C-NAMA : New Market Mechanism for Post-2020

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1 C-NAMA : New Market Mechanism for Post-2020 September 5, 2013 Inchul HWANG KEMCO

2 Existing Market Mechanisms Played a key role in expanding global carbon market. Also criticized for their limits such as long project cycle, uneven project distribution. e.g. CDM, JI, IET Once hailed as goose that lays golden eggs. But now it is turned to ugly duckling as carbon price has been plummeted

3 Market Mechanism for Post-2020 Era Which One? Old One? Pop! New One? Bon Appetit!

4 NMM(New Market Mechanism) Starting Point: Bali Action Plan 1 b (v) - started discussions on the need of new mechanisms to overcome the limits of existing Kyoto Mechanisms Various approaches, including opportunities for using markets, to enhance the cost-effectiveness of, and to promote, mitigation actions, bearing in mind different circumstances of developed and developing countries; NMM was defined in Decision 1/CP.17 in Durban - defines the new market-based mechanism, operating under the guidance and authority of the Conference of the Parties - It is still not clear about what(sectoral or NAMA, crediting or trading) and how(governance, procedures and modalities)

5 Existing Mechanism vs. New Mechanism Existing Mechanisms New Mechanisms Scope Projects broad segments of the economy (sector, project, policy) Participant Eligible Parties which meet some qualifications Voluntary participation. Fair and equitable access to all Parties Offsetting Offsetting Net decrease and/or avoidance of GHG emissions, above offsetting Relationship with domestic efforts and other supports Supplemental to domestic mitigation efforts by developed countries Supplemental to domestic mitigation efforts by developed countries. Complementing other means of supports for NAMAs Type CDM, JI, ETS Crediting or Trading * Edited Parties submissions and reports. May be changed according to progress in climate change negotiations.

6 C-NAMA: Korea s view on NMM Korea submitted its view on NMM in June Korea suggested C-NAMA, updated version of NAMA Crediting which was submitted in We need new perspective and approach for NMM as we need new wineskins for new wine A hybrid of bottom-up and top-down approach - C-NAMAs are registered and managed by a central body, while methodologies are determined by host countries

7 What is C-NAMA? C-NAMA : ex-post issuance of credit based on net reduction, acknowledging emission mitigation outcomes from implementing NAMA. Non-Crediting Mechanism Crediting Mechanism U-NAMA S-NAMA C-NAMA NAMAs planned and implemented unilaterally without foreign involvement NAMAs planned and implemented with overseas financial and technical assistance NAMAs planned and implemented with a view of acquiring emission reduction credit * U-NAMA (Unilateral NAMA): domestically supported NAMA * S-NAMA (Supported NAMA): internationally supported NAMA

8 Governance of C-NAMA Facilitative Body : A central body. Registers NDD, approves new methodology, manages(issues, transfers and retires) NAMA credits and supports host countries by providing capacity building NAMA DNA : National Authority on NAMA. Receives, validates and approves NDDs which are submitted by NAMA-implementing Ministries or authorized agencies Government of Host Country : Central(local) ministries or agencies which make NDD, implement and monitor C-NAMA and get credits. NAMA DOE : third-party verifier who verifies monitoring report

9 Unique Characteristics of C-NAMA Strengthened Government s Role: DNA and Ministries are key players. They are in charge of validating, monitoring and approval of C-NAMA activities. Flexible MRV: Host country can determine nationally appropriate baseline and methodologies, taking into account its capability and circumstances - Performance Indicator : EE improvement indicator(number of 1 st grade Building EPC, etc)can be used to calculate GHG reductions indirectly when having difficulties in calculating GHG reductions - Tiered Approach: Host country can choose the level of its activity data and emission factor, taking account of its data collection capability and other circumstances

10 Decision Flow of Tiered Approach

11 Kyoto Mechanism vs. C-NAMA Kyoto Mechanism Key Player Private sector Public sector Scope and Scale Role of Central Body Role of DNA Smaller scale: Project, PoA Authoritative role: project registration and approval, methodology development Limited role: Check the project s contribution to host country s sustainable development, etc. Role of DOE Validation and verification Verification C-NAMA Scaled-up activities : mainly policies and measures Facilitative(Supportive) role: NDD registration, capacity building for DNA Bigger role: NDD approval, methodology approval, baseline and methodology determination

12 Sectoral Mechanism vs. C-NAMA Sectoral Mechanism C-NAMA Type Crediting/Trading Crediting Governance Target Scope Procedural Flow MRV Centralized. IC(central body), CA(national body), IRT(reviewer) Sector and subsector submit Initial report(ca) verify IR & submit evaluation report(irt) approve ER(IC) implement sectoral activities submit annual report(ca) verify AR & submit ER(IRT) approve ER & issue credit(ic) Stricter. COP decides MRV guideline. Host country sets the baseline. Hybrid. FB, DNA, DOE, Implementing Ministry NAMA activities in line with government policies submit NDD(Ministry) validate, approve NDD(DNA) register NDD(FB) implement NAMA & submit monitoring report(ministry) verify MR & request credit issuance(doe) review DOE verification report & issue credit(fb) Less strict(performance Indicator, Tiered Approach). FB develops general guideline. DNA develops specific methodology.

13 Food for Thoughts We need more buyers in post NMM is a scaled-up mechanism. The amount of GHG emission reductions will be bigger - Bigger supply requires bigger demand. NMM needs to be host country-friendly - To overcome limits of Kyoto Mechanism, fair and equitable access to NMM needs to be guaranteed - To secure more voluntary participation by developing countries, NMM needs to reflect host countries needs and circumstances Pilot phase will be helpful - Pilot activities will be beneficial for Parties to get a glimpse on how NMM will work and design details of NMM