CDM and Municipal Finance Management

Transcription

1 CDM and Municipal Finance Management James Aiello PricewaterhouseCoopers 30 May 2007 Organised by

2 Contents of Presentation Landfill emissions as a municipal asset Potential for municipal participation in CDM regarding landfill emissions Legislative/regulatory context Challenges for municipal CDM projects The way forward

3 Landfill emissions as a municipal asset Topic is air emissions from landfills Municipal solid waste landfill emissions are primarily methane resulting from refuse decomposition Methane emissions are air pollution Contribute to global warming Amount emitted depends on a host of different factors

4 Landfill emissions as a municipal asset Carbon/other emissions from municipal landfill are a municipal asset The accounting officer of a municipality is responsible for the management of the assets of a municipality including the safeguarding and maintenance of those assets This municipal asset is not necessary for provision of the minimum level of a basic municipal service

5 Landfill emissions as a municipal asset Sale/disposition of this municipal asset is governed by MFMA provisions relating to transfer of ownership of a municipal asset not required for the provision of a basic municipal service Municipality may otherwise dispose of an asset not required for the provision of a basic municipal service, but only after an open Council meeting where Council: Reasonably decides that the asset is not needed to provide the minimum level of basic municipal services; and Considers the fair market value of the asset and the economic and community value to be received in exchange for the asset

6 Landfill emissions as a municipal asset Any transfer of ownership in a municipal asset must be fair, equitable, transparent, competitive and consistent with the supply chain management policy established in terms of MFMA Section 111 Section 111 requires, as part of supply chain management policy, a policy in terms of the disposal of goods no longer needed

7 Potential Municipal-sponsored CDM Project Municipalities with sufficiently-sized landfills could sponsor CDM projects involving the capture of landfill gases and conversion to energy Projects could be sponsored either as a disposal of a municipal asset not needed for the provision of a basic municipal service or As a public-private partnership (PPP)

8 Legislative/Regulatory Context Disposal of a municipal asset not needed for the provision of a basic municipal service Must be in terms of Supply Chain Policy Municipality not obligated to consider sole source proposals Clause 37 of Supply Chain Regulations would apply Environmental Impact Analysis (EIA) required MFMA 33 may also apply

9 Legislative/Regulatory Context Public-private partnership (PPP) Feasibility study required Can proceed as a PPP only where affordability, value for money and transfer of significant risk to the private party is demonstrated MFMA 120 and Regulation 309 provide the legislative/regulatory framework MFMA 33 may also apply EIA would also be required

10 Municipal PPP Project Life Cycle PPP PROJECT LIFE CYCLE Reflecting Municipal Public Private Partnership Regulations of the Municipal Finance Management Act, Act 56 0f 2003 INCEPT ION * Review and decide on mechanism to provide a municipal service * A ssess service provision through internal mechanism * Decide to explore external mechanism * A ppoint a Project Officer * Notify National Treasury and relevant Provincial Treasury * A ppointment of a Transaction Advisor * Notify local community Milestone 1 PPP UNIT TECHNICAL ASSISTANCE PROJECT PREPARATION PERIOD FEASIBILITY STUDY * Assess the different options * Conduct a feasibility study * S et meeting date where Council to take "in principle" decision * 60 days prior to meeting, make public particulars of feasibility study and invite comment * Solicit views and recommendations of National Treasury, DPLG, Sectoral Department * Decide "in principle" PROCUREMENT * P repare fair, equitable, transparent, competative procurement per Chapter 11 of the MFMA * Solicit views and recommendations of National Treasury and relevant Provincial Treasury on bid documents, including draft PPP agreement, 30 days prior to issue of bids * Issue rquests for proposals with draft PPP agreement * Recieve bids * Compare bids with feasibility study and each other * 30 days prior to award, solicit views of National Treasury and the relevant Provincial Treasury on the bid evaluation and preferred bidder * Negotiate with the preferred bidder * Finalise PPP arangement * 60 days prior to signing, make PPP agreement public, and invite public comment * P rior to signing, - solicit views and recommendations on proposed terms and conditions, contract management plan and preferred bidder's competency and capacity - solicit views and recommendations of relevant Provincial Treasury, DPLG and any prescribed Sectoral Departments * Municipal Council passes resolution authorising execution of PPP Agreement * Accounting Officer of Municipality signs PPP Agreement Milestone 2 Milestone 3 Milestone 4 Milestone 5 Milestone 6 Treasury Views and Recommendations 1 Demonstrating affordability Treasury Views and Recommendations 2(a) Demonstrating value-for-money and views on bid documentation Treasury Views and Recommendations 2(b) Views on evaluation of preferred bidder Treasury Views and Recommendations 3 Views on proposed terms and conditions PROJECT TERM PPP AGREEMENT MANAGEMENT * A ccounting Officer responsible for PPP Agreement management

11 Challenges for municipal CDM projects Time Kyoto protocol expires in 2012 Emissions credit market not established yet in South Africa EIA/PPP processes time consuming Limited EIA experience i.t.o. CDM in SA No CDM PPP experience in SA Sole source processes untested i.t.o. CDM

12 Challenges for municipal CDM projects Capacity Officials don t understand CDM Difficult for them to accept that emissions are an asset EIA/PPP processes too complex and confusing Not a municipal priority

13 Challenges for municipal CDM projects Funding CDM projects can cost big bucks SA financial community lack experience/expertise Lack of an established emission credits market doesn t help No clear BEE relationship

14 The way forward Time Kyoto won t go away Global warming becoming a major issue Initiative from the private-sector CDM community to establish a credits market can help Constructive engagement with DEAT/National Treasury can address time required

15 The way forward Time, continued One alternative may be to transfer rights to the Central Energy Fund, on a revenue sharing basis Competitive tender processes not required Requires independent value of LFG Council decision necessary May involve MFMA 33 decision as well

16 The way forward Capacity Current Eskom efforts can be instructive Capacity-building i.t.o. CDM Interaction by CDM community with officials is necessary and desirable Better understanding by politicians of roles and responsibilities i.t.o. CDM Other environmental management responsibilities can be leveraged Central Energy Fund involvement is an option

17 The way forward Funding International models can instruct Eskom can lead the way w/model contracts Pathfinding projects can help establish market Once initial dimensions of market appear, financial institutions will be interested BEE linkages need to be explored and identified

18 Conclusion Profile of municipally-sponsored CDM should be raised, especially in Metros Failure to manage any asset should be noted and steps taken Grass-roots pressure i.t.o. CDM can help determine new Kyoto Role of municipalities as implementers of pollution control legislation provides a basis for municipal CDM projects CEF alternative should be explored

19 Thank You James Aiello Principal Consultant PricewaterhouseCoopers Organised by