UNDP and the CDM: our strategy

Transcription

1 Expert Meeting on Trade and Climate Change: Trade and Investment Opportunities and Challenges under the Clean Development Mechanism (CDM) April 2009 UNDP and the CDM: our strategy by Marcel Alers Principal Technical Adviser MDG Carbon Facility, UNDP "The views expressed are those of the author and do not necessarily reflect the views of UNCTAD"

2 UNDP and the CDM: Our Strategy Marcel Alers Principal Technical Adviser, Climate Change Mitigation

3 In 4 years, the CDM has sparked an $8 billion/year market Compound Monthly Growth Rate = 11% Approximately 3 billion CERs by 2012 Number of Projects in the CDM Pipeline, January 2005 January ,285 3,265 3,035 2,838 2, ,819 3,580 4,359 4,660 1,759 1, ,311 1,495 1, Jan 05 Mar 05 May 05 Jul 05 Sep 05 Nov 05 Jan 06 Mar 06 May 06 Jul 06 Sep 06 Nov 06 Jan 07 Mar 07 May 07 July 07 Sep 07 Nov 07 Jan 08 Mar 08 May 08 Jul 08 Sep 08 Nov 08 Jan 09 2

4 But not everyone benefits and sub-saharan Africa is struggling 8 Number of CDM Projects In Selected Countries (January 2009) (Registered projects & those at validation) 6 4 countries (China, India, Brazil and South Korea) account for 70% of CDM projects and 80% of CERs through to 2012 Sub-Saharan Africa accounts for 2% of registered projects and 4% of CERs through to non-annex 1 countries have yet to benefit from any registered CDM project activity Kenya Tanzania Mozambique Zambia Malawi 3

5 Countries are incurring carbon costs but realising few benefits DNA Presence Across Regions Countries With A DNA But No Registered CDM Projects 45 Number of countries 21 Number without a DNA Africa Arab States Europe & CIS Latin America Asia & Pacific & Caribbean Africa Arab States Europe & CIS Latin America Asia & Pacific & Caribbean 4

6 UNDP s objective MDG Impact of Carbon Projects Current CDM Market Objective for UNDP Geographical & Sectoral Diversity of Carbon Projects 5

7 UNDP s two-pronged carbon strategy Capacity Development Creating an operational CDM framework in participating countries an environment in which functioning public institutions are able to effectively interact with the private sector to jointly develop carbon projects. MDG Carbon Facility Provides support to project developers through provision of a comprehensive package of services to assist private-sector project developers with the preparation and implementation of carbon projects. 6

8 The institutional set-up internal UNDP Climate Change Mitigation UNDP-GEF Project Development Platform Carbon Finance MDG Carbon Compliance Carbon GEF Finance Meth Advisor Advisor Carbon Due Legal Diligence Advisor Analyst MDG Carbon Voluntary Voluntary Carbon Market Advisor RBA Cluster Project LAC Cluster Project Capacity Development Global Capacity Development & UNDP-UNEP Coordinator RBEC RBAP Cluster Cluster Project Project RBAS Cluster Project 7

9 The institutional set-up the Nairobi Framework Cooperation agreement between 6 international agencies to help developing countries especially in Africa participate in the CDM UNDP UNEP UNFCCC World Bank African Development Bank UN Economic Commission for Africa Launched at COP-12 in Nairobi, November 2006 The Nairobi Framework is an outstanding example of a UN-led partnership linking government action to the private sector in the developing world -KofiAnnan 8

10 Capacity Building in Client Countries Africa CD4CDM project well underway, with national officers in 6 countries (end of phase 1 in June 2009) Active/founding partner in Nairobi Framework and co-sponsored 1 st Africa Carbon Forum LAC CD4CDM project just operationalized, with regional coordinator and 4 national officers in place Central Asia CD4CDM project regional coordinator in place; funding being mobilized Future projects in Arab States and Francophone Africa 9 9

11 CDM capacity development in southern / eastern Africa 6 participating countries: Ethiopia Tanzania Kenya Zambia Mauritius Mozambique Regional coordination, with in-country activities devolved to National Project Coordinators Co-implementation arrangement with UNEP Risoe Centre The project is aligned with Government strategy in the participating countries 10

12 How do we build national capacity to engage with the CDM? Workshops, tutorials, technical support, awareness-raising, PIN & PDD development, scoping studies Project scoping studies Sectoral scoping studies Workshops for project developers PIN development; technical assistance The Enabling Environment Capacity Knowledge support for products the DNA Awarenessraising for Training for local banks local consultants MDG Carbon projects Non-MDG Carbon projects 11

13 Our strengths Constant in-country presence not fly in, fly out UNDP is a trusted party with existing relationships Dual agency implementation mutual strengths Regional-level assistance and resources glocalised project 12

14 Even at its best, the CDM is intrinsically risky CDM projects involve the creation of assets: That are invisible, intangible and measured against a counterfactual baseline Located in emerging markets Associated with projects lasting a period of many years Subject to host-country consent for transfer of the asset to the buyer In an institutional framework that is evolving rapidly and which may or may not continue to exist after

15 Non-CDM barriers to implementing CDM projects Limited access to financing A particular problem for initiating the underlying project Capacity building for the finance sector; mobilising local funding Lack of baseline data Data on grid power sources, land ownership, landfill inputs, etc. are often lacking Addressed on a projectby-project basis or by putting data collation systems in place CER ownership Need for legislation especially for forestry Working with ministries, parliaments, etc. Time lags Approval processes, bureaucracy, the underlying project Requires a more holistic approach to capacity development 14

16 Some project-specific issues The CDM is challenging in Africa Most opportunities are small and dispersed CER ownership is often unclear The low-hanging fruit is largely publicly-owned Improved kiln design More efficient cookstoves 15

17 The CDM is not very supportive of bio-carbon projects AR is the only form of sequestration project permitted: Complex methodologies Restrictive eligibility (1990 rule) Satellite data not yet approved for monitoring Lack of biofuel methodologies No approved methodologies for the use of bio-ethanol or for the use of bio-diesel in stationary applications The avoided deforestation issue Cookstove projects should be treated as energy projects, not as avoided deforestation projects the fossil fuel baseline underestimates true emission reductions Africa s key opportunity to engage with the CDM has been weakened 16

18 The MDG Carbon Facility: what is it and how does it work? UNDP MDG Carbon Facility Fortis Bank Technical Assistance in Project Development $$ Cost Recovery Fee per Project Carbon Projects e.g., a Wind Farm Delivery of Carbon Credits Payment of $$ Proceeds from Sale of Carbon Credits The MDG Carbon Facility is a one-stop-shop mechanism where (i) UNDP provides technical assistance, on a full cost recovery basis, to carbon projects and (ii) a financial partner purchases the credits generated by these carbon projects 17

19 MDG Carbon Facility: UNDP s Project Development Services Signing of ERPA with Fortis Project registered with CDM First Credits Issued Part 1: 1: Due Diligence Five Five Tools Tools Carbon Carbon Layer Layer Technical Technical Finance Finance & Legal Legal MDGs/Environment Country Country risk risk Two Two step step process process Initial Initial screening screening In In depth depth evaluation evaluation Part 2: 2: Project Documentation Preparation Preparation of of documentation documentation Approval Approval by by host host country country and and CDM CDM Board Board Review Review by by 3rd 3rd party party auditors auditors Part 3: 3: Establish Monitoring System Implementation Implementation and and oversight oversight of of monitoring monitoring system system in in project s project s first first year year 18

20 MDG Carbon Facility: 34 Host Country Agreements to Date Macedonia Ukraine Uzbekistan Russia Albania Armenia Kyrgyzstan Georgia El Salvador Honduras Peru Uruguay Brazil Yemen Egypt Lebanon Cambodia Mongolia Sri Lanka Indonesia Iran Thailand Malaysia Bangladesh Lao Fiji Burkina Faso Ethiopia Mauritius Mozambique Namibia Nigeria Rwanda Tanzania Data as of April

21 MDG Carbon Facility: A Diversified Portfolio (Projects Screened) Projects by Region Projects by Technology (UNDP Scope) Projects by Size (Annual CERs/ERUs) Projects by CDM/JI Distribution JI 35 CDM 125 Total: 200 projects screened/ in screening. Data as of March

22 Hondupalma Case Study: the Carbon Project THE PROJECT PROPONENT: Cooperative of 30 small farm holders Established a company, Hondupalma, to process oil from their palm fruit THE CARBON OPPORTUNITY: Waste effluent from palm fruit is currently decomposing anaerobically in lagoons, releasing methane (CH 4 ) into the atmosphere Opportunity to capture the methane by sealing the lagoons. Methane can have following uses: 1. The reduced emissions of methane can be quantified, generating carbon credits 2. Captured methane can generate cleaner electricity 3. Captured methane can substitute use of fuel on plant 21

23 Hondupalma Case Study: the Benefits CLIMATE CHANGE: Reduced emissions of ~20,000+ tonnes of CO 2 a year FINANCIAL: Annual revenues from electricity generation and carbon proceeds IRR 20+% TECHNOLOGY TRANSFER: Onsite electricity generation equipment. Transfer of skills MDGs/SUSTAINABLE DEVELOPMENT: Employment Socially active project proponent Community hospital and school 22

24 Potential Trade Related Issues and Role of UNCTAD ISSUES: Taxing on CERs Import Duties/Taxes on hardware for CDM projects Import/Tariff exemptions or restrictions on imports from non KP parties Tech transfer and IPRs and competitiveness/export of jobs (exemptions from rules for CDM projects??) If exemptions, what are requirements? Potential Role for UNCTAD: Provide publicly available studies and analyses on the market (e.g. on tariff and non-tariff barriers for low-carbon goods and services; impacts of policies and environmental tariffs etc.) Provide input to more transparent and justifiable labeling and standards regime Address shortcomings in the HS code system - it does not differentiate other products from renewable energy+other clean energy technologies. 23

25 End Marcel Alers Principal Technical Adviser, Climate Change Mitigation 24