1. Belarus Environmental Centre:
Legal and Financial Framework
Lessons from International Experience
Amit Bando
Minsk, Belarus
November 30, 2009
ambando@gmail.com

2. Agenda
What is the role of the Environmental Centre?
The international experience
Convention-specific requirements: UNFCC
The way forward
2

3. Potential Role of a National Environmental Centre
Belarus signs
international
agreements/treaties
and pledges to
adhere to the
protocols of
environmental
conventions
Centre is focus of
national and
regional/oblast
capacity building:
legal, financial,
technical,
infrastructure and
human resources
Environmental Benefits:
compliance with
international conventions,
politically acceptable;
environmental protection
Economic Benefits:
inward investment, job
creation & technology
benefits
3

4. The Environment Centre Needs a Legal Basis




National law(s) provide an overall framework
Specific legislation and implementing guidelines are needed to
establish the Centre
National Legislation should
 Tie the Centre to national obligations
 Define the overarching goals of the Centre
 Establish a Designated National Authority (DNA) as the Centre’s
“home”
 Create provisions for modifications of roles and responsibilities
 Establish a timeline for implementation
Supporting rules, regulations and guidelines should be established
4

5. The Environmental Centre Needs Financial Support




Initially, public funds will likely be required
Using a “phased-in” approach priority activities should be conducted
on a fee-for-service basis
Private sector participation should be encouraged
Within a specified time-period, most services should be fee-based



A portion of the fees should be allocated to cover administrative costs
Additional funds should be directed to capacity building and workforce
development to support the Centre’s activities
Private sector could be active partner



Provide selected services -- certified by Centre
Provide relevant data and technical advice
Sponsor certain activities

6. Agenda
What is the role of the Environmental Centre?
The international experience
Convention-specific requirements: UNFCC
The way forward
6

7. The US experience

The US Environmental Protection Agency (USEPA) was established
by an Executive Order of the President in late 1970



Based on an in-depth institutional analysis - primarily the Ash Council
Focus on executive reorganization of diverse agencies that impacted each
other but were moving in different directions
Big issue was what to do with natural resource management -- ultimately
USEPA was separated from Department of the Interior

US Federal model is decentralized and there is considerable
“devolution” of authority from the national to the sub-national level

Legal support developed to support the institutional structure

8. The US experience -- continued

USEPA coordinates with other agencies to ensure compliance with
international convention requirements, including








Montreal Protocol on ozone depletion
Basel Convention on chemical contamination
United Nations Convention on climate change
Convention on international trade in endangered species
?????Convention on trans-boundary pollution
Stockholm Convention -----??? Convention on land degradation
Programs were established to cover, among others




Solid waste management
Chemical and hazardous waste
Air quality from stationary and mobile sources
Water quality

9. The US experience -- continued

Initially relied on command-and-control regime (CAC)

Over time, reliance on CAC and market-based-incentives (MBIs)

Active participation from private sector including





Toxic Release Inventory (TRI)
Certified laboratories for analysis
Voluntary disclosures
Superfund clean-up
Cap-and-trade regime

Relatively transparent data collection and dissemination process

Strong emphasis on public participation -- especially in EIA process

10. The China experience

At first, environmental units and analytical centers within each Ministry

Eventually, separate Ministry of Environment with central and provincial
analytical laboratories

Relies on command-and-control regime (CAC) with few market-basedincentives (MBIs)

Close links with academic institutions for sampling analysis and monitoring

Success with promoting environmental investments -- CDM; based on good
project development data

Successful at monitoring large scale industry; EIAs required for large facilities

11. The India experience

Ministry of Environment and Forestry has national and provincial analytical laboratories

Relies on combination of CAC and MBIs

Success in developing National Pollution Control Centers that collect data and conduct analysis -sell services for fee and train internationally

Strong network of state facilities for testing and monitoring; enhanced technical capabilities in
modeling and testing

Success with promoting environmental investments -- CDM

Developed reliable baseline data for medium size facilities and industrial zones

Active public participation, especially through NGOs

12. The Philippines experience

Department of Environment and Natural Resources (DENR) relies on combination of
CAC and MBIs

Success in developing reliable databases for certain sectors: e.g., forestry, sugar
energy production

Good central facilities for testing and monitoring, but weak provincial units -- difficulty
with monitoring

Success at involving private sector in certain locations to help defray costs of
monitoring and enforcement through corporate governance approach


Laguna Lake Development Authority (LLDA)
Regional leader in technical capabilities

13. Agenda
What is the role of the Environmental Centre?
The international experience
Convention specific requirements: UNFCC
The way forward
13

14. Every international convention has specific requirements




Belarus is a signatory to 21 international conventions and protocols -and is an Annex-1 country under the UNFCC
To promote economic development goals, the nation may need to
adhere to EU and WTO norms
To attract foreign direct investment (FDI), authorities need to create
an investment friendly environment -- an “enabling environment”
An example: the United Nations Framework Convention on Climate
Change (UNFCC) is an important international convention




Promotes national action plan on climate change
Involves mitigation and adaptation options
Involves public-private-partnerships
Promotes international investments through CDM and related investments
via the verifiable emissions reductions (VERs)

15. Investments through VERs are viable options for Annex-1
countries under the UNFCC

Belarus is an Annex-1 country under the UNFCC

To promote economic development goals, the nation will need to attract
foreign direct investment (FDI)

Projects developed under UNFCC norms to generate VERs are a viable
option

The VER market is growing rapidly with active VER registries in Europe,
Australia and the US -- market expected to grow post 2009

The CDM process fro generating CERs is a sound prototype for VER
generation

16. Example: UNFCC provides the basis to evaluate climate change
projects
Kyoto Protocol (1997)
The Protocol creates legally binding obligations for 38
industrialized countries to return their emissions of
greenhouse gases to an average of 5% below their 1990 levels
by 2012
Marrakech Accords (2001)
Define the principles of the Kyoto Protocol’s flexible
mechanisms: the Clean Development Mechanism (CDM),
Joint Implementation (JI) and Emissions Trading (ET)
16

17. In 3 years, the CDM has sparked a $5 billion/year
market
Number of Projects in the CDM Pipeline,
January 2005 – February 2008
3,035
2,838
2,593
Compound Monthly
Compound Monthly
Growth Rate = 13%
Growth Rate = 13%
2,285
1,759
Approximately 3 billion
Approximately 3 billion
CERs by 2012
CERs by 2012
1,141
67
Jan
05
83
118
171
Mar May Jul
05
05
05
275
440
554
Sep Nov Jan
05
05
06
647
749
1,311
1,885
1,495
883
Mar May Jul
06
06
06
Sep Nov Jan Mar
06
06
07
07
May July Sep Nov Jan
07
07
07
07
08
17

18. UNFCC Guidelines: how a CDM project generates carbon
credits
Greenhouse gas emissions
Carbon credits (CERs)
Carbon credits (CERs)
represent the difference
represent the difference
between the baseline and
between the baseline and
actual emissions
actual emissions
Project start
Project start
Historical Trend
Time
18

19. UNFCC guidelines: ‘Kyoto gases’ that can earn credits
There are over 30 atmospheric greenhouse gases…But only 6
attract carbon credits:
•
Carbon dioxide (CO2)
•
Methane (CH4)
•
Nitrous oxide (N2O)
•
Perfluorocarbons (CxFx)
•
Hydrofluorocarbons (HFCs)
•
Relevant to biocarbon & industrial
projects
Sulfur hexaflouride (SF6)
Relevant to
industrial projects
19

20. UNFCC methodology: each of these gases has a different
warming potential
Each of these gases has a different ‘radiative forcing’
capability and a different atmospheric residence time
Need for a ‘common currency’, so that all carbon credits are
denominated in the same way
Solution: develop a relative scale, using CO2 as a reference gas
20

21. UNFCC methodology: global warming potential
Greenhouse Gas
Greenhouse Gas
(GHG)
(GHG)
Global Warming
Global Warming
Potential (GWP)
Potential (GWP)
Carbon dioxide
Carbon dioxide
11
Methane
Methane
21
21
Nitrous oxide
Nitrous oxide
310
310
Perfluorocarbons
Perfluorocarbons
6,500 ––9,200
6,500 9,200
Hydrofluorocarbons
Hydrofluorocarbons
140 ––11,700
140 11,700
Sulfur hexafluoride
Sulfur hexafluoride
23,900
23,900
Relative scale – everything is
measured relative to CO2
e.g. methane is 21 times more
potent as a greenhouse gas
than CO2
e.g. sulfur hexafluoride is
24,000 more potent!
21

22. UNFCC methodology: global warming potential
Greenhouse Gas
Greenhouse Gas
(GHG)
(GHG)
Global Warming
Global Warming
Potential (GWP)
Potential (GWP)
Carbon dioxide
Carbon dioxide
11
Methane
Methane
21
21
Nitrous oxide
Nitrous oxide
310
310
Perfluorocarbons
Perfluorocarbons
6,500 ––9,200
6,500 9,200
Hydrofluorocarbons
Hydrofluorocarbons
140 ––11,700
140 11,700
Sulphur hexafluoride
Sulphur hexafluoride
23,900
23,900
Carbon credits are always
expressed in terms of ‘carbon
dioxide equivalence’ (CO2e)
e.g. 1 tonne of CO2 = 1 tCO2e
(= 1 carbon credit = 1 CER)
e.g. 2 tonnes of CH4 = 42 tCO2e
(= 42 carbon credits = 42 CERs)
e.g. 2 tonnes of SF6 = 47,800 tCO2e
(= 47,800 carbon credits
= 47.8 kCERs)
22

23. UNFCC requirement: additionality
Environmental additionality – the project produces fewer
greenhouse gas emissions than the baseline scenario
It is essential that the project achieve environmental
additionality – otherwise, it will not generate any carbon
credits!
However, the project developer must also usually
demonstrate that, without carbon revenues, the project
would not be viable and/or commercially attractive – this
is known as financial additionality
23

24. UNFCC guideline: additionality – benchmark analysis
Revenue / NPV / IRR
Choose an appropriate financial indicator and compare it
with a relevant benchmark value: e.g. required return on
capital or internal company benchmark
Investment
threshold
Project without
carbon element
Project with
carbon element
Carbon revenue
Carbon revenue
makes the
makes the
project attractive
project attractive
relative to
relative to
investment
investment
alternatives
alternatives
Project without
Project without
carbon revenue
carbon revenue
is profitable –
is profitable –
but not
but not
sufficiently
sufficiently
profitable
profitable
compared with
compared with
alternatives
alternatives
24

25. UNFCC requirement: crediting period
CDM mitigation projects
• Project developers have two crediting period options:
– A maximum of 7 years, which can be renewed up to 2 times
(i.e. a potential total crediting period of 21 years)
– A maximum of 10 years, with no option for renewal
CDM sequestration projects (forestry)
• Project developers have two crediting period options:
– A maximum of 20 years, which can be renewed up to 2 times
(i.e. a potential total crediting period of 60 years)
– A maximum of 30 years, with no option for renewal
25

26. A maximum of 10
years with no
option of renewal
Greenhouse gas emissions
UNFCC requirement: crediting period
Starting date of
Starting date of
the crediting
the crediting
period
period
e scen
baselin
der the
ons un
i
Emiss
ari o
Emissions under the project scenario
10 years
No renewal
No renewal
26

27. 6 to 12 months
CDM project
CDM project
development
development
// PDD
PDD
Host country
Host country
approval
approval
Project
Project
validation
validation
CDM
Executive
Board
DNA
Project
Project
feasibility
feasibility
assessment
assessment
// PIN
PIN
1.5 months Crediting period of the project
DOE
Project
Developer
UNFCC and the CDM project cycle
Project
Project
verification
verification
Project
Project
registration
registration
CER
CER
issuance
issuance
27

28. Costs of a typical CDM project
Pre-Registration
CDM Costs
Post-Registration
CDM Costs
53,000
US$ 164,500
Assumes a 10-year
Assumes a 10-year
project.
project.
34,000
111,500
10,000
77,500
67,500
16,500
38,000
51,000
13,000
Initial
Monitoring
Validation
Indicative CDM Cost Profile For
A ‘Typical’ CDM Project
Ongoing
Verification
By
DOE
Ongoing
Annual
Monitoring
Recurrent costs
Recurrent costs
discounted at 3%
discounted at 3%
annual rate to express
annual rate to express
in present-value
in present-value
terms.
terms.
Registration costs,
Registration costs,
Administration Fee
Administration Fee
and Adaptation Fund
and Adaptation Fund
Levy not included.
Levy not included.
PDD
PIN
28

29. Using the UNFCC as an example we recognize multiple
needs

The UNFCC itself requires signatories to adhere to requirements and
increase capabilities in several areas





Legal, regulatory and policy
Economic and financial
Technical analysis
Infrastructure
Human resources

Other Conventions have similar (and often different) requirements

The Environmental Center needs to meet the multiple requirements

30. Agenda
What is the role of the Environmental Centre?
The international experience
Convention specific requirements: UNFCC
The way forward
30

31. Establish an “enabling environment”

Conduct a needs assessment to identify priority sectors
and gaps in CAC regime

Develop and strengthen standards, permit process,
monitoring protocols and enforcement mechanisms

Develop laws, implementing regulations and institutional
support

Develop baseline data, starting with priority sectors

Determine evaluation methods and guidelines

32. Establish an “enabling environment” - continued

Initiate active participation with academia to develop baseline data as
well as sampling, monitoring and analytical capabilities

Promote training to develop a cadre of qualified professionals

Promote regional cooperation and awareness to create a “unifying
force” on environmental issues in international discussions

Actively seek out sources of international investment flows -- using
the CDM model to generate VERs

Create a more transparent busines investment climate

Address financial risk and repatriation issues to ease investment flows

33. Programmatic CDM offers new opportunities -- can be used
Regular CDM
Regular CDM
to generate VERs
Size-Distribution of Potential CDM Project Sites
•• Single site, stand-alone
Single site, stand-alone
projects
projects
•• ‘Carbon upgrades’
‘Carbon upgrades’
Bundled CDM
Bundled CDM
Number of installations / units
•• Bundling several
Bundling several
projects under a single
projects under a single
PDD
PDD
•• All projects must be
All projects must be
identified ex ante, and
identified ex ante, and
must start at the same
must start at the same
time
time
Programmatic CDM
Programmatic CDM
large
medium
Installation / unit size
small
•• Addresses the ‘long
Addresses the ‘long
tail’ of small units
tail’ of small units
•• Permits sector-wide
Permits sector-wide
transition to low-carbon
transition to low-carbon
economy
economy
•• Particular relevance to
Particular relevance to
non industrial sector
non industrial sector
33

34. An Example: Overall Methodology for Energy
Sector Analysis
Step 1
Step 2
Step 3
Demand Forecast
R eg ressi o n
M et h od
Least-cost Generation &
Transmission Expansion (Using
Horizon-year Plan)
Planning Study
S im u lat ion
M od els
Costs and
Benefits
Quantification
W illingness to-Pay
Energy Supply
Incremental
Step 4
Environmental
Impacts
Economic Analysis
Sensitivity and Risk Analysis
Bene fits
Trans fer
Method
Spreadsheet
Calculat ion