Pcc climate finance_cdm_po_a,_nam_as,_sectoral_mechanism cdm workshop 2011 en pp 6

CDM PoA, NAMAs, Sectoral Mechanism
and Donor Funds –
What does the Future hold for
Carbon Financing?

Emerging Carbon Finance Instruments
GIZ Workshop

Nicolas Müller, Perspectives
29.04.2011, Tunisia

www.perspectives.cc · info@perspectives.cc © 2011 Perspectives GmbH

Agenda

 What is Climate Financing?
 What are PoAs, NAMAs, Setoral Mechanisms?
- Programme of Activities - PoA
- Nationally Appropriate Mitigation Action – NAMA
- Sectoral Mechanisms
 What is a standardized baseline?
- Standardise baseline under PoAs, NAMAs and
Sectoral Mechs
 Donor funds
 Case studies of on-going activities

www.perspectives.cc · info@perspectives.cc 2

What is Climate Financing?


How to finance the 2°C stabilisation pathway?

 Increased investments of trillions of  Current emission reduction
dollars are needed to maintain on a ambitions to low to reach
2°C stabilisation path stabilisation path
www.climateactiontracker.org
- Global carbon emissions have to - No international agreemtn
peak before 2020 - Short pledges
- estimates of the need for public  Additional finance and incentives to
and private climate change
be mobilised
financing vary widely
 „Climate Finance‟ aims to achieve
this by scaling up funds
- public funds used and the means
to disburse them must be
appropriate and efficient
- finding instruments that allow
scaling-up of mitigation activities is
the most important challenge at
this stage

Source: www.climateactiontracker.org


From carbon finance to climate finance

Carbon markets Non-carbon market
(established) (up-scaling)
 Market and carbon revenue  Governmental driven
driven  Uncertain flow and channel of
- ETS financing
- Offets - Bilateral
- Multilateral
Gov. AAU sales JPN/CAN/NZ
- UNFCCC
CDM/JI
 Different sources
- Taxes, auctioning, public and
Gov. procurement
programs Governments Private sector EU ETS private funds, ODA
= Supply Forwarding compliance

= Demand

Carbon Finance

Climate finance incentives for low carbon development
Year Maturity of mechanism
high low

1997 Kyoto Track
(1997/COP3)
Registry: UN
MRV: UN (established)
ER to date1: 401 MtCO2e
ER until 20121: >1,775 MtCO2e

2001 CDM (2001/COP7)
Registry: UN
MRV: UN (not ready)
Conventional ER to date: 0
CDM Registry: UN Crediting: maybe (“ NAMA
MRV: UN (not ready) crediting”)
ER to date: 0 Financial/CB support: possible
ER until 2012: ?
2005
CDM
LCA Sectoral Mechanism
Programme of Activities Cap or no-lose target
(Bali Action Plan
(PoA) - (2007) MRV: Domestic or UN
REDD + 2007/COP13) ER to date: 0
2009 (2009/COP15) Crediting or trading

Registry: UN Autonomous Supported
MRV: UN (established) NAMAs NAMAs
ER to date2: 0 MtCO2e
ER until 20122: 2 MtCO2e (2009/COP15) (2009/COP15)
Sectoral
> 2010 Mechanisms
Registry: Not envisaged
MRV: Domestic (Bali Action Plan)
ER to date: 0
Crediting: No
Financial/CB support: possible

1. Registered projects only (2,148); 2. Registered PoAs only (2); As 19th April 2010
Source: Perspectives Analysis; Point Carbon‟s Carbon Project Manager (April 2010)

What are PoAs, NAMAs, Setoral Mechanisms?


Scaling up mitigation and incentives for financing
From single measures to sectorwide efforts

Single CDM CDM Programme Nationally Appropriate Sectoral
projects of Activites Mitigation Action - NAMA Mechanism

Mitigation
action in Sub-
Sector A

Sectorwide
Voluntary
programme targets

Capacity
building

Scale of mitigation financing


Carbon market so far failed to provide pre-financing

 The Clean Development Mechanism (carbon market) creates
revenues though trading offset
 However, it has not provided a structured financing from developed
to developing countries (due to associated CDM regulatory risks)
 Biggest demand for CDM certificates will remain coming from the
EU after 2012
- CERs only eligible if projects registered before 2012 (time is running
out)
- More restricted import conditions
- Demand for CER uncertain especially for supply from non least
developed countries (LDCs)
 Cancun: Surprisingly positive outcome regarding market But still
mechanisms limited
demand for
- Existing mechanisms to be continued under Kyoto emission
 New market mechanisms “to be considered” by COP 17 reduction
- Also “non-market mechanisms” credits

Programme of Activities - PoA


Why Programme of Activities (PoA)?

 Scale up the CDM
 Increase number and size of
CDM activities
 Increase emission reduction

 Allow for more project types and
host countries

 Reduce transaction costs


A PoA combines project activities in one programme

 One tree for one apple  One tree for many apples

Single CDM project CPA under programmatic
CDM


Key features of PoAs

 As CDM: baseline + credited approach -> offsets
 The PoA provides the organizational, financial, and methodological
framework for the emission reductions to occur
- but the PoA does not actually achieve the emission reductions

 The emission reductions are attained at the level of the “CDM
program activities” (CPAs)

 Duration of the PoA, up to 28 years
- crediting period of any CPA (1x10 or 3x7years) shall be limited
to the end date of the PoA regardless of when the CPA was
added


Main characteristics of a PoA under the CDM

 Multiple Sites
 CPAs can occur at different local, regional or national sites.
 A PoA boundary may extent to more than one country
 Two-tiered structure
 Two types of project participants
 PoA coordinator
 CPA developers
 Coordinator is key programme participant
 (not required to undertake CPAs himself)
 Unknown number and timing of projects
 Exact number and time of implementation of CPAs not known at time of
submission (not possible to estimate overall emission reductions of
PoA)
 Any CPA can be added to the PoA at any time during the duration of
the PoA by the coordinating/managing entity.

The inclusion of an activity (CPA) under a PoA

PoA Design Letter of Approval
- Methodology
CDM validation
- Technology
- Eligibility criteria
CDM registration
- Baseline
- Additionality
- Monitoring Plan

Generic CPA

CPA1 CPA2 CPA3 CPAX


Latest rules and procedures: Additionality

Additionality of each CPA has to be demonstrated through the eligibility
criteria for inclusion of CPAs and not on the CPA level itself
 Desk review by DOEs, no individually on-site visit
 E.g. once it has been determined that a certain technical equipment is
additional (on PoA level), e.g. a 5 W CFL of manufacturer x, every CPA
with same CFL meets additionality criteria

CPA developers do not need to be formal programme participants


Latest rules and procedures: Methodologies

PoAs can use a combination of baseline methodologies

 Combination must be applied to all CPAs, in a consistent manner

 Each combination proposal is to be checked by the Meth Panel/SSC
WG

 Recommendation: Include option of front-loading the request for
approval of multiple methodologies


Currently 8 Programme of Activities are registered

Mexico: India:
ENEF – consumption - 1. ENEF – consumption –
power (CFL) power (CFL)
2. Renewable - Biomass
(other) – Biomass
based heat
generation systems

China - ENEF - Power
transmission and
distribution –
Transformer
Replacement
76 PoA currently
under validation

Honduras: Brazil: South Africa: Uganda:
Renewable – Hydropower Waste – Animal Waste Renewable - Solar Waste – Avoidance and
(run of river) thermal – SWH Incineration

Source: Point Carbon Database, 28 April 2011


Nationally Appropriate Mitigation Action - NAMA


Nationally Appropriate Mitigations Actions (NAMAs)

 Concept created in the Bali Action Plan (2007) at COP13 to denote
[voluntary] mitigation actions by developing countries after 2012

“Nationally appropriate mitigation actions’ by developing
country Parties in the context of sustainable development, supported
and enabled by technology, financing and capacity building, in a
measurable, reportable and verifiable manner.”

 Futher specified in Copenhagen Accord (2009) at COP15
- Supported by technology, financing and capacity building
- 30 billion $US total by 2012; 100 billion $US yearly until
2020
- Should be measurable, reportable and verifiable - MRV


NAMA: Wide options for mitigation actions

Appendix II to the Copenhagen
Mitigation actions Accord
 Activities for emissions mitigation in
developing countries that are not
subject to mitigation commitments

- National emission (intensity)
target

- Sector strategy / sector crediting
baseline / sectoral emission
target

- Government policy programme

- Single project


NAMAs are a key topic of UNFCCC negotiations

 Different views and different ways on NAMAs
- Institutional structure to support NAMAs
- measurement, reporting and verification (MRV) of underlying
measures
 NAMAs can basically be categorized as follows:
- Unilateral NAMAs: mitigation actions independently funded and
carried out by developing countries
- Supported NAMAs: climate protection measures in developing
countries, supported by technical assistance and/or direct
funding for climate protection from Annex I countries of the
Kyoto Protocol ("directly" supported NAMAs)
- Credited NAMAs: climate protection measures in developing
countries, that generate certified emission reduction credits
(credits) to be sold on the international carbon market (e.g.
sectoral measures)
 NAMA by developing countries and support by develop countries to
be recorded in a NAMA registry (to be established)

Different tiers of NAMAs (theoretical concept)

Supported and credited NAMAs

Mitigation
cost Supported
NAMAs

Credited
NAMAs
Credit
price
Supported
NAMAs
Unilateral
NAMAs

Mitigation
volume


NAMAs submissions by RCREEE member states
Country NAMA as reported to the UNFCCC (Stand March 2011) Type

Algeria Renewable energy management and Unilateral
development programmes
Egypt - -

Jordan a) Transport sector, e.g. railway, freight Supported
b) Environmental projects, e.g. energy efficiency, wet land protection
c) Energy sector, e.g. fuel switch, renewable energy law
d) waste sector, e.g. waste management and wastewater treatment
e) Agriculture and forestry sector
Lebanon - -

Libya - -

Morocco a) Energy sector, e.g. hydropower, solar power and heat, wind power, CCGT, use of Unilateral
natural gas, energy efficiency (lightning, labelling etc.)
b) Transport sector, e.g. fleet renewal, rail transport promotion, urban transport
c) Industrial sector: energy recovery, energy efficiency
d) Waste sector, e.g. landfill gas recovery, wastewater treatment
e) Agriculture and forestry, e.g. Farm land yield improvement reforestration
f) Actions related to housing, e.g. incentives and programmes for limiting urban sprawl,
energy efficencies, renewable energies
Palestine - -

Syria - -

Tunisia a) Renewable energies: Tunisian Solar Plan + Diversion of organic waste from landfills Supported
b) Fuel switch in all sectors; industrial proecess.
c) Energy efficiency, e.g. transport, construction of buildings, appliances certification
d) Agriculture and forestry sector
Yemen - -

Successfully attracting donor support for low carbon growth
and NAMAs
• EU “fast-track“ decisions (May 2010): 2.2 billion € additional funds pledged from member states and EU
Commission
Donor
• US “fast-track“ decisions (April 2010): 1.9 billion $US for international climate finance until 2011 40%
support
administered by USAID; 60% through multilaterals
activated
• Japan (May 2010): 4 billion $US through Japan Bank for International Co-operation (JBIC) for NAMA
support

1 Low Carbon Development Strategy 2 Financing Strategy 3 Defining concrete NAMAs for
large-scale donor support
• What are the concrete sectors and
GHG BAU emissions scope?
emissions Own financing
• Whole sector or sub-sector?
• Which are the detailed measures
Require- to be implemented?
ments for • What is the envisaged MRV
support approach?
Supported action
• Plans for NAMA crediting?
• What are the detailed financial
Emissions pathway
under LCDS
requirements and what is the
external financial contribution
sought?
Carbon markets • What is the delivery framework
supporting the NAMA?
Time


Sectoral Mechanisms: how do they work, what is the difference?


Sectoral Trading - concept

Basic functioning (as per EU proposal)1
 Non Annex I (NAI) country defines sectoral target, to be reviewed &
approved by COP
 Substantially below business as usual
 Absolute target
 Should cover all entities/installations within a sector
 Allocation of emission rights according to target
 NAI country implements national policies / NAMAs
 May include domestic ETS (not a must!)
 NAI country can participate in International Emissions Trading (IET)
 Both buy and sell
1 Submission of the EU to the 6th AWG-LCA

Sectoral Trading – mitigation
incentive

Emissions
of GHGs
BAU-emissions

Sectoral cap

Allocated
emission rights

time


Sectoral Trading – country level

1. Trading on country level

CMP Effects:
• Direct incentive for NAI country
Proposes target; Reviews &
reports approves target to implement national policies &
Carbon initiate MRV
market • Means for NAMA-crediting
Trades NAI
(buy & sell)
Implements measures &
But:
MRV System • Limited incentives for private
investments as in CDM
Report
Sector • Potential overlap with CDM
1-n Company (especially in power + waste
1-n Installation sector)
1-n

Sectoral Trading – installation level

2. Trading on installation level (not part of EU-Proposal)
Effects:
CMP
• Sets high incentives for financing
Proposes target; Defines rules for ETS
reports
mitigation at installation level!
Reviews & approves • Step to national targets? –
target
Opposition of NAI countries
NAI • Potential overlap with CDM

Allocation & Installation
specific MRV

Report
Sector
1-n Company Carbon
1-n Installation Trade market
1-n

Sectoral Crediting - concept

 NAI defines sectoral target, to be reviewed & approved by COP
 Substantially below BAU, absolute target
 Covers all entities/installations within sectors
 NAI implements national policies / NAMAs
 Emission Reduction Certificates may be issued in respect of sectoral
emissions reductions beyond the absolute emission threshold
 ex-post crediting
 no-lose target
 Supervision by COP / „a body“
 Procedures and modalities tbd by COP (incl. MRV)
1 Submission of the EU to the 6th AWG-LCA

Sectoral Crediting – incentives for
mitigation

No lose target • No penalty in case the target is missed
in given crediting period
Emissions • Issuance of credits in case target is
of GHGs exceeded

BAU-emissions

No penalty

No-lose target
Credits issued
actual emissions

CP CP CP time


The current debate on sectoral mechanisms

 AWG-LCA 2009 (Copenhagen): Worked out a draft decision on item 1b (v)
of the BAP on “various approaches, including opportunities for using
markets, to enhance the cost-effectiveness of, and to promote, mitigation
actions”.

 2010: Climate talks in April, June, August, October: Particular interests
heavily riddled the AWG LCA text with brackets; No direct reference to
trading or crediting mechanism in LCA / KP text

 Cancun 2010: COP decided to „consider“ establishment of market based
mechanisms (MBMs) in Durban 2011

 COP invited parties to submit views and position on the establishment of
one or more MBMs; (besides this, there were other calls for submissions,
eg on non-market based mechanisms, evaluation of the KP mechanisms)

 22 submissions received for launch of debate on MBMs in Bangkok (April
2011) and Bonn (June 2011)


 Scope of submissions in early 2011:
- Perceived as mainly constructive
- MBMs only opposed by ALBA (Bolivia, Venezuela),
- „tolerated“ by Bangladesh, Tuvalu rather „cautious“
- (to some extent) supportive for MBMs by EU, AOSIS, Australia, China
(cond.), Colombia, Ecuador, Japan, NZ, Norway, PNG, Peru, South
Korea, Saudi Arabia, Singapore, Switzerland, Turkey,
- No submission from
- India (interpreted as in line with China)
- Brazil (traditionally opposing)
- South Africa (embarking on neutral diplomatic attitude towards
COP)
- US…
- Sectoral mechanisms
- Hold a prominent position on the agenda
- Are perceived as one tool amongst several MBMs (such as NAMA
crediting, CDM,...)

Distinctive features compared to classical CDM

Scope Basis of Additionality MRV Readinees
credits for MENA
CDM Single project, Baseline and Project level CDM 100%
limited bundling credit assessment, methodologies
mainly
economic
PoA Programme with Baseline and Programme / CDM 90%
unlimted CPAs credit CPA eligibility, methodologies
mainly
economic
NAMA Project, Baseline Incremental Activity ???
programme, (credited cost specific to be
(Sub-)Sector, NAMA) defined,
policies different due
to measures,
emission
reductio vs.
soft measures
Sectoral (Sub-)Sector Benchmark, Not relevant Allocation 0%
mechanism allocation


What is a standardized baseline?


What are standardised approaches?

 Extensive use of default factors
- Use of pre-defined, conservative values instead of actual data
monitored
- Default factor for key parameter can boost project development
(AMS-II.J Energy Efficient Lightning; ACM0002 + Grid Emission
Factor, e.g. India (CEA))
 Performance standard approach
- Emission-rate threshold (tCO2/t output) for baseline and/or
additionality
- Emerging use of performance standards in CDM (ACM13,
AM70)
 Other options for standardisation
- Positive list for additionality demonstration
- Specification of best available technologies or practices
- Threshold on technology penetration rate

Why we need standardised approaches?

 Increase the number and range of CDM projects
- Holistic, integrated approach with flexible technology choice
- Increased investment certainty (less regulatory uncertainty)

 Streamline project implementation & assessment
- Reduced transaction costs & lead time
- Increased objectivity, transparency and consistency
- Clear definition of level of ambition

 Improve access to CDM in underrepresented countries &
sectors
- Shift of burden from project developers to a central coordinator


Standardise baseline under PoAs, NAMAs and Sectoral Mechs


PoAs: Performance standard for baseline and additionality

Emission intensity
(tCO2 / t output)
C
A B
Baseline PS
CERs
Additionality PS

Note: A single performance standard can also be applied to baseline and additionality.


NAMAs: Differentiated benchmarks support & credits
Example: A NAMA financing framework developed to interface non-carbon credit-
based NAMAs and carbon credit based-financing for the building sector
Specific
energy BAU Baselines1
demand
in kWh/m² Improved future baselines
(electricity
and heat)
Non-carbon credit based
Supported NAMA financing

Mandatory Minimum
Performance Standards

Credited NAMA/CDM
Carbon credit based
financing

State of the Art

time frame (year)²
1 Several baselines and benchmarks may be established for use in building sub-sectors. The baselines and benchmarks could be determined by
building end-use types, climate zones and energy types, etc.
2 Minimum performance standards and crediting benchmarks are tightened over time.
Source: According to UNDP 2009

Sectoral Trading: Benchmark for allocation of allowances

Example EU ETS: Benchmark for existing lignite plants (exemplary)

Allocation

Inefficient plants
High efficient with higher
plants without adjustment
adjustment

990
g/kWh
Efficiency related
adjustment

New plant Old plant

990 g/kWh 1,150 g/kWh
Emission of plant


Donor funds


Donor funds: Financial, technology
and capacity-building support
 The financial, technology and capacity-building support agreed in Cancun
applies to both mitigation and adaptation actions by developing countries
 FAST-START FINANCE UP TO 2012
- fast-start finance for developing countries of USD 30 billion up to
2012
 NEW LONG-TERM FUNDING ARRANGEMENTS
- In order to scale up the provision of long-term financing for developing
countries, Governments decided to establish a Green Climate Fund
functioning under the guidance of, and be accountable to the
Conference of the Parties (COP).
- Industrialized countries committed to provide funds rising to USD
100 billion per year by 2020 to support concrete mitigation actions by
developing countries that are implemented in a transparent way.
- Funds would be raised from a mix of public and private sources


Funding sources for both adaptation
and mitigation projects
 Universe of funding sources
- Bilateral
- Multilateral
- Foundation / Philanthropic
- Private sector
 Bulk of available and emerging resources relates to mitigation, mainly through
transactions under the CDM in the carbon market and through World Bank
administered carbon funds and facilities
- including Climate Investment Fund (CIF) programmes like
- the Clean Technology Fund (CTF) and
- the Scaling Up Renewable Energy Program in Low Income Countries
- The Global Environment Facility (GEF) has been the largest source of
grant financing for energy efficiency and renewable energy projects.
Source: http://www.climatefinanceoptions.org/cfo/Funding%20Sources

New and additional funds?

“New and additional” mentioned in all major climate agreements
- UNFCCC
- Kyoto Protocol
- Copenhagen Accord
Never clearly defined
- “New and additional” to what? ODA vs. climate finance, past vs. present?
- “New and additional” above which baseline

Situation without baseline
- “New and additional” can not be assessed
- (Fast-start) finance fails to build trust

Only old wine in new bottles?


Case studies of on-going activities


PoA

Programme of Activities project idea for Tunisia

Name of the Programme Development of roof thermal insulation (Promo-Isol)
Roll-out of large programme for insulating roofs of
private houses (new and existing buildings) in Tunisia
to reduce the demand of fossil fuels for heating and fossil
fuel based power generation for cooling in such premises
and hence reducing Greenhouse Gas Emissions.
Objective
The Tunisian Energy Market is highly subsidized. By
reducing the demand for fossil fuels for heating purposes
and the electricity consumption for cooling, an additional
objective is to reduce the amount paid for subsidies on
fossil fuels.

• Tunisian National Agency for Energy Conservation
Programme description: (ANME) is initiating this programme
• The PoA will target newly self-constructed and existing
proposed activities + private buildings.
incentive scheme • Specific subsidy provided by ANME per m²


PoA

Scoping PoA opportunities in Morocco

 Scoping study to identify PoA opportunities
- Sectors
- Technologies
- Organisational framework and Coordinating Entity
- Stakeholder involvement

 Planned PoA feasibility study for Moroccan Solar Plan


NAMA

More than 500.000 new houses per year demanded until
2030 in Mexico due to demographic change
Housing stock in millions
38.1 Mil.
35.6 Mil.
33.1 Mil.
30.2 Mil.
10.8 Mil.
5.8 Mil. new houses
27.3 Mil.
new houses 2011-2030
2011-2020

24.4 Mil.
NAMA focused on new houses

Source: CONAVI, 2010

NAMA

Supported NAMA Design Concept for Energy-Efficiency
Measures in the Mexican Residential Building Sector
Item Description
Sector Building sector
Sub-sector New residential houses (maximum 4 storeys and 8 units)
NAMA boundary Entire country
Measures and activities with Substantial up-scale of “Green mortgage” and “Ésta es tu casa” schemes through
direct impact on GHG increased subsidies and more ambitious efficiency standards.
emission reduction
Measures and activities with Supportive actions for transformation of the “Green Mortgage” and "Ésta es tu casa"
indirect impact on GHG programmes into a holistic urban planning process including building codes
emission reduction • Building code pilot in 1 federal state
• Promotion and enforcement of building codes across federal states over time
• Capacity building
• Extension of urban planning criteria and inclusion in the holistic framework

NAMA timeframe
-Preparation 2011-2012
-Implementation 2012-2020

NAMA implementation and Full costs of substantial up-scaling of actions until 2020
operation costs
NAMA type Supported NAMA (with the possibility of NAMA crediting for parts of the actions)
Type of support required Financial, technical and capacity building
under the NAMA


NAMA

The NAMA could significantly reduce the BAU emissions

Emission paths under different scenarios Emissions 2013-20
Current practice
= 57.6 MtCO2

-12% = 50.9 MtCO2
-18% = 47.2 MtCO2
-19% = 46.5 MtCO2

-28% = 41.4 MtCO2
-41% = 33.8 MtCO2


NAMA

Climate financing for the Mexican NAMA?

 A revolving NAMA fund is a possibility
- Directly reinvests monetary benefits (Mexican saved subsidies)

 Such a fund could be supported by soft loans from
donors/climate funds until break-even is achieved
- Which are the incremental costs given that
- Air-conditioners and refrigerators have negative abatement costs?
- Mexican government saves a huge amount of subsidies?

 Possible private sector involvement
- Carbon market (NAMA crediting; e.g. of PV) => EU: Sectoral Mechanism pilot
through a bilateral agreement
- Provide loans to the NAMA fund on commercial terms (senior tranches)

 Industrialised countries could purchase credits as well


NAMA

Specific investment needs

Billion € Investment needs 2013 - 2020
8
6.6 billion €
7
6.2 billion €
6
5 4.0
4.3 billion € 3.6
4 3.8 billion €
1.7
Current 3 1.2
Green
Mortgage 2
2.6 billion € 1 2.6 2.6 2.6 2.6

0
Scenario 1 Scenario 2 Scenario 3 Scenario 4

Minimum supporting finance:
~ 0.17 billion EUR/year
www.perspectives.cc · info@perspectives.cc

NAMA

NAMA proposals for Tunisia

Tunisian Diversion of organic waste
Solar Plan from landfills
 Implementation of “Solar Plan” as NAMA  Potential for GHG mitigation in the Tunisian
under the UNFCCC and Copenhagen waste sector
Accord - waste management for a more sustainable
treatment of biowaste
 Expanding the existing Tunisian Solar - Communal waste, agroindustry/food
Plan covering: processing, agricultural production, wood,
- Solar energy waste water, hotels and restaurants
- Wind energy - Actions: composting and/or anaerobic
digestion
- Energy efficiency
 Components (2011-2016)
- Biogas
- Study to detect cost-efficient measures for
- Studies emission reductions
 40 public-private projects scheduled - Scientific research on degradation processes
between 2010-2016 - national concept on biowaste treatment
development
 Estimated emission reductions of 1.5 - Review (or study) on feed-in of electricity
MtCO2e per year, compared to current - Construction of composting and anaerobic
annual emission of 35 MtCO2e in Tunisia digestion plants
- Awareness Building
- Capacity building and training
Source: Tunisian “Nationally Appropriate Mitigation Action” NAMAs,
Tunisian Environmental Ministry, 2010
- Norming and standardization

NAMA

Tunisia Solar Plan

Source: Tunisian “Nationally Appropriate Mitigation Action” NAMAs, Tunisian Environmental Ministry, 2010

Multilateral fund

World Bank„s Clean Technology Fund

 Clean Technology Fund (World Bank)
- Egypt seeks finance to scale up wind energy and address
urban transport needs by replacing old public buses and
private taxis with a new fleet of Compressed Natural Gas
vehicles; completing two new lines of its underground metro;
and preparing for Bus Rapid Transit and Light Rail Transit
systems
- kick start the establishment of a national renewable energy
fund to incentivize transmission companies to purchase
renewable energy


Planned activities


UNEP National Green Economy Initiative in Egypt

 UNEP National Green Economy Initiative (GEI)
- Since 2010, GEI has been providing advisory services to lend
support to countries‟ national initiatives to achieve a green
economic transformation
- Advisory services include providing platforms for national
dialogue and consultations; analytical and research support
through macro-economic and sectoral assessments of green
economy opportunities and options; capacity enhancing
activities; and sharing of international experiences and best
practices.
- The Egyptian National Council of Competitiveness ENCC in
cooperation with the Ministry of State for Environmental Affairs
and the United Nations Environment Programme launched
"Egypt Green Economy National Initiative" workshop on January
23, 2011
- Repot for Egypt in preparation

Worldbank„s Carbon Fund soliciting the assistance to
develope NAMAs for Jordan
 Further definition of Jordan‟s NAMAs
 with a particular focus on possibilities of public-private partnerships in a
future international climate regime
 Identification on the regulatory and institutional reforms required to
encourage public-private sector participation
 Identification potential infrastructure for NAMAs (policy and projects)
for further development
 Selection of infrastructure NAMA (or possibly a program/policy
NAMA) to serve as a pilot case
 identify any legal, regulatory and institutional issue that would need to
be addressed to allow implementation
 propose measures
 development of an initial pre-feasibility assessment suitable for
funding negotiations under the fast-start finance/long term finance
 other finance opportunities


Summary


Summary

 The future of demand for CERs post-2012 is highly uncertain
 First movers on developing country and donor side are
currently exploring new mechanisms, e.g.
- How PoAs could be upscaled, and
- and how NAMAs could be designed
 However, demand for such certificates (and large-scale
financing) is not existing & modalities and procedures are not
clear
 „old“ climate financing is available and planned to be scaled-
up (WB, GEF, etc)
 Pilot initiatives on PoAs/New Mechs and NAMAs with a donor
country partner provide opportunity in the long-term


Many Thanks for
Your Attention!

Emerging Carbon Finance Instruments
GIZ Workshop

Nicolas Müller, Perspectives
29.04.2011, Tunisia

www.perspectives.cc · info@perspectives.cc © 2011 Perspectives GmbH

Back up / unused slides


Main steps for NAMA potential identification and selection

2. Mitigation 3. Investigate 4. Identification 5. Formulation 6. Outreach
1. Identification
potential of NAMA of actions and of a concrete and capacity
actions
assessment requirements selection NAMA building

• Analysis of • Analysis of • Investigation of • Identification • Formulation of • Outreach to
national current GHG NAMA of most a concrete international
context in mitigation requirements for promising NAMA concept donor agencies
terms of potential of each identified options and for the building to seek support
existing possible action selection for sector in terms for NAMA
policies and actions • Desk-review of NAMA of general • Capacity
programs • Review of studies/ formulation scope, detailed building on low
and current GHG regulatory text to following measures, carbon
identification mitigation draw out in detail specific NAMA MRV approach business
of opportunities the potential selection criteria and type of plans/NAMAs
appropriate within the opportunities (as • Establishment NAMA
and possible building sector well as of a priority list • To be included
actions and with regards to challenges) for of mitigation in Annex II of
opportunities co-benefits NAMA measures / the
in the • Stakeholder supporting, e.g. actions Copenhagen
building consultations MRV, financing • Selection of Accords and its
sector to discuss and requirements, action or set of development in
refine options barriers action for NAMA practice
formulation

Sectoral Trading

2. Trading on installation level (not part of the EU proposal)
 NAI country defines absolute emission targets on sector level and
breaks it down to level of installation level
 -x% from BAU, recent base year
 Mandatorily covers ‚all„ installations within sector to avoid intra-
sectoral carbon leakage
 Each company is self-responsible for meeting target
 Companies may buy/sell on international carbon market
 On national level, all installations can trade with each other
 If access to international carbon market:
 either directly or via public ‚aggregators„
 Attractive to NAI countries?
 No national emission target
 Voluntary opt-in to ETS @ predefined rules

Sectoral Trading

2. Trading on installation level (not part of EU-Proposal)

 Companies / private investors have a direct incentive to reduce
emissions below their target
Sell
€/t CO2

Average cost to Average cost : Carbon
target: e.g. 5 €/t e.g. 7.5 €/t
5 market

t CO2

Target Effective
reduction


 Recalling the support for sectoral mechanisms...
 North/South division reflected in party positions
 Annex I: supportive
- EU, Japan, Australia, NZ,...
 Non Annex I:
- BASIC/G77: Sceptic, but generally agrees that sectoral mechanisms
are feasible for mitigation action;
- BUT: Main mitigation to be bourne by Annex-I
- National sectoral mitigation can only be a part of the overall instruments
toolkit
- Establishment conditional on concrete AI mitigation action
- Fear trade barriers and oppose benchmarks or standards for Non-
Annex-I
- Fear “sneaking” imposement of firm targets
- Crediting supported by certain smaller countries (Costa Rica, Colombia,
Korea)
- ALBA: Partially opposing market based instruments

Standardized baselines

UK DFID project on standardised approaches for CDM

 Title
- Piloting greater use of standardised approaches in the CDM
 Objective
- Develop practical examples of performance standards and
default factors that could be applied to the CDM
- Identify project types of relevance to low-income countries
- Develop standardised approaches suited to national
circumstances
- Demonstrate the benefits of standardised approaches
 Expected outcome
- Development of 3 standardised CDM methodologies, each
tested in 3 case studies (total of 9 case studies)


Standardized baselines

UK DFID project on standardised approaches:
Methodological approach
Approach for current phase 2:
 development of framework concept for standardisation
 consultation with local stakeholders (e.g. DNA, project staff).
 Implications of standardised baselines
- practicability of application the chosen countries (standardised
approaches + data collection)
- effectiveness of approach (comparison with existing CDM elements).
 finalisation of the standardised approach based on outcome of
assessments.
 disseminations of the findings.


Cancun paved the way for CDM reform

 Mixed success of the CDM
- >2,500 projects registered, >1.8 billion CERs until the end of 2012
- Uneven distribution of CDM projects:
- Location: Dominance of emerging economies
- Size: Lack of micro-scale projects
- Sector: Large, untapped mitigation potential (e.g., building,
transport)
 Some major bottlenecks remain
- High transaction costs & long lead time
- Concerns about the environmental integrity (mainly, additionality)
- Limited contribution to sustainable development
 Standardised approaches to be developed
- Both top down, and bottom up, including industry associations and
NGOs
- Streamline baseline & additionality procedures
- Encourage participation of underrepresented countries & sectors

Expectations from standardised approaches
Advocacy groups, e.g.
 Industry (additionality)
 DNAs (from regions in which the CDM is underrepresented due to data
availability problems and difficult MRV requirements)
Expand the CDM
 Allow a greater access and participation to the CDM
 Change the balance of the CDM (projects – geography)
 Reduce the time to registration
 Reduce the transaction cost
Ease the baseline determination and MRV
 Reduce the monitoring, easier MRV
 Reduce subjective judgment
 Prevent gaming
 Might reduce CER outcome due to conservativeness


Expectations from standardised approaches

Additionality
 Reduce subjective judgment
 Increase the investment certainty
 Reduce complexity (whole system assessment)


Pcc climate finance_cdm_po_a,_nam_as,_sectoral_mechanism cdm workshop 2011 en pp 6

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