10 most attractive countries for the development of CDM projects in the world. CDM is promoted in the country by FONAM, with a vision of "promotion of investments, source of job posts, use of renewable energies and contribution to the sustainable development" Capacity building has been developed within possible investors in the country. There is an increasing number of companies associations, and public sector that knows about CDM potential an how to apply to the mechanism. Local capacities in the National Financial System have been developed, in order to generate financial support to Peruvian CDM projects. Among these financial institutions there are Commercial Banks, Financial Institutions, and Bank Associations. FONAM promotes the National CDM Portfolio in International Carbon Fairs, International Environmental Forums, and among diverse actors of the carbon market including Governments, Carbon Funds, Investors and Technology Suppliers. Local capacities have been developed through the participation on international events and the organization of international seminars and forums within the country. These events include: Meetings and Conferences of the Parties of the UNFCCC COPs / MOPs International Carbon Seminars and Forums. Other international and national carbon events Peru has signed cooperation agreements with: Canada, Austria, Japan - JBIC, Spain and Germany, and the agreements with France, Italy and Holland are in signature process.

Sectors promoted by FONAM in the CDM

Services offered by FONAM for the development of CDM projects

We elaborate the Project Design Document (PDD), including the baseline study. We elaborate the Official File for the presentation of the project to the Designated National Authority (CONAM) to obtain the approval of the Host Country. We do the Public Awarenes of the CDM project among stakeholders in the area of influence of the project. We advise the project developers in the processes of validation and registration in front of the CDM Executive Board. We give counselling in the emission reduction monitoring, and in the verification process. We develop the chapter of environmental and social commitments of CDM projects, and give counselling for their accomplishment.

We promote the Peruvian CDM Project Portfolio at international level. Serving as a nexus among the international stakeholders of the carbon market, specifically between the CER buyers and the Peruvian CDM project developers, in this case, the sellers.

We give support for the financial design of CDM projects, serving as a bridge between national and international financial institutions and the national economic agents or project developers. We give counselling in the development of a suitable legal frame for the accomplishment of CDM projects.

We promote projects that foster synergies among the three environmental conventions of the United Nations: Climate Change, Desertification and Biological Diversity.

FONAM has a remarkable position within the country regarding public awareness of the Carbon Market opportunities, identifying eligible projects under the CDM and offering counselling to the project developers in a successful way. Among the main services that we offer are:

We do the identification of projects that can be eligible within the CDM framework, by doing a personalized work with the private sector and organizations of the public sector. We develop local capacities and give counselling to project participants in the preparation of CDM projects through all the project cycle: We prepare the initial document, Project Idea Note (PIN), and we made the eligibility analysis of the project.

FONAM Capacities

FONAM has a staff of national consultants trained in carbon market

organizations, experts in the CDM both in energy and forestry sector, and also

experts in the strengthening of the CDM institutions. FONAM has the

capacity to summon international experts in order to advise competitively

CDM project developers. This is possible because of FONAM´s institutional

responsability and participation in international networks on CDM in diverse

sectors such as renewable energy, transportation, biomass, bio-fuels, and

solid waste management, among others.

FONAM is recognized by its efficiency and pro activity, and is supported

by multilateral and bilateral international organisms to maintain its

competitiveness in carbon market issues. In this sense, FONAM as CDM

expert is invited to participate in diverse CDM meetings and forums.

As part of its promotion activities, FONAM runs a Web Site, a News

Bulletin, an Electronic Group on CDM, among other publications that are

permanently updated.

Participation of the Official Peruvian Delegation, leaded by FONAM, in the

Carbon Expo since its first edition in 2004. Been recognized as one of the

most important delegations, with the participation of the private and public

sector, and with an outstanding CDM Project Portfolio, as follows:

2004: 18 projects and estimated investment of US$ 700 millions

2005: 39 projects and estimated investment of US$ 1200 millions

2006: 50 projects and estimated investment of US$ 1441.85 millions

2007: 71 projects and estimated investment of US$ 2,944.4 millions

FONAM also promotes projects based on programs, denominated CDM

Programmatic, especially those of fuel switch to natural gas, energy efficiency,

transportation and management of solid waste.

CDM Project Portfolio

At international level, Peru has carried important actions to consolidate its position as one of the most proactive and attractive countries in terms of CDM project development, being considered as one of the ten most attractive Hosts Countries (sellers) at a world-wide level.

By the first semester of 2007, Peru has a portfolio of 71 CDM projects which represents US$ 2,944.4 millions in investments.

60 projects in the energy sector with 11 million reductions of TCO2e per year.

11 projects in the forestry sector with 9,9 million reductions of TCO2e in twenty years.

Progress of the CDM Project Portfolio:

21 projects approved by the Designated National Authority (CONAM).

5 projects registered by the CDM Executive Board.

10 projects on validation and in registration process.

10 projects with PDD under elaboration.

1 project approved at methodology level.

All the projects have at least a Project Idea Note (PIN)

At least 15 projects have signed purchase agreements, and have letters of

purchase commitment.

CDM PROJECTS ENERGY SECTOR

By the first semester of 2007, there are 60 energy CDM projects. They have

a great GHG emission reduction potential, calculated in 11,099,660 tCO2e per

year and representing investments of US$ 2,892 millions.

Most of the projects are Hydroelectric projects (34) representing 64.9% of the total of reductions of tCO2e. In second place with 12.3% are Transportation projects. Biomass projects for energetic purposes have 11.4%. Fuel Switching projects represent 4.4%,meanwhile Solid Waste management projects represent 6%, of the total reductions.

CDM PROJECTS FORESTRY SECTOR

Activities in the forestry sector are crucial since they are not about emission reduction but the absorption and the storage of the already existing GHG in the atmosphere, due to the accumulation of CO2 in the trees, in the form of biomass. One hectare of forest could capture in average between 70 and 250 tons of carbon in 20 years, depending on the characteristics of the site, the species used in the plantation and the forest management plan.

Taking into account that CDM activities in the forestry sector within the Kyoto Protocol are limited to afforestation and reforestation activities in non forest areas without forests since year 1989, FONAM has identified opportunities in deforested and/or degraded land, in all regions of the country. These 11 projects, total a extension of 67,394 hectaries, implying an absorption of more than 9,973 millions of tons of CO2 in twenty years, representing an investment of US$ 52,58 millions.

Transportation

Energy Efficiency

Renewable energies: solar, biomass,

wind and mini hydros

Energy Generation

Alternative energy sources:

ethanol and biodiesel

Fuel switch to Natural Gas

Afforestation and reforestation

Sustainable Development

Solid Waste Management

GHG Emission Reduction in tCO2e, by Project Type, April 2007

Source: FONAM

Hidroelectric

Wind

Solid Waste

Transportation

Biomass

Fuel Switching

TOTAL

Project Type QuantityInvestment

(US$ millions)tCO2e reduced

per year

Transmission Lines

34

2

4

3

11

3

60

3

7,208,330

77,247

661,238

1,361,872

1,265,985

490,339

11,099,660

34,649

1,794

71

9

825

153

7

2,892

33 Hidroelectric64.9%

GHG Emission Reduction in tCO2e by Project Type, April 2007

Source: FONAM

Fuel Switching4.4%

Biomass11.4%

Transportation12.3%

Solid Waste6%

Wind0.7% Transmission Lines

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Tons of Carbon Absorbet in 20 years according to Project, April 2007

Sectors promoted by FONAM in the CDM