Expanding Carbon Markets: Cities and Access to Carbon Finance

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1 Expanding Carbon Markets: Cities and Access to Carbon Finance OECD Global Carbon Markets Workshop April 2010, Paris Christa Clapp OECD Environment Directorate

2 Presentation outline Why cities? OECD / CDC Climat Research joint project Case study: Transmilenio Bus Rapid Transit System in Bogotá, Columbia Preliminary conclusions 2

3 Why cities? Population trends The world's urban population now exceeds the world's rural population. Greenhouse gas (GHG) emissions The IEA estimates that energy in cities accounts for 60-80% of GHG emissions from energy use. Policy potential The role of cities in climate change policy debate and mechanisms has so far been limited. 3 Bogota, Colombia Source: Flickr.com, 2010

4 Cities and carbon finance Sources of finance for city projects Using carbon markets to finance city mitigation projects Carbon markets (e.g. CDM, JI) 4 Sao Joao Landfill, Sao Paolo, Brazil Source: Picasaweb.com 2009

5 OECD & CDC Climat Research Joint Project Origin Extension of previous OECD work on cities & climate change and also on carbon markets Builds on CDC Climat Research expertise in offsets and Club ViTeCC city engagement Aim To explore the opportunities and challenges that cities face in accessing carbon market finance, including Public/private sector involvement Project finance and risk management 5

6 Case studies Luz Verde/CUIDEMOS Compact Fluorescent Lightbulb Programme Puebla, Mexico Recycling biogas and replacing natural gas in buses Lille, France = CDM projects = JI projects Fuel Switching and Energy Efficiency Project North Rhine Westphalia, Germany Additional JI Project Eastern Europe TBD Transmilenio Bus Rapid Transit System Bogotá, Columbia Solar Water Heating Systems PoA Ho Chi Minh City, Vietnam Bandeirantes & Sao Jao Landfill-Gas-to- Energy Projects Sao Paolo, Brazil Landfill Gas Utilisation Project Christchurch City, New Zealand Source: NACIS.org, 2010 Mariannhill, La Mercy & Bisasar Road Landfill-Gas-to-Electricity Projects Durban, South Africa Landfill Gas Utilisation Project Palmerston North City, New Zealand 6

7 Source: Ciudadmovil.com, 2010 CDM Case Study Transmilenio Bus Rapid Transit System Bogotá, Columbia 7

8 National government Colombia Key actors and interactions: Transmilenio BRT Project, Bogotá, Columbia Provided funding for infrastructure Promoted BRT systems elsewhere DNA approval Transmilenio S.A. Bogota City Hall PPP Private sector Bus suppliers Feeder bus operators Ticket machine operators $$$ CERs Provided loan for infrastructure Credit buyer CAF, Venezuela Financed upfront CDMspecific costs (methodology, PDD, etc.) $$$ CERs International CDM Market Sponsor State of the Netherlands (VROM) Validation DNV, Norway Verification SGS, UK Developed methodology Wrote PDD External consultant Grütter Consulting $$$ Abbreviations CAF = Corporación Andina de Fomento CER = Certified Emission Reduction DNV = Det Norske Veritas PDD = Project Design Document PPP = Public-Private Partnership 8 SGS = Société Générale de Surveillance VROM = Ministry of Housing, Spatial Planning and the Environment

9 Preliminary conclusions: Project organisation and key actors City authorities can Initiate projects with local co-benefits Collaborate with private sector to Provide expertise in project development under CDM/JI Facilitate project coordination Provide up-front financing or access to loans National governments also key in Providing expertise to help cities overcome transaction costs Providing financial support or loans Facilitating replication of successful projects in other communities Sao Joao Landfill-gas-to-energy project, Sao Paulo, Brazil Source: Ggpht.com,

10 Preliminary conclusions: Project finance and risk management Carbon market finance is a new resource for cities, with complex requirements Carbon markets provide only a proportion of total project finance Public-private partnerships can help to manage risk UNFCCC project accreditation can be a catalyst for: Additional media and political interest Additional financing Sao Joao Landfill-gas-to-energy project, Sao Paulo, Brazil Source: Ggpht.com,

11 Preliminary conclusions: Ideas to enhance city access to carbon markets National and local authorities can work together to: Develop necessary tools at city-level Compatible local GHG inventories Gain national recognition or role for city projects in carbon markets Adapt/enhance existing mechanisms Develop programmatic approach notably in transport and buildings (e.g. JI PoA in NRW, Germany, CDM EB) Establish institutional certainty over future of JI & CDM crediting periods Simplify process and reduce transaction costs 11

12 Summary Cities are important emitters and can be a powerful ally in developing carbon policy responses Potential for city authorities to design & implement costeffective mitigation projects with large co-benefits Current GHG market structure is not conducive to city actors National governments need to consider the role of cities in scaling-up markets and mechanisms 12

13 Acknowledgements Greg Briner Jan Corfee-Morlot Ian Cochran Alexia Leseur Oliver Sartor 13