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 THE KYOTO PROTOCOL AND THE INDIAN
                 NATURAL RUBBER SECTOR
                                       James Jacob
 Deputy Director (Plant Physiology), Rubber Research Institute of India, Rubber Board,
                             Kottayam 686 009, Kerala, India
                                              &
 Liaison Officer, Plant Physiology Specialist Group, International Rubber Research and
                      Development Board, Kuala Lumpur, Malaysia.
                                  (pappan@scientist.com)


The Kyoto Protocol (signed in 1997) to the United Nations Framework Convention on
Climate Change (UNFCCC, adopted in 1992) is entering into force on February 16,
2005; thanks to the much-awaited Russian ratification of the climate pact three months
earlier. With the proclaimed US stand against the Protocol (2001), the rules of
engagement of the Kyoto Protocol necessitated ratification by Russia to achieve the
critical mass required for it to enter into force. With the Kyoto Protocol’s entry into force,
the green house emission reductions restrictions imposed on the developed countries
become legally binding on those countries that have ratified the Protocol. With less than
5% of the world’s population living in the USA and that country emitting about 25% of
the world’s green house gases (GHGs), their non-ratification of the Kyoto Protocol has
been widely criticized by the international political and scientific communities alike.
       The Kyoto Protocol requires the rich and industrialized countries of the world as
listed in the Annex I to the UNFCCC to reduce their collective carbon dioxide emission
to at least 5.2% below their 1990 emissions levels between 2008-2012, the first
commitment period of the Kyoto Protocol. Developing countries like India, China, Brazil
etc. and the least developed countries of the world are currently exempted from GHG
emission reduction targets at least for the time being. However there is a considerable
international pressure on India and China to cap their GHG emissions.
       Domestic actions required to meet the Kyoto compliance targets can be very
expensive for the Annex I countries- both financially and politically. Therefore, the
Kyoto Protocol established three market mechanisms (flexible instruments) to help the
Annex I countries meet their GHG emissions reduction target cost effectively. They are:
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International Emission Trading (IET), Joint Implementation of emission reduction
projects (JI) and Clean Development Mechanism (CDM). Annex I countries can purchase
Assigned Amount Units (AAU) on the basis of IET or Emission Reduction Units (ERU)
on the basis of JI projects from another Annex I country. Both IET and JI can be
operated only among the Annex I countries.
       The third mechanism, CDM encourages projects by Annex I countries (i.e.,
industrialized countries) in non-Annex I counties (i.e., the developing and the least
developed counties) that do not have GHG emission reduction restrictions under the
Protocol. The CDM aims at brining funding from Annex I countries for environment-
friendly projects that are in tune with the sustainable developmental needs of the people
in the non-Annex I countries in the tropics and subtropics (Article 12) that will earn the
Annex I country what is called Certified Emission Reduction (CER) credits that can be
used by the investing Annex I country to partially offset its Kyoto targets (Article
12.3(a)). One CER is taken as one tonne of CO2 (or its equivalent in the case of the other
GHGs) that is prevented from releasing into the atmosphere (emission reduction) or
removed from the atmosphere (sequestration) as a result of the CDM project over and
above (additionality) the emission reduction/sequestration that would have occurred in
the absence of the project (business-as-usual scenario) in the participating non Annex I
country. Several analyses show that given the small marginal costs of projects
implemented in developing countries under the CDM, this will be the preferred market
instrument unlike JI or IET which can be operated only between developed Annex I
countries.
       While Marrakech Accords (CoP-7, November 2001) set the framework for
approval of the general modalities and procedures for the CDM projects, they did not
cover sink projects (forestation/reforestation activities such as plantation agriculture).
However the Subsidiary Body for Scientific and Technical Advise (SBSTA) under the
Protocol was asked to develop modalities and procedures for sink project activities under
the CDM. At CoP –9 held in Milan during December 2003 they were adopted as an
annex to the existing CDM modalities and procedures (FCCC/SB-STA/2003/L.27). The
Annex I countries can use only 1% of their 1990 GHG emissions from such CDM
activities. Activities such as forest management, crop land management and grazing land
management are not allowed under the CDM but they are permitted under Joint
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Implementation project in Annex I countries. Avoided deforestation is eligible for small
scale CDM project.
       Under the Kyoto Protocol aforestation is defined as the direct human induced
conversion of land that has not been forested for a period of at least 50 years into the
forested last and reforestation is limited to that land that did not contain forest as on 31st
December 1989. According to the Kyoto Protocol a forest should have a minimum tree
cover of 10-30 per cent, a minimum area of 0.5 to 1 ha and a minimum tree height of 2.5
ms. These are factors that limit the sink CMD potential in the natural rubber plantation
sector. However, a small scale sink CDM project developed by a low income community
as determined by the host countries will have a much less rigorous treatment at the hands
of the CDM Executive Board which is the final authority to approve all CDM projects.
       A small-scale sink CDM project activity should have a GHG removal of less than
8 kt CO2/yr. All carbon pools such as above and below ground biomass, dead wood, litter
and soil organic carbon should be defined. As discussed in an earlier article (Rubber Asia,
March – April, 2004) natural rubber plantations have a very high carbon sequestration
capacity. In addition to the carbon sequestered in the various sinks, there are several other
activities associated with the primary processing of latex and rubber products
manufacturing that are eligible as CDM activities. A summary of potential CDM
activities in the NR sector is given in Table 1.
       Preparing the project development document (PDD) for the CDM project activity
is crucial and requires considerable expertise and insight. An over view of the CDM
project cycle showing the various steps involved in the preparation of a CDM project
development document are given in table 2. The roles and responsibilities of the various
parties in the CDM project cycle are given in Table 3.
       India is rated as one of the top CDM host countries because of our stable political
and economic environment, sound infrastructure and human resources. A CDM project
has to be first approved by a designated national authority in the host country which in
India is the National CDM Authority (NCA) headed by the Secretary, Ministry of
Environment and Forests. The NCA has nine members from six ministries and the
Planning Commission. Its major function is to accord host country approval for the CDM
project, which it does normally in less than two months through its single window
clearance. India has perhaps the largest number of CDM projects in the pipeline with
more than 25 projects approved by the NCA and 150 project documents and another 200
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project idea notes already prepared by various project developers and project proponents.
But no projects have been formulated from the NR sector as of now. India also has the
largest number of methodologies submitted to the CDM Executive Board. Most of the
projects have come from the private sectors on their own initiatives. Power, energy-
intensive industries etc. have the highest number of projects prepared from India. They
are mostly in the energy efficiency, renewable energy and fuel switching sectors. There
are possibilities to develop a CDM project in these areas in the NR sector as given in
Table 1. Several Indian states such as Andhra Pradesh, Maharashtra, Madhya Pradesh,
West Bengal, Karnataka and Tamil Nadu have established CDM Cells to facilitate
development of more CDM projects.
       India expects to achieve 10% share of the global CDM market and this can lead to
a cash flow of several hundred million US dollars into the country. The major operators
of carbon funds in the Indian CDM market are, the EEU, The World Bank, Rabo Bank,
International Finance Corporation, Ecosecurities and Standard Bank London, KfW
Germany and Japan Carbon Fund and the other major CDM players are the designated
consultants such as Det Norske Veritas Certification Ltd., TUV Industrie Service GmbH,
TUV SUD GRUPPE and Societe Generale de Surveillance UK Ltd.
       For several reasons CERs from sink projects do not have strong presence in the
CDM market at the moment. Firstly sink project have been only very recently brought
under CDM. The EEU, which is perhaps single largest block of CER buyer, is not
willing to buy sink credits. Finally the modalities and procedures for sink projects are yet
to be fully approved by CDM Executive Board. However it is expected that the market
for sink projects will evolve. The carbon market for CDM project coming under energy
efficiency, alternative/renewable energy and fossil fuel substitutions is presently very
strong. The use of biomass gassifier, biogas production from latex processing effluents,
potential use of natural rubber seed oil as a bio-diesel are strong cases that can attract
CDM funding in the NR sector. CDM Executive Board has already approved modalities
and procedures for such CDM project.
       Rubberized roads have been known to improve the fuel efficiency to transport
fleet, which is eligible for CDM funding under energy use efficiency. The additional cost
that has to be incurred in the rubberization of roads could be met from the potential CDM
cash flow into the project.
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        The possibility of cultivating natural rubber as part of reforestation activity in a
degraded region with the exclusive aim of supplying the rubber produced from there into
the market where it will directly substitute synthetic rubber is yet another potential
opportunity that is worth exploring under an ambitious CDM project. Such a project
would generate CERs as a result of the carbon sequestration by the plants. In addition,
the carbon dioxide equivalent of the amount of synthetic rubber displaced and the carbon
dioxide equivalent of the energy that was required to synthesize that much amount of
synthetic rubber will earn clean and strong CERs in the CDM market. Both in terms of
the sale of the CERs and the rubber, such a project will ensure a captive and pre-
determined market with due financial security from the start. In the fast changing global
economic scenario, financing natural rubber cultivation from internally generated cash
flows such as from CDM as discussed above needs to be explored on a priority basis



       TABLE 1. CDM POTENTIAL IN THE NATURAL RUBBER SECTOR

                Sector                                       Description
I.   Carbon Sinks                        1. Above and below ground biomass
                                         2. Soil organic carbon
                                         3. Harvested dry rubber
II Alternative/renewable energy          1. Biomass gassifiers for drying rubber
                                         2. Biogas production from natural rubber
                                            latex processing effluents.
III. Avoided deforestation               1. Rubber wood as alternative source of
                                            timber and firewood
IV. Fossil fuel substitution             1. Potential use of natural rubber seed oil as
                                             bio-diesel
                                         2. Rubberized bitumen for road construction
                                         3. Natural rubber as a substitute to synthetic
                                            rubbers
                                         4. Co cultivation of Jetropha for bio-diesel with
                                            natural rubber
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                     TABLE 2. OVERVIEW OF CDM PROJECT CYCLE

1. Planning a CDM         CDM project participants plan a CDM project activity
project                     There are several conditions in order to be registered as a CDM
                                  project activity and CDM project participants should consider those
                                  conditions form a planning stage
2. Prepare the project    CDM project participants prepare the project design document (PDD) for a
design                                               CDM project activity
document (PDD)                    There is the standard format for the PDD and CDM project participants
                                  must fill in all the contents as necessary
3. Getting approval from  CDM project participants shall get written approvals of voluntary participation
host Party and Annex I     form the designated national authority (DNA) of a host Party and an Annex I
Party                      Party
                                    The written approval from host Party should include confirmation by
                                     the host Party that a project activity assists it in achieving sustainable
                                     development.
                                    The details of approval procedure is up to each Party
4. Validation and         Validation is the process of independent evaluation of a project activity
    registration           against the requirements of the CDM on the basis of the PDD.
                                    Validation is carried out by a designed operational entity (DOE).
                                    There is a formal procedure for validation
                          Registration is the formal acceptance of a validated project as a CDM project
                           activity.
                                    Registration is done by the CDM Executive Board
                                    There is a formal procedure for registration
5. Monitoring a CDM       CDM project participants collect and archive all relevant data necessary for
project activity           calculating GHG emission reductions by a CDM project activity, in
                           accordance with the monitoring plan written in the PDD.
6. Verification and       Verification is the periodic independent review and ex post determination of
   certification           the monitored GHG emission reductions
                                     Verification is carried out by a designated operational entity (DOE).
                                    There is a formal procedure for verification.
                          Certification is the written assurance by a DOE that a project activity
                           achieved the reductions in GHG emissions as verified.
                                    A DOE also does certification.
7. Issuance of CERs       The CDM Executive Board (EB) will issue certified emission reductions
                           (CERs) equal to the verified amount of GHG emission reductions.
                                    There is a formal procedure for issuance of CERs
                                    GHG emission reductions since 2000 may be eligible to claim CERs.
                          Among issued CERs, 2% of those will be deducted for “the share of
                           proceeds” to assist developing countries that are particularly vulnerable to
                           climate change.
                          Among issued CERs, X% of those will be deducted for “the share of
                           proceeds” to cover administrative expenses of the CDM.
                                    The COP upon the recommendation of the EB shall determine the
                                           level of X.
8. Distribution of CERs  CERs will be distributed among CDM project participants
                                    The decision on the distribution of CERs from a CDM project activity
                                     shall exclusively be taken by project participants.
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 TABLE 3. ROLES AND RESPONSIBILITIES IN THE CDM PROJECT CYCLE


Activity                   Definition                           Responsible entity
Project Development        Developing a CDM project             Project promoter
Project Design Document    Developing a CDM PDD                 Project promoter
Validation                 Independent evaluation of PDD,       Designated
                           including calculations of baseline   Operational      Entity
                           emissions and estimated project      (DOE)
                           emissions
Host Country Approval      Approval from host government –      Project promoter     &
                           Mandatory                            host government
Registration               Formal acceptance of a validated     Executive Board
                           PDD
Project     Implementation Commissioning and operation of       Project promoter
and Monitoring             the CDM project and measuring
                           and recording project performance
                           related indicators/parameters
Verification               Periodical independent review of     Designated
                           monitored GHG reductions             Operational Entity
Certification              Written assurance on the actual      Designated
                           GHG reductions verified.             Operational Entity
Issuance of CERs           Issuance of Certified Emission       Executive Board
                           Reductions (CER), based on
                           DOE’s certification

				
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