5. COUNTRY STUDY EGYPT
5.5 C LIMATE P OLICY AND I MPLEMENTATION OF THE C LEAN D EVELOPMENT M ECHANISM
5.5 Climate Policy and Implementation of the Clean Development
5. Country Study Egypt
5.5.2 National Climate Policy
The establishment of institutions dealing with environmental issues in Egypt started already in the early 1980s. In 1982, the Egyptian Environmental Affairs Agency (EEAA) was established as the main governmental body designing and executing environmental policy.
This was followed by the foundation of the New & Renewable Energy Authority (NREA) in 1986 as already mentioned, although NREA was not established for purely environmental reasons. However, it took another decade until the Egyptian government established a separate Ministry of State for Environmental Affairs (MSEA) in 1997, with the EEAA becoming the executive agency of the Ministry.
As a country that is highly vulnerable to the impacts of climate change, Egypt ratified the United Nations Framework Convention on Climate Change (UNFCCC) in December 1994.
This was the starting point for Egypt’s national climate policy.46 Just a few months later in 1995, EEAA launched two major programs addressing climate change: the “Support for National Action Plan” (SNAP) and the project “Building Capacity for Egypt to Respond to the UNFCCC”. These projects resulted in Egypt’s first National Communication to the UNFCCC submitted in June 1999 (EEAA 1999), in the National Action Plan on Climate Change (August 1999) as well as in the establishment of a Climate Change Unit at EEAA (December 1999). Since then, this unit has served as the focal point for coordinating all climate change activities and complemented the institutional structure to address climate change that mainly consisted of the inter-ministerial National Climate Change Committee.
This committee was formed in October 1997 and its membership covers a wide range of governmental and non-governmental stakeholders. It is chaired by the Chief Executive Officer of the EEAA.
The National Action Plan on Climate Change of 1999 contained a detailed list of measures on mitigation and adaptation activities, complemented by identified research needs as well as measures in the area “Public Awareness, Education & Training”. As regards RET, it set a focus on wind energy, integrated solar thermal systems and, to a lesser extent, on PV technologies. It also highlighted the need for (further) research on the use of agriculture
46 Chapter 1.3 and 4 of the National Strategy Study on the CDM provide a good overview of Egypt’s climate policy and its actors (EEAA 2003).
residues as an energy source, use of renewable energy technologies in the building sector, alternative transportation fuels and solar cars (ENC-WEC 2005).
Egypt’s climate policy was up-dated in the National Action Plan on Climate Change for the years 2002-2007, based on the National Environmental Action Plan of Egypt for 2002-07.
After Egypt’s ratification of the Kyoto Protocol in January 2005, discussions started to renew the institutional setting of climate policy. There are currently proposals under review to up-grade EEAA’s Climate Change Unit to a Climate Change Department and to expand the Climate Change Committee by including also experts from academia and industry (EEix). The committee should also serve as the steering committee for the second National Communication to the UNFCCC which is currently under preparation.
Table 5.8: Milestones of Egyptian Climate Policy
Milestones of the Egyptian Climate Policy Date
Ratification of the UN Framework Convention on Climate Change 5th of December 1994
First “National Communication“ June 1999
Ratification of the Kyoto Protocol 12th of January 2005
Establishment of the CDM-DNA 14th of March 2005
Source: http://unfccc.int; http://www.cdmegypt.org
5.5.3 CDM Implementation
Egypt’s activities to prepare an institutional structure for CDM implementation date back to 2000 when Egypt, supported by the World Bank and the government of Switzerland, started to prepare its National Strategy Study (NSS) on the CDM. The study was finished in 2002 and outlined an action plan to accelerate the implementation of CDM activities (EEAA 2003).
This was followed by the UNEP-led capacity building project “Capacity Development for CDM” that has worked at enhancing technical and institutional CDM capacities of Egypt since 2002 (see http://www.cd4cdm.org).
These projects prepared the basis for the establishment of Egypt’s Designated National Authority (DNA) for CDM by ministerial decree in 2005. The DNA consists of two bodies (see Figure 5.11):
5. Country Study Egypt
1. The Egyptian Council for CDM (EC-CDM) is headed by the Minister of State for Environmental Affairs and its current composition is as follows:
- 6 representatives from the Ministry of State for Environmental Affairs;
- 1 representative from each of the following ministries: Ministry of Foreign Affairs, Ministry of Electricity & Energy, Ministry of Transportation, Ministry of Industry &
Foreign Trade, Ministry of Agricultural & Land Reclamation, Ministry of Petroleum, Ministry of Investment, Ministry of Finance;
- 1 NGO representative.
A steering committee emanating from the EC-CDM and consisting of five of its members is delegated some expedited and intermediate responsibilities related to the process of implementation under the supervision of the EC-CDM.
The EC-CDM meetings are held on a quarterly basis, but specific meetings can be convened upon request by the Steering Committee that meets more frequently depending on required action in the project evaluation and approval process.
2. The Egyptian Bureau for CDM (EB-CDM) acts as the permanent secretariat of the EC-CDM and is headed by the EEAA CEO. Its current composition is as follows:
- 5 representatives from the Ministry of State for Environmental Affairs;
- 1 representative each from the Ministry of Electricity & Energy and from the Ministry of Industry & Foreign Trade.
To ensure an effective performance of the Egyptian DNA, the responsibility for the internationally defined functions and additional tasks set at the national level are divided between the two DNA bodies (MSEA/EEAA 2004a).
Figure 5.11: Institutional Setting of Egypt’s Designated National Authority
The functions and tasks covered by the EC-CDM47 include:
- Establishing project application guidelines to ensure that project proposals conform to (inter-)national programme objectives and standards
- Setting project evaluation criteria and procedures (e.g. criteria/requirements for additionality, monitoring & validating criteria and sustainable development)
- Establishing a project review and approval process - Evaluating and approving projects
- Raising local awareness of the CDM
- Promoting Egyptian CDM project opportunities internationally and representing national interests at UNFCCC negotiations
- Overseeing monitoring, verification and reporting of approved CDM projects - Annual reporting to Egyptian authorities
47 Some of the duties of the EC-CDM are delegated to its steering committee.
Ministry of State for Environmental Affairs (MSEA)
Egyptian Bureau for CDM (EB-CDM)
Climate Change Unit
Egyptian Council for CDM (EC-CDM)
Steering Committee of the EC-CDM
Project Developer
DD NN AA
5. Country Study Egypt
As the executive secretariat of the EC-CDM and the “one stop desk” for CDM project developers, the EB-CDM is responsible for the following tasks:
- Being the spokesperson, nationally and internationally, for the EC-CDM - Pre-evaluating project proposals and transmitting them to the EC-CDM
- Communicating with the CDM Executive Board and up-dating the EC-CDM on the evolution of international rules and procedures
- Initiating/keeping contacts with potential CDM stakeholders - Ensuring the monitoring of projects throughout their life cycles - Organising meetings of the EC-CDM
- Preparing the annual report of the EC-CDM
This institutional setting was positively assessed in most interviews with Egyptian CDM stakeholders and builds the basis for the effective operation of the DNA during the project approval procedures as described below.
5.5.4 Project Evaluation and Approval Procedures
Egypt’s DNA has established a two-step procedure to approve and evaluate project proposals (see Figure 9.12; MSEA/EEAA 2004a). Before preparing a detailed Project Design Document (PDD) as required by international regulations, the project proponent needs to submit a short Project Idea Note (PIN) to the EB-CDM which outlines key elements of the planned project.
To minimise efforts for the project proponent and standardize the information submitted, the EB-CDM provides a template for the preparation of the PIN. The EB-CDM evaluates the PIN regarding conformity of the proposed project with international requirements and national sustainable development criteria. Based on the results of this pre-check it consults the EC-CDM which issues a “letter of no objection” within two weeks after PIN submission if the evaluation of the PIN is positive. The EC-CDM via the EB-CDM might ask for further information on the project if there are doubts regarding its conformity with CDM criteria. The aim of this preliminary evaluation is to give the project proponent a clear indication whether a project might be acceptable as a CDM project at an early stage of project preparation.
Figure 5.12: Project evaluation and approval procedure
If the preliminary evaluation of a project proposal is successfully completed, the project proponent needs to submit a detailed PDD based on the templates provided by the CDM Executive Board for an in-depth evaluation. Core part of this evaluation is the “sustainability assessment” that assesses the benefits of a project for Egypt’s sustainable development according to a set of environmental, social and economic criteria (see Annex 4) (MSEA/EEAA 2004). As the preliminary evaluation of the first PINs revealed deficiencies as regards the sustainable development benefits of some projects, the EC-CDM is planning to oblige project proponent to compensate for these deficiencies by providing funds for two purposes. First, every project proponent has to pay a percentage of the CER revenues to the
Project not accepted
Project not accepted Project approved
PDD submission to DNA
Project accepted
“Letter of No Objection”
Project Developer
Preliminary evaluation within two weeks after PIN submission
“Letter of approval”
In-depth evaluation within four weeks after PDD submission
PIN submission to DNA
Project Developer
5. Country Study Egypt
Environmental Protection Fund.48 The percentage level differs according to project types (see Table 5.9). Additionally, the DNA can oblige the project proponent to financially support environmental or social activities in the communities close to the project. The level of this funding is not standardised but decided on a project-by-project basis.
Table 5.9: “Sustainability” Share of CER Revenues to be Provided for the Environmental Protection Fund
Project Type Share of CER revenues for EPF
Renewable energy 1% (small scale: 0.5%)
Energy efficiency, fuel switching 3% (small scale: 1.5%)
Landfill, afforestation, biofuels 6% (small scale: 3%)
N2O, CFC 8%
Source: EEix
The project proponent will receive a response from the EB-CDM within four weeks after submission of the PDD. Projects that have been evaluated with a positive result will receive a
“letter of approval” confirming the voluntary participation of Egypt in the CDM activity and its contribution to sustainable development. This letter is the prerequisite for entering the international project cycle starting with the validation of the project activity by a Designated Operational Entity (DOE) and ending with the registration as a CDM project by the Executive Board of the CDM.
5.5.5 Project Portfolio
Egypt’s current CDM project portfolio comprises 24 projects. Concerning the number of projects across different project types and categories, its composition is well balanced (see Table 5.10). Most projects are listed in the categories “renewable energy”, “fuel switching”
and “energy efficiency” with each including six projects. However, this balance changes if the expected annual CERs of projects are compared. The overall CER volume of the current project portfolio is about 4.7 Mt CO2e per year which is slightly more than 40% of the potential that was identified in Egypt’s National Strategy Study for 2010, based on the
48 The Environmental Protection Fund (EPF) was established in 1994. The EPF offers financial support (e.g.
soft loans, grants, subsidies) to stimulate investment in the environmental sector.
assumption of a CER price of 8.5 US-$ (EEAA 2003).49 More than 60% of these CERs are going to be generated in four N2O emissions abatement projects (project category “industry”).
One of these projects (“Abu Qir Fertilizer N2O Abatement”) is expected to reduce about 1,500,000 t CO2e per year which is almost one third of the overall amount of CERs.
As of September 2006, two CDM projects are awaiting registration and two further projects are at the validation stage (Fenhann 2006).
Table 5.10: CDM Project-Portfolio in Egypt
Project Category Number of Projects
Annual CERs (1000 t CO2e)
Remarks
Renewable energy 6 825.2 1 small-scale project (see also Table 5.11) 1 at validation
Industry 4 2,900.0 All projects N2O abatement
1 request for registration
Energy efficiency 6 101.4 4 small-scale projects
Fuel switching 6 446.9 4 small-scale projects
1 at validation
Waste management 1 400.0 Request for registration
Afforestation 1 100.0
Total 24 4,773.5 9 small-scale projects
Source: EEAA 2005; http://www.cdmegypt.org, Fenhann (2006).
The share of RE projects in overall CERs generated annually is projected to be about 17%.
They include wind and hydropower projects as well as a solar combined cycle power project (see Table 5.11). All of these projects are implemented by public entities with the financial support of foreign donor organisations.
49 Assuming a CER price of US-$ 8.5 (2.1), the expected emission reduction potential is about 11 (9.5) Mio. t CO2e by the year 2010 (EEAA 2003). This was calculated using a “bottom up” approach based on proposed projects. Thus, the actual CDM potential may be significantly higher.
5. Country Study Egypt
Table 5.11: Renewable Energy CDM Projects in the Current Project Portfolio
Project Title / Project Type
Annual CERs (t CO2e)
Installed Capacity (MW)
Project Location (City / State)
Project Proponent Cooperating Donor Organisation Zafarana Wind
Power Plant
211,900 120 Zafarana /
Suez
New & Renewable Energy Authority
(NREA)
JBIC / Japan
Zafarana Wind Farm Project
155,313 85 Zafarana /
Suez
NREA Spain
Damietta Barrage Small Hydro-power Project
47,058 20 Al-Qanater
Al-Khairvah / Qalyoubia
Hydro-Power Plants Executive Agency
(HPPEA)
KfW / Germany
Naga Hamadi Barrage Hydro-power Project
183,138 64 Naga Hamadi
/ Qena
HPPEA KfW / Germany
Assiut Barrage Hydropower Project
134,330 40 Assiut /
Assiut
HPPEA KfW / Germany
Kuraymat Integrated Solar Combined Cycle Power Project
93,408 30a Kuraymat /
Giza
NREA GEF / JBIC
a: The capacity of the solar component is about 20 % of the total capacity installed (150 MW). The “solar” contribution to electricity generation, however, will be less than 10 % (NREA 2004).
Source: PINs as available at http://www.cdmegypt.org.
Four more wind farms with a total capacity of 540 MW are currently under preparation by NREA and should also become CDM projects. These projects will be implemented in cooperation with KfW, DANIDA and JBIC and will be located in Zafarana and El-Zeit Gulf, which is a new site to be developed. This focus on wind energy is in line with the results of the National Strategy Study (NSS). The NSS predicted a large potential for wind energy whereas other renewable energy projects such as solar-fossil combined cycle power stations were regarded as less qualified for implementation under the CDM and should rather be implemented under classical development assistance schemes (EEAA 2003). However, NREA aims at registering all future renewable energy projects as CDM projects. Besides, there are plans to get retroactive credits for the already established wind farms in Zafarana (140 MW).
5.5.6 Conclusion