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Advancing Carbon MarketsAn Overview of German Initiatives
2 An Overview of German Initiatives
Advancing Carbon Markets
ImprintPublished byFederal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety (BMUB) Division KI I 6 • 11055 Berlin • GermanyEmail: KII6@bmub.bund.de • Website: www.bmub.bund.de/english
Edited byDr. Silke Karcher, BMUB, Head of Division KI I 6 Email: silke.karcher@bmub.bund.de; Miriam Faulwetter, Advisor to the BMUB, Division KI I 6 Email: miriam.faulwetter@bmub.bund.de
Subject editorsWuppertal Institute for Climate, Environment and Energy (Wuppertal Institut für Klima, Umwelt, Energie GmbH) Research Group 2: Energy, Transport and Climate Policy
Authors Lukas Hermwille, Nicolas Kreibich, Patrick Fortyr, with contributions from ACAD and Wolfgang Sterk
DesignSelbach Design, Lohmar
Printed byRautenberg Verlag, Troisdorf
Picture creditsp. 1: Vestas Wind Systems A/S; p. 4: Marcus Gloger; p. 10: JIKO; p. 12: RWE; p. 14: The Gold Standard / Biogas Program for the Animal Husbandry Sector of Vietnam; p. 16: Carbon Market Watch (formerly CDM Watch); p. 17: Dominic Nahr / Magnum Photos for UNEP; p. 20: Christoph Herwartz; p. 21: Siemens Press Picture; p. 23: picture alliance / Anka Agency International; p. 25: GAED / Wikimedia commons; p. 29: GIZ / Zeller; p. 30: GIZ; p. 32: Xu Zhiyong, GIZ China; p. 34: UNFCCC / Dongmei (CDM Project 2230)
DateMay 2014
Edition Second revised edition, 2014
First print 500 copies
NoticeThis publication is part of the public relations work of the Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety.It is distributed free of charge and is not intended for sale. Printed on recycled paper.
An Overview of German Initiatives 3
Contents
Preface 4
Introduction 6
Cross-Cutting Support for Carbon Market Stakeholders 7
Boosting Carbon Market Development in Key Regions: The Country Managers for the Global Carbon Market 7
The JIKO Project – Research and Public Information Services 9
Promoting CDM Project Development in Least Developed Countries 11
Strategies for Carbon Market Development through Standardised Baselines in African LDCs 11
Expanding Carbon Markets: The Gold Standard Programme for Underrepresented Regions 13
Re. Ecological Integrity – A Watchdog for the CDM 15
Fostering Low-Carbon Investment in Africa: The African Carbon Asset Development Facility (ACAD) 17
Programmes of Activities – Broadening the Scope of the CDM 19
Assisting the Implementation of Programmes of Activities: PoA Support Centre Germany 19
Overcoming Financial Obstacles and Developing Carbon Markets – The ‘Future of the Carbon Market’ Foundation 21
Advancing the Development of the Programmatic CDM: The PoA Working Group 22
Emerging Carbon Markets 24
Piloting New Market Mechanisms – A Partnership for Market Readiness 24
The Clean Development Mechanism and Emerging Offset Schemes: Options for Reconciliation? 27
Tapping Mitigation Potential at Multiple Levels – Vertically Integrated NAMAs 28
Enhancing Greenhouse Gas Management in Tunisia 30
Energy Efficiency in Northern China’s Residential Buildings Sector – Developing Baselines for an Emission Trading Scheme 32
Capacity Building for Emissions Trading to Support Bilateral Cooperation 33
Abbreviations and Acronyms 35
Preface
On the international level, the global community is currently working towards establishing a comprehensiveclimate change agreement to enter into force in 2020. We need to act now and find ambitious solutions to holdglobal warming below 2° C. This is urgently required inthe light of unambiguous scientific projections of the dramatic impacts of climate change.
Within the Kyoto Protocol, carbon market mechanismshave been at the backbone of mitigation efforts. Sincetheir start in the early 2000s, the Clean DevelopmentMechanism (CDM) and Joint Implementation (JI) haveleveraged billions of euros of private financing in over8000 emissions reduction projects. The EU EmissionsTrading System (EU ETS) has so far been the largest source of demand for credits from these mechanisms.
However, the current lack of ambition in the global climate regime negatively affects the carbon market: Demand for emissions reduction certificates is shrinkingin the absence of appropriate mitigation targets globally,prices are falling and incentives for mitigation are there-fore decreasing. During the second commitment period ofthe Kyoto Protocol, the demand from the EU ETS will notcontinue at the same level as before, and recently emerg-ing emissions trading systems in other countries and regions do not yet make up for the reduced demand of the EU ETS.
At the same time, many believe carbon finance must play a vital role in the future climate finance architecture: It is acentral instrument for leveraging much-needed privatefunds. In parallel to the negotiations on mitigation targets,the international community is therefore working on enhancing and improving the supply side: By introducinga New Market Mechanism and reforming the Clean Development Mechanism.
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The new market mechanisms, as defined in 2011, aim atupscaling mitigation efforts from individual projects tosectoral levels and achieving net mitigation beyond offset-ting. While the exact role and modalities for the New Market Mechanism in the post-2020 agreement still needto be defined, the European Union has put forward one ofthe most concrete proposals. Yet, progress in the interna-tional negotiations remains slow, and the question of howto increase global mitigation ambition looms large.
What we need, against this background, is concrete action to enhance the dynamics of the international dis-cussions. Despite all challenges and uncertainties, thereare countries pioneering in the field of new market-basedinstruments in order to be ready once a new system entersinto force. We need these pioneers, these visionary coun-tries, to bring climate policy forward. Germany is cooper-ating with many of them in order to develop and test possible approaches. In order not to reinvent the wheel, itis also critical to build upon experiences from the CDM.Important steps towards reforming and improving theCDM have already been taken. They helped to overcomesome of the initial flaws that the CDM undisputedly had and to bridge the gap to upscaled new market mechanisms.
These bottom-up activities and pilots can provide impor-tant input for the international negotiations. While it ispossible that country-specific approaches to the New Market Mechanism might differ, it will be central that we can actually count on what is traded – following thewell-known principle that a ton must actually be a ton.This is where bottom-up processes must be framed by internationally defined accounting frameworks.
However, we must also continue working on the demandside of the equation. The fading demand for certificates isputting the entire – existing and future – market at risk.The challenge will therefore be to synchronize the estab-lishment of market mechanisms with raising ambition on the international level. Market mechanisms cannotfunction without appropriate mitigation targets. Since theearly years of the CDM, Germany has been a key actor infostering international carbon markets. We will continueour efforts by cooperating with our partners on reformingand further developing the global carbon market. Thisbrochure provides a synopsis of the diverse portfolio ofour activities and I hope you can use it as an inspirationfor joint work to come on the future of the carbon market.
Jochen FlasbarthState Secretary
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Advancing Carbon Markets
Introduction
With climate change advancing at a high speed, global so-ciety is confronted with what is likely to be the largestchallenge humankind has ever experienced. Avoiding dan-gerous climate change demands fundamental changes toour economies and ways of living. There is urgent pressureto act, yet many industrialised countries hesitate to engagein ambitious climate protection as they are still recoveringfrom the collapse of the global financial system in 2008and the subsequent economic crisis. In the light of thesecircumstances, efficient allocation of financial resources toinduce the necessary transformation processes is deemedkey.
International carbon markets have been identified as an ef-ficient instrument for reaching these goals. Since the entryinto force of the Kyoto Protocol in 2005 and the introduc-tion of the two project-based mechanisms Clean Develop-ment Mechanism (CDM) and Joint Implementation (JI), theglobal climate community has gained valuable experienceand both recognised the achievements of the mechanismsand identified their limitations. The agreement on a secondKyoto Protocol commitment period reached at the Dohaclimate summit in 2012 provides the scope to further in-crease the mechanisms’ performance. At the same time, ex-perience gained can be fed into the process of developingemerging new market mechanisms that may become partof a post-2020 global climate agreement to be agreed by2015. This process is accompanied by important develop-ments at the national level, as several developing countriesbuild on the knowledge gained with the CDM and are cur-rently developing domestic market-based approaches. Thesupport provided through initiatives such as the Partner-ship for Market Readiness (PMR) has been key to thisprogress. Thailand, for instance, has been granted PMRfunds to implement a domestic energy efficiency schemeand an urban emissions offset system, which are expectedto pave the ground for a future mandatory emission trad-ing scheme (ETS). However, the capacities and knowledgeestablished through the CDM can also be used outsidemarket-based approaches, such as in the context of results-based finance. The World Bank’s Carbon Initiative for Development (Ci-Dev), for instance, makes use of the CDMinfrastructure to provide funding to energy access pro-grammes.
Against this backdrop, the Federal Ministry for the Envi-ronment, Nature Conservation, Building and NuclearSafety (BMUB) supports a wide range of activities withinthe context of international carbon markets. The idea be-hind this is to promote innovative approaches in all areasof the carbon market with a view to increasing the mecha-nisms’ performance, advancing their scope towards hith-erto neglected areas and ensuring their environmental in-tegrity and contributions to sustainable development.Further, options to expand the scale of mitigation activitiesbeyond the existing carbon mechanisms are explored.
The first range of activities presented in this brochure areaimed at providing support to specific carbon marketstakeholders. The initiatives assist businesses and politicalstakeholders as well as the interested public and the re-search community.
The second section of this brochure presents BMUB-sup-ported initiatives aimed at promoting CDM activities inLeast Developed Countries (LDCs). These regions with lowlevels of development have been largely neglected by car-bon markets in the past, despite holding vast and stronglysustainable emissions reductions potential.
A third range of activities aim at expanding the scope ofthe CDM by fostering the implementation of Programmesof Activities (PoAs). PoAs hold the potential to tap smalland regionally dispersed emission sources at considerablylow transaction costs. Despite these benefits, their applica-tion has been restrained by financial as well as regulatoryobstacles. These barriers to PoA development are targetedby the BMUB-funded initiatives.
The fourth section of this brochure presents several initia-tives that go beyond the current project-based mecha-nisms and try to elevate the idea of carbon markets to thenext level. Building on the experience gained with CDM, JIand emissions trading, these initiatives explore various op-tions to increase the scope of future carbon markets andenhance national climate policy action.
An Overview of German Initiatives 7
Cross-Cutting Support for Carbon Market Stakeholders
The project-based mechanisms, CDM & JI, have developed dynamically since their introduction in 2005. At the same time,the mechanisms’ performance displayed a number of shortcomings over the years, such as an unbalanced geographicaldistribution of projects and the underrepresentation of certain business sectors. Moreover, the lack of ambitious climatetargets and an oversupply of certificates led to reduced demand and negative price signals. For emerging and middle-in-come countries, new market-based approaches such as emission trading schemes are therefore coming into play.
Against this background, BMUB funds various initiatives that provide cross-cutting support to specific stakeholders: OneBMUB-funded initiative aims at assisting decision makers in key regions to use existing and future carbon market instru-ments in the implementation of climate change mitigation activities. A second initiative serves policy makers, the researchcommunity and the interested public by providing policy and scientific advice along with media outreach.
Boosting Carbon Market Development in Key Regions: The Country Managers for the Global Carbon MarketWith its CDM/JI Initiative, BMUB strengthens its collabo-ration with emerging and developing countries in thisfield and fosters involvement of German businesses in car-bon reduction activities worldwide. As part of this initia-tive, BMUB has commissioned Deutsche Gesellschaft fürInternationale Zusammenarbeit (GIZ) GmbH to host Car-bon Market Units in India, Brazil, Uganda and in theMENA region.
Fostering Carbon Market Activities and Paving theWay for New Climate Instruments
The objective of this long-term international cooperationproject is for public and private decision makers to havethe capacity to use existing and new carbon market in-struments for the implementation of nationally adaptedclimate activities. Further, the Carbon Market Units facili-tate market access for German businesses, technologyproviders and project developers. Since 2008, the projecthas promoted single CDM activities as well as Pro-grammes of Activities in key partner countries and the im-provement of the respective national frameworks for cli-mate change policies. With new instruments evolving at
international level, the Country Manager Project is in-creasingly focusing on the development of new marketmechanisms and the interlinkages between market instru-ments and partner countries’ Nationally Appropriate Miti-gation Actions (NAMAs). The project comprises a large va-riety of activities that are being implemented by theCarbon Market Units in the respective countries togetherwith local institutions. Activities include conferences,training activities for specific sectors and project types aswell as individual advice for local and German stakehold-ers. The Carbon Market Units also provide policy advicefor partner countries in their efforts to use more encom-passing climate protection instruments.
Building on the existing structures of German develop-ment cooperation in the field of climate change and en-ergy policy allows the project to use synergies with part-ner countries and development cooperation agencies. Thisstructure is particularly important for cooperation withlocal institutions in the development of innovative policyinstruments and measures, an activity that is playing anincreasing role in the project.
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Tailor-Made Cooperation
Despite the common approach, the activities of the indi-vidual Carbon Market Units are tailored to suit the specificneeds in the respective target countries. In the MENA re-gion, for example, the Carbon Market Unit focuses on thedevelopment of new market mechanisms in the region.The Carbon Market Unit assisted in the launch of a stake-holder dialogue and an in-depth feasibility study to elabo-rate a market-based mitigation concept for the Tunisiancement sector and initiated a partnership between Tunisiaand the European Commission in this regard.
In India, the Carbon Market Unit cooperates closely withthe Ministry of Environment and Forests, which is responsi-ble for approving CDM projects as well as for the develop-ment of new market mechanisms. In this connection, thesocio-economic impact of the CDM in India was analysedin order to gain insights for future market-based mecha-nisms that strongly consider the developmental needs ofthe country. Furthermore, a management and informationsystem was implemented to enable the Designated NationalAuthority (DNA) to better monitor the Indian CDM Portfo-lio. A REDD+ (Reducing Emissions from Deforestation andForest Degradation) methodology will be developed inte-grating the India-specific context. Last but not least, theUnit organises the annual Climate Change Policy and Busi-ness Conclave as a platform for Government and Businesscooperation.
In Brazil, one focus of the Carbon Market Unit has beencooperation in CDM-related technology, and several activ-
ities were initiated together with local partners to fosterBrazilian-German business partnerships. However, thepost-2012 reorientation of carbon markets together withthe fact that Brazil adopted ambitious voluntary reductiontargets has led the Carbon Market Unit to concentrate itsactivities on national climate protection instruments.Among other things, the project therefore supported theanalysis of options for a future national carbon market bybringing in European expertise on Measurement, Report-ing and Verification (MRV) and registry issues. In view ofthe dynamic political context, activities in Brazil will becontinued through a separate project under the BMUB In-ternational Climate Initiative (IKI).
Uganda is among the world’s Least Developed Countriesand has low capacity for the development of CDM proj-ects. Mitigation potential is concentrated in complex sec-tors. On the positive side, however, the European UnionEmissions Trading Scheme (EU ETS) provides a continued,albeit small, source of demand for credits from Uganda.The Carbon Market Unit started its activities in Uganda byassisting the Carbon Foundation for East Africa, a non-profit arm of a local CDM project developer, in the devel-opment of a transnational PoA. The PoA, which aims atdistributing energy-efficient cookstoves in East Africa, wasregistered as the world’s first multi-country CDM pro-gramme at the end of 2012. In the future, the Carbon Mar-ket Unit will also work together with the Ugandan DNA todevelop standardised baselines (SBs), provide capacitybuilding with regard to new market mechanisms and as-sist the Ugandan private sector to benefit from climate fi-nancing through bankable and sustainable project ideas.
Contracted Organisation ContactDeutsche Gesellschaft für Internationale Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH Zusammenarbeit (GIZ) GmbH
Other Organisations InvolvedRegional Centre for Renewable Energy and Energy Efficiency, Tunisia Madhya Pradesh Forest Department, India German-Brazilian Chamber of Commerce, BrazilCarbon Foundation for East Africa, Uganda
Point of contact in Germany:
Michael Engelskirchen Email: CarbonMarketUnits@giz.de
Points of contact in host countries:
Project DurationMENA region: Anselm DuchrowEmail: anselm.duchrow@giz.de
2008–2015 India: Enrico Rubertus
Funding SourcesThis project is supported by BMUB as part of its CDM/JI Initiative.
Email: enrico.rubertus@giz.de
Brazil: Arnd Helmke Email: arnd.helmke@giz.de
Uganda: Ina Hommers Additional Information Email: ina.hommers@giz.de
www.jiko-bmub.de/english/background_information/german_government_initiatives/doc/951.php
An Overview of German Initiatives 9
The JIKO Project – Research and PublicInformation ServicesThe Joint Implementation Coordination Unit (JIKO)within the German Environment Ministry coordinates di-verse activities in the context of the two project-basedmechanisms, CDM and JI. While the German EmissionsTrading Authority (DEHSt) is in charge of the regulativeand administrative side of international carbon marketsand provides services regarding the application process forcompanies participating in climate protection projects,JIKO covers the policy and research side. JIKO further sup-ports BMUB internally in developing carbon market ini-tiatives and implementation of activities. BMUB has con-tracted the Wuppertal Institute to support JIKO withscientific expertise and tailor-made media outreach forboth the interested public and the expert community.
Scientific Advice
The preparation of scientific policy papers and policybriefs is a core element of the JIKO project. These policypapers analyse individual aspects of the flexible mecha-nisms, from the evaluation of particular technologies andproject types and their applicability in the CDM to the fu-ture of flexible mechanisms in an international climateregime beyond the Kyoto Protocol.
Many of the issues discussed in the policy papers have ad-ditionally been discussed with experts in complementaryfora organised by JIKO.
Furthermore, JIKO regularly observes and evaluates themeetings of the CDM Executive Board (CDM EB), the JointImplementation Supervisory Committee as well as theconferences of the parties of the United Nations Frame-work Convention on Climate Change (UNFCCC) and itssubsidiary bodies.
Publications Available on the JIKO Web Portal
Recently published policy papers:
Quo Vadis, Africa? Update on the Uptake of the CDM inAfrica
Benefitting from Carbon Markets? German Participation inCDM and JI during the first Kyoto Commitment Period
Ambitious New Market Mechanisms - Exploring Frameworks for Pilots
Carbon market-related studies available on the JIKO web portal:
Integrating Africa’s Least Developed Countries into theGlobal Carbon Market
Prospects for CDM in Post 2012 Carbon Markets
CDM Market Support Study
Information brochures:
Carbon Market Research - German Government Projectsand Initiatives
The Clean Development Mechanism - The World‘s First Carbon Crediting Mechanism
Mitigating Climate Change, Investing in Development:Fostering the CDM in Least Developed Countries
Media Outreach for the Interested Public and theExpert Community
JIKO publishes Carbon Mechanisms Review, a quarterlymagazine covering CDM/JI-related issues and new marketmechanisms. Carbon Mechanisms Review covers recentdevelopments in the field of international carbon marketpolicy. It offers insights and opinions regarding the stateand trends of CDM, JI and possible new market mecha-nisms.
The JIKO-BMUB web portal is of special interest for busi-nesses already investing or looking to invest in interna-tional carbon markets. It contains detailed descriptions ofthe CDM/JI project cycles, gives information on the fungi-bility of CERs and ERUs in the European Emissions Trad-ing Scheme, and provides project manuals prepared byDEHSt – the German DNA – along with other relevant leg-islative or regulatory information.
In recent years, the German government has focusedamong other things on enhancing the geographical distri-bution of the CDM project pipeline. To promote CDMprojects in Least Developed Countries, Wuppertal Institute
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Advancing Carbon Markets
compiles information on potential and relevant processesfor conducting CDM projects in the 20 most importantLDCs. These synopses complement existing host countryinformation on the JIKO-BMUB web portal. Host countryinformation will then be available for countries that col-lectively host more than 95% of all existing CDM projects.
The JIKO-BMUB web portal also provides detailed intro-ductory information on the history, the functioning andthe development of the project-based mechanisms. Itserves as a knowledge base and offers an easy entry pointfor anybody interested in the subject. Relevant, BMUB-sponsored studies and research projects in the field ofproject-based mechanisms are also compiled and pre-sented on the JIKO web portal.
Supporting the Transition of International CarbonMarkets
JIKO will continue its efforts as described above. One focuswill be on the development of a new climate agreementuntil 2015 and the role of the flexible mechanisms in sucha regime. What are the prospects of new market mecha-nisms and how can they contribute to making a futureagreement more ambitious overall? Another focus will beon the implementation of relatively new concepts such asstandardised baselines that are beginning to be imple-mented more widely. Last but not least, JIKO will explorethe extent to which methodologies and knowledge devel-oped under CDM and JI can be used in other parts of a cli-mate regime such as the Green Climate Fund.
Contracted OrganisationWuppertal Institute for Climate, Environment and Energy
Project DurationCurrent project phase: 2012–2015
Funding SourcesThis project is supported by BMUB as part of itsCDM/JI Initiative.
Additional Informationwww.jiko-bmub.de/english
ContactWuppertal Institute for Climate, Environment and Energy
Christof Arens
Email: jiko@wupperinst.org
The magazine Carbon Mechanisms Review covers CDM/JI-relatedissues and new market mechanisms as well as recent developmentsin the field of international carbon market policy.
An Overview of German Initiatives 11
Promoting CDM Project Developmentin Least Developed Countries
According to the Kyoto Protocol, the CDM has a dual purpose: to promote sustainable development in developing coun-tries and to assist developed countries in achieving compliance with their mitigation obligations. The sheer number of ex-isting projects and certified emission reductions demonstrates that the CDM has been quite successful with regard to thelatter objective.
However, the regional distribution of CDM projects is very uneven. By far the most projects are being implemented inBrazil, China, India or Mexico. Only a very small number of projects are being developed in LDCs, where sustainable devel-opment is most urgently needed.
There are a number of reasons for the inequitable geographical distribution: Firstly, Least Developed Countries typicallyhave limited potential for CDM projects, be it due to little economic activity or be it a difficult climate for investment. Sec-ondly, LDCs often lack capacity with regard to financial resources, national expertise or administrative processes and sup-port by the relevant ministries. Thirdly, the rules and regulations of the CDM itself pose barriers to project implementationin LDCs: The CDM incentive structure favours large projects with low transaction costs in contrast to projects in rural areasthat are typically small-scale and thus have higher transaction costs. BMUB supports various initiatives that target thesebarriers in order to promote a more equitable distribution of CDM projects and increase the CDM’s effect on sustainabledevelopment.
Strategies for Carbon Market Developmentthrough Standardised Baselines in African LDCsStandardised baselines can contribute to removing barri-ers for the development of CDM projects in LDCs. Cur-rently, every CDM project has to develop a business-as-usual scenario reflecting what would happen in theabsence of the project in question. That scenario serves asa baseline that is used to calculate emissions reductions.Under a standardised baselines approach this is no longernecessary. A country can propose a standardised baselinefor a particular sector through its DNA. Once approved,every project that falls below the baseline qualifies for theCDM if it demonstrates that it is financially not viablewithout the CDM.
Standardised baselines thus help to reduce transactioncosts and improve profitability of small-scale projects andprojects in rural areas and regions of low development,where financial resources are scarce. Furthermore, the de-velopment of project-specific baselines typically requireslarge administrative capacity. With a standardised baselinein place, the capacity needs for individual projects are re-duced.
The Conference of the Parties (COP) in Cancún 2010 there-fore recommended the active promotion of SBs to fosterprojects in LDCs and thus to improve the regional distri-bution of CDM projects.
A Standardised Baseline for Rural Electrification inEthiopia
To support this, BMUB commissioned Perspectives Cli-mate Change GmbH and UNEP Risø to conduct a researchproject, “Strategies for carbon market development inAfrican Least Developed Countries”. The aim of the projectis to develop strategies and practical approaches to even-tually enable sustainable development in LDCs throughincreased participation in carbon markets.
As part of the project, a case study will be conducted onrural electrification in Ethiopia. The objective of this casestudy is to identify knowledge gaps and develop strategiesto overcome existing barriers. The project formulates astrategy paper for the Ethiopian DNA and other stake-
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holders providing recommendations on the practical ap-plicability of SBs in the Ethiopian rural electrification sec-tor and successful administrative implementation. Basedon this experience, an advisory tool will be developed pro-viding guidance on how to formulate and create SBs andhow to fulfil data management requirements. Lessonslearned from the case study will be used to assess the po-tential for replication of the project in other sectors, coun-tries and regions.
SB’s can assist the development of small-scale CDM projects inLDCs that provide particularly high contributions to sustainable development: the cookstoves project in Lusaka, Zambia.
Developing an Advisory Tool together withEthiopian Stakeholders
In a first step, Perspectives Climate Change and UNEP Risøidentified the necessary steps to develop a standardisedbaseline for rural electrification by analysing literatureand by interacting with key local institutions. Consulta-tions with those stakeholders were held during a field tripto Ethiopia. These activities resulted in the preparation ofa strategy paper for further capacity building within insti-tutions relevant to the development of SB projects in therural electrification sector. The strategy paper further ex-plores existing processes and financing sources that can beused as a basis for capacity building.
In a second step, the project team enters into a dialogueon strategy and capacity building with a broader group ofEthiopian stakeholders. A workshop with national and re-gional actors took place in the first half of 2013. The work-shop covered processes identified in the strategy paper
mentioned above, including activities for enhancing regu-latory infrastructure, administrative processes and accessto finance for implementation.
Based on experience from the stakeholders involved, thestrategy paper was fine-tuned for the best possible fit withlocal and regional circumstances. The final strategy paperanalyses the potential of standardised approaches(methodologies, baselines and additionality demonstra-tion) for rural electrification in Ethiopia, and recommendsstrategic options for the Ethiopian DNA to harness the po-tential of these recently approved methodological innova-tions.
The next phase of the programme will consist of four as-signments (i.e. short analytical studies or related capacitydevelopment) which will focus on specific issues that havebeen identified as key steps to facilitate moving potentialCDM projects closer to implementation. These studiesjointly developed with Ethiopia’s DNA will focus on theknowledge and capacity needs of local stakeholders. Po-tential topics are institutional capacities (e.g. providing re-lated training for key stakeholders such as PoA Coordinat-ing/Managing Entities, and quality control and qualityassurance for SBs), the scaling up of renewable energyprojects for rural electrification and the assessment of spe-cific data and aspects regarding measurement, reportingand verification of emission reductions.
Finally, an advisory tool will be developed which will as-sist DNAs and practitioners in developing and implement-ing standardised CDM approaches for rural electrificationin Eastern Africa, based on the experience in Ethiopia. Thetool will be applicable not only for the rural electrificationsector in Ethiopia but also for other sectors and other re-gions, notably Sub-Saharan Africa.
Contracted OrganisationPerspectives Climate Change GmbH, UNEP Risø Centre
Project Duration2012–2015
Funding SourcesThe project is supported by the German Federal Environment Agency (Umweltbundesamt) as part of the German Environmental Research Plan.
ContactPerspectives Climate Change GmbH
Stefan Wehner
Email: wehner@perspectives.cc
An Overview of German Initiatives 13
Expanding Carbon Markets: The Gold StandardProgramme for Underrepresented Regions
Least developed countries in general, and African LDCs inparticular, have hardly participated in the CDM. The rea-sons for that have been discussed above but can mostly betracked down to a lack of capacity and high transactioncosts due to the small-scale nature of many projects.
The situation is different for what are referred to as volun-tary carbon markets. Voluntary carbon markets offer theopportunity for companies or individuals to offset theircarbon footprint voluntarily, including in sectors that arenot regulated by climate policy. Unlike in the CDM com-pliance market, projects for voluntary markets do not haveto undergo the process of registration by the CDM Execu-tive Board and do not need host country approval. Ofcourse, such projects have to be certified as well, but thevoluntary nature of the market allows for a more flexiblebut equally robust approach that can lead to reducedtransaction costs in comparison with the CDM. This holdsespecially for Africa, as African CDM potential consists of alarge share of small-scale projects with particularly hightransaction costs. Furthermore, small-scale projects invery poor countries often feature many co-benefits: Theycontribute to sustainable development and improve thelivelihoods of many. Such projects are highly valued bybuyers of voluntary carbon credits as they not only reducecarbon emissions, which can be used for offsetting, butalso enhance the buyer’s reputation because of the sus-
tainable development benefits of the project. In contrastto compliance markets, which are currently suffering fromextremely low prices, high quality projects in the volun-tary carbon markets are currently under less pressure.
Lowering Entry Barriers and Allowing for the Scaling-up of Carbon Markets
The Gold Standard is one of the major actors in the volun-tary carbon market and has significant experience in de-veloping top-down and bottom-up methodologies for thevoluntary carbon market (see box). In a three year pro-gramme of work, BMUB commissioned The Gold Stan-dard Foundation to develop new micro-scale methodolo-gies for the voluntary carbon market.
The Gold Standard has consequently developed a set of in-novative tools that lower entry barriers and allow for ascaling-up of clean energy/energy efficient activities inpreviously underrepresented regions. The work aims to bea catalyst for innovation and institutional preparation inthe target region, with the hope that the concrete solu-tions will be transferred to other countries. It is also hopedthat the new concepts will diffuse to compliance schemes,once again fostering the participation of underrepresentedregions.
The Gold Standard
The Gold Standard is a premium climate financeframework, established by NGOs, including WWF, todemonstrate that carbon markets can deliver capitalefficiently to greenhouse gas mitigation projects whilstdelivering their full potential in terms of sustainabledevelopment co-benefits. The Gold Standard has addi-tional requirements to safeguard its approach: Comple-menting the CDM documentation, project developersmust demonstrate that they will implement one ormore renewable energy or energy efficiency activitiesand will contribute to sustainable development bymaking a net-positive contribution to the economic,environmental and social welfare of the local popula-tion hosting the project.
Innovative Tools as Part of an Integrated Approach
To tackle the entry barriers for carbon market activities inthe target region, The Gold Standard has developed an in-tegrated approach consisting of several individual activi-ties and measures:
It has revised its rules and procedures for micro-scaleprojects and Programmes of Activities. A new micro PoAscheme is one of the cornerstones of the programme thatwill allow scaling up of activities in underrepresented re-gions while keeping transaction costs low. Under thestandalone micro-scale scheme, project developers can re-duce transaction costs as well as project registration andissuance timelines and benefit from simplified procedures.Projects are eligible for the scheme if their activities arecapped at a maximum of 10,000 tCO2e reduced annually
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Advancing Carbon Markets
and if they implement renewable energy supply, energyefficiency and waste management and handling measuresin LDCs, Landlocked Developing Countries and Small Is-land Development States or target poor communities else-where. The Gold Standard micro-programme scheme al-lows the extension of these micro-scale activities to aprogrammatic approach, combining the benefits of bothconcepts.
Another element of The Gold Standard Programme con-sists of special procedures for projects in conflict zonesand refugee camps, where project proponents face consid-erable challenges in contracting a Designated OperationalEntity (DOE) for validation and verification procedures.Under these circumstances, the new rules allow for a devi-ation from the usual procedures combining desk reviewsby DOEs with on-site visits by objective observers, sup-porting project activities located in such zones.
The Gold Standard DNA Programme is another pivotal ac-tivity of this project. Building on its experience in ensur-ing that the social, environmental and economic benefitsof its projects reach local and global communities, TheGold Standard supports DNAs that have adopted rigorousprocedures for the assessment of sustainable developmentcontributions. Memoranda of Understanding have alreadybeen signed with DNAs from the Philippines, Egypt andRwanda. The DNA programme is further providing insti-tutional capacity building to DNAs that are at the stage ofdeveloping sustainable development assessment proce-dures and criteria.
Contracted OrganisationThe Gold Standard Foundation
Other Organisations InvolvedPerspectives Climate Change GmbH NIRAS
South South North
Project Duration2011–2014
Funding SourcesThis project is part of the International Climate Initiative (IKI). The Federal Ministry for the Environ-ment, Nature Conservation, Building and Nuclear Safety(BMUB) supports this initiative on the basis of a decision adopted by the German Bundestag.
Additional Informationwww.goldstandard.org
ContactThe Gold Standard Foundation
Lloyd Fleming
Email: lloyd.fleming@goldstandard.org
The Gold Standard certifies a broad range of climate changemitigation activities, such as the biogas programme of Vietnam,which provides access to clean energy and manure manage-ment solutions to improve the livelihoods of many.
New Methodologies, Improved Training
The Gold Standard has also developed innovative tools ina number of fields of activities. The new rules for micro-
An Overview of German Initiatives 15
scale projects and PoAs are complemented by an addi-tional four new methodologies and web-based tools re-leased in 2013. The new methodologies focus on ruralelectrification and energisation, the processing of agricul-tural products and food preservation. In addition, themethodology for efficient cookstoves has been simplified.A capacity-building workshop conducted in 2013 pro-vided training on the new methodologies.
In order to improve the assessment of sustainable devel-opment impacts, an individual accreditation scheme, to-gether with an online training tool, was launched in 2013along with case studies to help project developers and au-ditors.
Re. Ecological Integrity – A Watchdog for the CDM
Many CDM projects are criticised in terms of sustainabilityand environmental integrity. Social acceptability is fre-quently questioned. However, the people directly affectedby projects in the host countries often lack the ability toinfluence how projects are implemented and have novoice in the international debate.
CDM Watch was set up with financial support from BMUBas a watchdog organisation specifically focusing on theside-effects of the CDM. The idea of CDM Watch was tostrengthen the ability of civil society groups in selectedhost countries, influence the implementation of projectsand the international debate on redesigning the flexiblemechanisms, and hence enable civil society to voice itsconcerns within both the national and the internationalcontext. The project thus contributed to improving theenvironmental and sustainability benefits of the CDM.
Strengthening the Voice of Civil Society
CDM Watch specifically aimed to support civil society inthe global south. CDM Watch repeatedly exposed weakgovernance rules and practices. Capacity-building work-shops were organised targeting civil society in India,China, Brazil, South East Asia and Mesoamerica.
CDM Watch also supported national organisations in hostcountries to address challenges encountered with localstakeholder consultations. For example, they supported anumber of Panamanian organisations that felt were notconsulted during the validation process for the BarroBlanco hydropower project on the Tabasara River in West-ern Panama. CDM Watch amplified the voices of these or-
ganisations and raised concerns about weak rules for localconsultation and questionable additionality. The issue ofhuman rights abuses was also highlighted in relation to aproject in the Bajo Aguan region, Honduras.
Advocating Robust Rules
Within the United Nations Framework Convention onClimate Change, CDM Watch advocated for stronger envi-ronmental and social integrity of UN offsetting schemes.They raised concerns about weak rules and CDM projectswith negative impacts at major UNFCCC and CDM Execu-tive Board meetings and provided recommendations forimprovement.
CDM Watch was particularly successful in exposing per-verse incentives in HFC23 destruction projects. Theyclaimed that the companies involved expanded their pro-duction of HCFC, a refrigerant, to increase the productionof the unwanted and highly climate-relevant HFC23 gasso as to maximise profits from CERs generated by the de-struction of the same HFC23. As a result, a thorough revi-sion of the respective CDM methodology was carried outand the EU decided to ban the use of CERs from industrialgases in the EU ETS.
The work of CDM Watch also led to the improvement oflocal stakeholder consultation rules, raised the importanceof sustainable development in the CDM, and pointed atthe importance of addressing human rights in this con-text. Other campaigns focused on CDM coal power proj-ects, forestry and other land-use projects, and hydropower.
16 An Overview of German Initiatives
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Coordinating a Civil Society Network
Besides its role as a watchdog advocacy group, CDM Watchconnected more than 800 civil society organisations in de-veloping countries through the CDM Watch Network. Thenetwork comprises environmental groups, developmentgroups, local movements from the global south and aca-demic institutions.
The network provides a platform to share informationabout CDM policy developments, alerts about opportuni-ties for public input in the project validation process andprovides peer support for questions related to the localstakeholder consultation process. Network members havealso shared experience and encountered challenges in theimplementation of CDM projects. Members further usethe network list as a resource to seek information frompartners on the network.
From CDM Watch to Carbon Market Watch
CDM Watch was supported as part of BMUB’s Interna-tional Climate Initiative. This funding helped to kick-startthe project. Since then, CDM Watch broadened its focus toa wider range of carbon market initiatives. CDM Watchwas re-launched as Carbon Market Watch in November2012 and now also works on other initiatives such as new
market mechanisms, the EU ETS, Joint Implementation,Emissions Trading and Reducing Emissions from Defor-estation and Forest Degradation. Carbon Market Watchcontinues its work without financial support from theGerman government.
Workshops provide the opportunity to share information about CDM developments and strengthen the voice of civil society.
Contracted OrganisationCDM Watch
Project Duration2009–2011
Funding SourcesThis project was part of the International Climate Ini-tiative (IKI). The Federal Ministry for the Environment, Nature Conservation, Building and Nu-clear Safety (BMUB) supported this initiative on the basis of a decision adopted by the German Bun-destag.
Additional Informationwww.carbonmarketwatch.org
ContactCarbon Market Watch
Eva Filzmoser
Email: info@carbonmarketwatch.org
An Overview of German Initiatives 17
Fostering Low-Carbon Investment in Africa: TheAfrican Carbon Asset Development Facility (ACAD)
The difficulties faced by African countries and especiallyAfrican LDCs in attracting and hosting CDM projects notonly refer to a lack of institutional capacity. Lacking ca-pacity in the finance sector to transact carbon deals and toleverage commercial debt for CDM projects forms anotherbarrier that stunts otherwise technically and economicallyviable projects. This situation has constrained Africancountries from being able to deploy low-carbon technolo-gies more rapidly and implement national green growthstrategies.
Preparing the African Finance Sector to Invest inClimate Change Mitigation
The African Carbon Asset Development Facility (ACAD) – aBMUB-supported partnership between the United Na-tions Environment Programme and its Risø Centre andStandard Bank – has been working to alleviate the de-scribed barriers since 2009. ACAD supports transactionalcapacity-building activities for banks and investors andalso provides seed funding to project developers.
During its initial period of activity (2009–2012), ACADsupported the implementation of 15 demonstration proj-ects and built capacity within Standard Bank and other fi-nancial institutions to bank low-carbon projects. Exam-ples of ACAD project successes include the first large-scalewind power project in Africa to be registered under theCDM and the first registered Programme of Activities in-volving kerosene-replacing efficient lamps in Rwanda.Highly diversified across asset types, ACAD-supportedprojects are located in eight countries, a third of them inLeast Developed Countries.
By stimulating more engagement on the part of Africanbanks in climate finance mechanisms and by leveragingthe closure of a pool of demonstration projects that arehighly replicable in the region, ACAD is supporting marketdevelopment and mobilising new investment.
One of the activities supported by ACAD is Nafa Naana, a cookstoves project in Burkina Faso. High efficient cookstoves provide health benefitsand help protect the environment by reducing the amount of wood needed for food preparation.
ACAD’s Three Lines of Support
What makes ACAD’s approach to market and capacity de-velopment different is that its investment is project-spe-
18 An Overview of German Initiatives
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cific, practical, flexible, and highly demand-driven. ACADactivities are organised along three main lines, the first ofwhich entails sharing of transaction cost for low-carbonprojects. ACAD supports projects that are not immediatelycommercially viable through grants to ensure that theseprojects can complete critical milestones like environ-mental impact assessments and project validation. Projectsupport prioritises demand-driven projects hosted inLDCs, with replicable business models. Continued supportis offered to ACAD-beneficiary projects for sustainabilityplanning, with particular attention placed on enhancinginvestment access.
The second support line focuses on technical assistancefor financial institutions. ACAD partners with local finan-cial sector actors on several capacity development activitylines: multi-faceted technical assistance to address partnerinstitutions’ specific needs; capacity building on carbonfootprint and greenhouse gas inventorying for Africanbanks; developing proofs-of-concept for climate asset-backed financing in the area of dissemination of small-scale technologies through micro-finance institutions orthrough micro-finance arrangements, and sectoral-basednew market mechanisms.
The third support line consists of stakeholder outreachand methodology development. ACAD has, for example,supported the adoption and application of a standardisedbaseline for all grid-connected utilities operating withinthe Southern Africa Power Pool (SAPP). Standardised base-lines allow the typical emissions to be calculated for anentire sector, rather than for individual projects, and helpboost access to climate investment in the region.
This support line also includes the African Bankers’ Car-bon Forum, likewise initiated by ACAD. The Forum targets
a wide range of institutions, regional development banks,private sector financial institutions, banks, insurance com-panies and investment funds. It is at the core of ACAD’stechnical assistance component.
Continued Support in a Changing Environment
Early in 2013, ACAD entered into its second implementa-tion phase, continuing the successful partnership model itestablished during its first years of operation and sharingtransaction costs with two project developers. ACAD con-tinues to work with African financial institutions to en-hance their literacy on carbon and climate finance, as wellas with entrepreneurs to access finance through seed capi-tal including micro-credit schemes or grants. Additionally,ACAD is supporting the transitioning of a PoA to a NAMA,working closely with public and private stakeholders.
In contrast to the first project phase, ACAD aims also toengage African financial institutions in readiness for antic-ipated new market mechanisms and other results-basedclimate financing mechanisms, both to embrace new busi-ness opportunities and to hedge the risks of currently lan-guishing carbon markets.
With regard to the third support line described above, amajor step in the second phase is the development of astandardised baseline replicating the model of the South-ern Africa Power Pool in another sub-region of Africa, theWest African Power Pool. The work is currently ongoingunder the auspices of the Economic Community of WestAfrican States (ECOWAS) comprising 15 nations. Thiswork is expected to be completed by June 2014.
Executing OrganisationUnited Nations Environment Programme
Other Organisations InvolvedThe UNEP Risø Centre on Energy, Climate and Sustainable Development
Standard Bank
Project Duration2009–2014
Funding SourcesThis project is part of the International Climate Initiative (IKI). The Federal Ministry for the Environment,
Nature Conservation, Building and Nuclear Safety (BMUB)supports this initiative on the basis of a decision adopted by the German Bundestag.
Additional Informationwww.acadfacility.org
ContactUNEP
Françoise d’Estais
Email: francoise.destais@unep.org
Technical University of Denmark / UNEP Risø CentreSøren Lütken
Email:snlu@dtu.dk
An Overview of German Initiatives 19
Programmes of Activities – Broadening the Scope of the CDM
Programmes of Activities were introduced in 2005 as a new modality under the Clean Development Mechanism. Experi-ence drawn from previous projects revealed that small and micro-scale abatement activities were not sufficiently coveredby the CDM, mainly due to disproportional transaction costs and complex validation and registration processes. The sin-gle-project CDM structure has strongly favoured sectors that are dominated by large point sources of greenhouse gases(GHGs), whereas sectors such as transport and the building sector that are dominated by small and distributed emissionsources have largely been excluded.
This characteristic has also contributed to the uneven geographical distribution described earlier. Emerging economiesfeature abundant large point sources of greenhouse gases that are easy to�tap with standalone CDM projects. The Africancontinent and many LDCs, instead, are characterised by mostly small emission sources and have thus attracted only a smallnumber of CDM projects.
The PoA modality expands the scope of feasible project activity types in comparison to the standalone CDM. To date, thePoA modality has been particularly successful in the fields of energy efficiency, transportation and renewable energies.
Programmes of Activities feature a two-level structure: Small activities that would not be implemented individually due toout-of-scale transaction costs can be aggregated under the roof of one PoA. Only the programme itself and its componentshave to be validated and demonstrate additionality, not every activity that is covered. Once the overall programme is estab-lished, it is possible to include multiple and unlimited numbers of CDM Programme Activities (CPAs) over time withoutthese having to undergo the whole CDM registration procedure.
However, several unsolved obstacles especially regarding the regulatory framework and financing still restrain the use ofPoAs to date. In the following, three initiatives are presented that target these barriers.
Assisting the Implementation of Programmes ofActivities: PoA Support Centre Germany
The PoA Support Centre Germany was introduced in 2008on behalf of BMUB and is managed by KfW DevelopmentBank. Against the backdrop of the technical and economicconstraints in many countries, the Support Centre aims tofoster the development of PoAs through capacity-buildingmeasures within local authorities and programme devel-opers. A focus lies on activities with strong sustainable de-velopment impact in Least Developed Countries, espe-cially in Sub-Saharan Africa. Yet the Support Centre alsoaims at supporting other innovative approaches whichprovide valuable inputs for the future development of car-bon markets. Support by the PoA Support Centre covers
programme development including advisory, structuringand assessment services for programme proposals as wellas grants to cover the costs for the CDM registrationprocess. In addition, it offers its know-how during pro-gramme implementation and assists with marketing ofthe expected carbon credits.
A Knowledge Base for PoA Developers
By providing best practice knowledge of PoA developmentand the marketing of carbon credits, the Support Centreeases the implementation of PoAs for project developers
20 An Overview of German Initiatives
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and executing organisations. Programme implementationis also supported with financial assistance granted for thepreparation of programme concepts and PoA-DDs.
Furthermore, the PoA Support Centre has commissionednumerous studies that contribute to the development andimprovement of the programmatic approach focusing onsimplifying processes for small-scale activities throughstandardisation and sampling (see box). In addition tothese studies, the PoA Blue Print Book was developed incooperation with carbon market consultant PerspectivesClimate Change, providing examples of PoAs for projectexecuting bodies and project developers. The PoA SupportCentre has also initiated the PoA Information and Assis-tance Platform (www.poaplatform.org). This web-basedsupport instrument is managed by South Pole and Per-spectives and provides resources, webinars and a Q&A blogfor PoA developers.
On-the-Ground Support to Kick-start PoA Implementation
To date, the Centre has assisted in the development of 49PoAs in 28 countries. The support ranges from early stagesupport in project conceptualisation to the complete reg-istration cycle and the design and implementation of proj-ect management and monitoring structures.
Studies Commissioned by the PoA SupportCentre
DNV: MRV Manual for CDM Programme October 2013of Activities
ECOFYS/Climatekos: May 2013CDM Market Support Study
INFRAS: CDM baseline approaches for PoA April 2012upscaling and new market mechanisms
Perspectives: Sampling Manual – A guide to sampling April 2012under the CDM with special focus toPoAs
Climate Focus: Handbook to standardised eligibility April 2012criteria for frequent types of Programmes of Activities
Climate Focus/Carbonflow: April 2012CME Starter Kit
Climate Focus/Carbonflow: Annex for CME Starter Kit SOPs and April 2012Forms
South Pole: July 2011On the road from PoA to NAMAs
PoAs are particularly well suited to foster the expansion of energy-efficient appliances at the household level.
Contracted OrganisationKfW Development Bank
Project Duration2008–2015 (currently 3rd phase)
Funding SourcesThis project is supported by BMUB as part of itsCDM/JI Initiative.
ContactKfW banking group
Nils Medenbach
Email: Nils.Medenbach@kfw.de
An Overview of German Initiatives 21
Overcoming Financial Obstacles and Developing Carbon Markets – The ‘Future of the Carbon Market’ FoundationProgrammatic market-based mitigation projects, such asCDM Programmes of Activities, can be an effective tool forthe dissemination of sustainable climate-friendly tech-nologies, even under difficult circumstances. However, theimplementation of programmes faces barriers. One partic-ular problem developers face is the lack of seed funding.Against this background, BMUB initiated the Future of theCarbon Market Foundation and endowed it with financialresources of €10 million to support selected program-matic mitigation initiatives. Funding by the Foundation is usually provided in form of advance payments againstfuture carbon revenues.
The start-up financing is complemented with consultingactivities aiming to increase public awareness, to alleviatereservations against investment in climate-friendly tech-nologies and to build government capacity in developingcountries.
The main focus of the Foundation is on small-scale emis-sion reductions in sectors currently underrepresented inthe CDM that require a high degree of organisation andhave a high likelihood of being replicated in other regionsor countries. However, the Foundation also intends tosupport initiatives which help Governments in the imple-mentation of ambitious climate policies, making use ofmarket-based approaches.
Fishermen on Lake Victoria using high-efficiency light bulbs.
Long-Term Perspective on Market Development
The Foundation is set up for a timeframe of at least tenyears. With this long-term perspective, the Foundationpromotes programmes with strategic considerations, fo-cusing on proposals with an innovative approach.
Supported Programmes have to fulfil certain prerequisites,which are detailed in the Funding Guidelines (available on
22 An Overview of German Initiatives
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the Foundation’s website). These notably include financialviability and emission mitigation potential. A supportedprogramme has to demonstrate strong potential for long-term sustainable operation and is required to lead to sub-stantial emission reductions with a high replication po-tential.
Any programme funded by the Foundation is required tobe in line with the host country’s climate policies and helpto implement sustainable development goals. Beyond this,the Foundation has a special focus on approaches that playa direct role in the host country’s national climate strat-egy. This can include the implementation of ambitious cli-mate policies which promote the use of market-basedmechanisms.
Initial Phase of Operation
The Foundation identified its first funding initiatives in2013. Details on the supported programmes will be pub-lished on the Foundation’s website. The Foundation alsosupports the development of Standardised Baselines andhas recently started to assess the potential in the charcoalsector in West African countries. Further support for Stan-dardised Baseline development is planned for 2014.
The Future of the Carbon Markets Foundation launched itssecond call for proposals in February 2014. The deadline forsubmissions is mid-April. Applications can also be submit-ted after the deadline, but it cannot be guaranteed that theywill go into the ongoing selection round. The foundationaims to support an average of two PoAs per year. The maxi-mum funding amount per project is €2 million.
Contracted OrganisationKfW Bankengruppe
Other Organisations InvolvedExecuting agencies of the programmes, banks, non-gov-ernmental organisations
Funding SourcesThis activity is part of the International Climate Initia-tive (IKI). The Federal Ministry for the Environment, Na-ture Conservation, Building and Nuclear Safety (BMUB)supports this initiative on the basis of a decision adoptedby the German Bundestag.
Additional Informationwww.carbonmarket-foundation.org
ContactKfW banking group
Nils Medenbach
Email: Nils.Medenbach@kfw.de
Advancing the Development of the ProgrammaticCDM: The PoA Working GroupIn contrast to the PoA Support Centre, the PoA WorkingGroup does not directly assist with the development ofprogrammes, but focuses on the scientific, regulatory andpolicy side of PoAs. It provides a platform for dialogue toallow for the exchange of experience and the coordinationof support for PoAs, and it acts as a change agent to reformthe rules of the PoA framework and to strengthen the PoAas an instrument.
The PoA Working Group was established in November2011 with support from BMUB. The Working Group is ledand coordinated by Perspectives Climate Change. It con-sists of well-established, topic-related agents such as the
BMUB itself, the World Bank, United Nations Develop-
ment Programme (UNDP), the Project Developers Forum,
the DNA Forum, KfW, the German Emission Trading Au-
thority, the Institute for Global Environmental Studies
(IGES), the Designated Operational Entities Forum, the
Swedish Energy Agency and the Belgium Technical Coop-
eration.
Impacts of the Working Group
At six official meetings, several experts and representatives
of related institutions (e.g. UNFCCC, single DNAs or DOEs)
An Overview of German Initiatives 23
provided their input on the current situation and the fur-ther development of PoA modalities and procedures.
The Working Group provided submissions to the severalCDM Executive Board meetings concerning technical PoAmatters. Among others, it made recommendations regard-ing the threshold limits for micro-scale activities regard-ing additionality, the start date of CPA implementation inrelation to the overall PoA start date, the sampling, moni-toring and verification of CPAs and the provision of serialnumbers for multi-country PoAs. Most of the recommen-dations were taken up by the CDM EB and led to changesof rules and procedures. For example, a procedure forcross-CPA sampling proposed by the PoA Working Groupwas agreed upon.
Furthermore, the Working Group provided input to UN-FCCC DNA training workshops and to UNFCCC Joint Co-ordination Workshops and CDM roundtables. In addition,the Working Group elaborated recommendations with regard to suppressed demand guidelines, environmentalintegrity and technical matters.
Research Continues
The Working Group has proved to be a valuable body ofexperts: In particular, the combination of expertise in fi-nancial matters and the existing experience among themembers in implementing PoAs and other mitigation ac-tions in the host countries allows for fast identification ofpressing issues for PoA implementation and the develop-ment of appropriate solutions. The Working Group willcontinue to work on improving the PoA framework andpromoting dialogue on PoA-related topics. Another inter-est for the future is how experience with the PoA conceptas such and with related instruments (standardised base-lines, sampling approaches, MRV systems, institutionalsetup) can be used to shape and design future emissionmitigation instruments.
Contracted OrganisationPerspectives Climate Change GmbH
Other Organisations InvolvedWorld Bank, United Nations Development Programme(UNDP), Project Developers Forum, DNA Forum, KfW,German Emission Trading Authority (DEHSt), Institutefor Global Environmental Studies (IGES), KfW, ProjectDevelopers Forum, Designated Operational EntitiesForum, Swedish Energy Agency, Belgium Technical Cooperation.
Project DurationOngoing since 2011
Funding SourcesThis project is supported by BMUB as part of its CDM/JI Initiative.
ContactPerspectives Climate Change GmbH
Marc-Andre Marr
Email: marr@perspectives.cc
Solar home systems are ideally suited for programmatic CDM.
24 An Overview of German Initiatives
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Emerging Carbon Markets
The German government is strongly advocating for a more comprehensive global climate regime and foresees an impor-tant role for international carbon markets. To date, the CDM is the only large-scale example of a global carbon marketmechanism. The mechanism can serve as a treasure trove of experience for the development not only of future marketmechanisms but also for other mitigation instruments. Of particular value is the growing body of methodologies and theCDM’s approach to measurement, reporting and verification of emission reductions.
However, the CDM with its project-based nature is limited in scope and will likely not be comprehensive enough to triggermitigation efforts at the scale needed. Furthermore, many hope to improve the environmental integrity of the climateregime by switching over to more comprehensive (e.g. sectoral) approaches. Last but not least, it is common understandingthat carbon markets must not continue as pure offsetting mechanisms in the future. For the development of new marketmechanisms, parties have therefore decided that the new mechanisms must generate net mitigation on top of credits thatare used as offsets for compliance with others’ mitigation obligations.
BMUB therefore supports a number of initiatives that elevate the idea of the CDM and international carbon markets ingeneral to the next level. PoAs, as discussed above, are already one step towards widening the project-based approach un-der the CDM. Other initiatives supported by BMUB focus on market readiness for new market-based instruments, the de-velopment of emission trading schemes and linkage of ETSs. Furthermore, the Ministry supports two initiatives that trans-fer the ample experience from the CDM to the context of nationally appropriate mitigation actions in developingcountries. These initiatives are portrayed below.
Piloting New Market Mechanisms – A Partnershipfor Market Readiness
Many believe that carbon markets can play a vital role inefficiently leveraging private finance to contribute to thischallenge. The CDM has proven to trigger investment inlow-carbon technologies in developing countries and tocreate financial flows into developing countries. However,the net mitigation impact of the CDM is considered lim-ited, due to its nature as a project-based offsetting mecha-nism.
To overcome these limitations, new market mechanismswere discussed under various terminologies until in 2011parties agreed that a New Market Mechanism should beestablished under the UNFCCC. This would address emis-sions on a sectoral scale and result in net emissions reduc-
tions by integrating developing countries in an enhancedmanner into mitigation efforts. At the same time, a num-ber of frontrunner countries are already introducing mar-ket-based instruments for climate protection in a bottom-up manner or planning to do so. The idea is to speed upthe process and to be ready for a new climate changeagreement once it enters into force.
Building Blocks for Carbon Markets
The Partnership for Market Readiness was launched at theclimate talks in Cancún in 2010 to support proactivecountries in preparing and implementing innovative car-bon market instruments. The PMR provides financial and
An Overview of German Initiatives 25
technical support: It serves as a dialogue forum to shareexperience between industrialised countries having mar-ket-based instruments already in place and developingcountries currently implementing such instruments. Theimplementation of these instruments is then supported fi-nancially and through capacity-building workshops.
Implementing countries (see table) are invited to prepare“Market Readiness Proposals” (MRPs): comprehensivestrategy papers that are based on systematic analyses andstakeholder consultations. These proposals lay down aroadmap for developing and implementing domestic mar-ket-based instruments. The readiness proposals are dis-cussed at regularly held meetings of the Partnership As-sembly and feedback provided for the implementingcountries. The Partnership Assembly decides whether thePMR should support the implementation of a proposal fi-nancially since the PMR also serves as the trustee for thecurrently over US$ 127 million pledged by contributingparties.
The support focuses on central building blocks of marketmechanisms, such as systems for measurement, reportingand verification, data collection, baseline setting, and theestablishment of regulatory institutions.
Meanwhile, seven countries have submitted their finalMRPs and two more countries have presented draft MRPs.The substance of the MRPs and the approaches chosen bythe respective countries differ substantially. Thailand, forexample, was granted funds to implement a voluntarymechanism to incentivise and credit energy demand re-ductions – what is called a white certificate scheme – andan offsetting scheme for urban emissions. In a second step,the Thai government plans to prepare draft legislation fora mandatory emission trading scheme including an offset-ting mechanism for 2020. Other countries such as Chinaand Chile are already at various stages of developing emis-sions trading schemes. China for example has alreadystarted pilot emission trading schemes to test different approaches in a variety of industrial centres including
Ticket to ride: The government of Mexico City operates the second busiest publicly owned transit system in North America after New York City. Parts of the service are operated by a bus rapid transit system. With its NAMA proposal, the country intends to systematically upgrade public transport.
26 An Overview of German Initiatives
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Beijing and Shanghai and aims to develop a nationalscheme based upon the experience gained. US$ 22.6 million has been allocated in grant funding for the implementation of the MRPs in the 2013 fiscal year.
Participants in the Partnership forMarket Readiness
Implementing Country Contributing Country Participants Participants
Brazil Australia
Chile Denmark
China European Commission
Colombia Finland
Costa Rica Germany
India Japan
Indonesia Netherlands
Jordan Norway
Mexico Spain
Morocco Sweden
Peru Switzerland
South Africa United Kingdom
Thailand United States
Tunisia
Turkey
Ukraine
Vietnam
“The Only Game in Town”
The Partnership Assembly, as both the PMR’s governingbody and its dialogue forum, has been successfully estab-lished and taken up work. Christiana Figueres, ExecutiveSecretary of the UNFCCC, stated that she sees the PMR as“the only game in town” when it comes to the develop-ment of new market mechanisms. The PMR’s success is
due to partners working together constructively and notpoliticising discussions – as is unfortunately too often thecase in the international negotiations.
At the same time, experience and lessons learned in thePMR can be fed back into the UNFCCC process. In parallel,the private sector has set up the Business Partnership forMarket Readiness (B-PMR) to enhance dialogue betweenthe International Emissions Trading Association (IETA)and industries in PMR countries planning on introducinga domestic emissions trading system. The B-PMR aims toenhance awareness regarding emissions trading systemsand to facilitate decision-making processes in line withPMR processes.
Contracted OrganisationThe World Bank
Project Duration2011–2021
Funding SourcesThe German contribution is provided through the In-ternational Climate Initiative (IKI) of the Federal Min-istry for the Environment, Nature Conservation,Building and Nuclear Safety (BMUB). BMUB supportsthis initiative on the basis of a decision adopted by theGerman Bundestag.
Additional Informationwww.thepmr.org
ContactThe World Bank's Carbon Finance Unit PMR Secretariat
Email: pmrsecretariat@worldbank.org
An Overview of German Initiatives 27
The Clean Development Mechanism and EmergingOffset Schemes: Options for Reconciliation?
A Trend of Carbon Market Splintering
The global carbon market has increasingly fragmentedover the past few years as various jurisdictions have optedto develop new alternative mechanisms, departing fromthe erstwhile standard of the Clean Development Mecha-nisms. Prominent examples include the Australian CarbonFarming Initiative, the offset protocols for the emissionstrading systems being implemented in California andQuebec, Japan’s Joint Crediting Mechanism, ‘Chinese Cer-tified Emission Reductions’ developed for the Chinesemarket, and perhaps offset provisions in the plannedSouth Korean ETS. The development of new carbon stan-dards outside the existing multilateral framework maylead to an increasing splintering of the global carbon mar-ket and pose a challenge to future linking of differentemission trading schemes. The design of new offset sys-tems can be construed as a reaction to the perceived fail-ings of the CDM and an evaluation of their characteristicsmay therefore contribute to discussions on how to recon-cile the CDM and other instruments in international car-bon markets.
The research and dialogue project, Linking Carbon Mar-kets through the CDM and Other Offsetting Mechanisms,sought to analyse the climate policy frameworks in Aus-tralia, California, Japan and South Korea, with a focus ontheir offset policies. Preliminary findings were presentedat the CDM Roundtable in April 2013 and at a workshopand a side event during the UNFCCC intersessional in May2013.
A Global Currency for Carbon Offsets
The analysis found a number of different motivations forthe ongoing fragmentation of the carbon market. On theone hand, the general critiques of the CDM have beenechoed in Australia, California and Japan, in particularwith regard to the CDM’s project-by-project approach todetermining additionality. On the other hand, each juris-diction also has its own specific reasons for departingfrom the CDM, in each case influenced by local circum-stances and political contexts. In California, initial interestin the CDM disappeared after a change of governor andthe administration has had to proceed carefully due to a
particularly active local environmental community thathas repeatedly challenged the state’s emissions tradingand offset policies. In the Japanese case, the issue shouldprobably be seen in the broader context of Japan’s generalopposition to the Kyoto framework. South Korea hasshown a preference to focusing on domestic reductionsand has completely ruled out the use of internationalcredits until at least 2020.
Regarding their own offset systems, Australia, Californiaand Japan all reject the project-by-project approach to ad-ditionality that the CDM has taken so far and instead pro-mote an ex-ante additionality assessment for entire classesof projects. They consider this to be not only more effi-cient and cost-effective but also more ‘objective’, implyinga higher degree of environmental integrity.
A Continued Role for the CDM as De Facto Standard Setter?
Looking at the systems in detail, it becomes apparent thateach policy was not developed in a vacuum, but rathertheir approaches and methodologies borrow a great dealfrom the CDM. The CDM has served as a kind of ‘opensource’ material which was then modified to suit the spe-cific needs of each jurisdiction. The CDM has also (slowly)moved in the direction of the larger trend towards adopt-ing standardised baselines, which may also be used todemonstrate additionality. Despite the divergent reason-ing that jurisdictions have taken up with regard to theiroffset policies, moving towards greater standardisationmay enhance the CDM’s acceptability from the perspec-tive of the systems examined and of future systems.
Scope for a further role of the CDM may thus lie in its pro-lific methodology development function. If efforts to de-velop standardised baselines and criteria for automatic ad-ditionality are earnestly pursued, the CDM may be able tomaintain a role as de facto standard setter and thus con-tribute to coherence in the international carbon market.
Standardisation alone is, however, not a panacea. Whileincreased standardisation may lower overall transactioncosts in an individual system, it also frontloads transaction
28 An Overview of German Initiatives
Advancing Carbon Markets
costs and shifts them from project participants to thosewho develop the standardised metrics. Individual savingson transaction costs may be lost when the world at large isawash with competing standards. One option to fundthese efforts may be to use the scaling up of climate fi-nance that has been pledged by industrialised countries.The CDM presents a readily established global standard toachieve measurable, reportable and verifiable results fromclimate finance. Instead of using CDM credits to achievetheir emission targets, governments could choose to countthe money spent towards their finance commitments andcancel the credits.
Contracted Organisationadelphi and Wuppertal Institute for Climate, Environment and Energy
Project Duration2011–2013
Funding SourcesThe project was funded by the German Federal Environment Agency (Umweltbundesamt) as part ofthe German Environmental Research Plan.
Additional Informationwww.dehst.de/EN/Climate-Projects/Project-Mecha-nism/CDM/cdm-past-2013/cdm-past_node.html
Contactadelphi
Dennis Tänzler
Email: taenzler@adelphi.de
Tapping Mitigation Potential at Multiple Levels –Vertically Integrated NAMAs
Keeping the global mean temperature rise below 2 °C re-quires increased effort not just in developed countries, butalso in developing countries. Several developing countrygovernments have proposed Nationally Appropriate Miti-gation Actions to contribute in this regard.
Cities are major contributors of greenhouse gas emissions.At the same time, sub-national authorities at provincialand local level have key powers in a number of relevantsectors such as waste management, buildings and trans-port. There is a need for subsequent involvement of theseactors in the planning and implementation of NAMAs. Atthe moment, however, there is a lack of experience withintegrated approaches to align the interests of these multi-ple government levels to achieve national mitigation tar-gets, and with the respective instruments needed for effec-tive planning, management and monitoring.
Embracing Multiple Levels of Government in NAMAPlanning and Implementation
The Deutsche Gesellschaft für Internationale Zusamme-narbeit GmbH, with funding from BMUB, has initiated the
Vertically Integrated NAMA (v-NAMA) programme to de-velop a practical approach for integrating multiple levelsof government in the process of NAMA design and imple-mentation. The Governments of Indonesia and SouthAfrica both have ambitious national climate strategies andin that context have decided to test the v-NAMA approachin practice. Indonesia is focusing on the development of av-NAMA in the municipal solid waste management sectorand South Africa on energy efficiency in public buildingsat provincial and municipal level.
Based on the experience from these two NAMAs, the v-NAMA programme will develop practical guidance for thedesign and implementation of v-NAMAs, which will alsobe mainstreamed into existing toolboxes and handbookson NAMA development. Experience with the approachwill also be fed back into the international negotiationsprocess. The project thus promotes efforts to shape futureNAMA mechanisms in such a way that they can increas-ingly unlock mitigation potential that is under the juris-diction of sub-national actors.
An Overview of German Initiatives 29
In Indonesia, the v-NAMA programme is targeting the waste sector.
Implementing v-NAMA Pilot Programmes
Important steps in preparing the v-NAMA pilot pro-gramme have been taken in both partner countries.First, both countries installed national steering struc-tures that include representatives of the relevant min-istries along with sub-national actors. Second, the proj-ect teams, consisting of employees of the GIZ climateprogrammes in both countries and local consultantsidentified key barriers, estimated the mitigation poten-tial, and discussed possible strategies and measures toovercome the barriers with the help of local experts.Third, based on this analysis, a concept note was devel-oped for each of the pilot programmes as guidance forthe full v-NAMA preparation phase. Fourth, a consulta-tion process was initiated involving key national andsub-national actors, including stakeholder workshopswith all the relevant levels of government to facilitatethe vertical integration process.
Based on the previous steps, v-NAMA elements are nowbeing developed, including the baseline, business-as-usualscenario, mitigation options, abatement costs, co-benefits,risk assessment, incentives, plan of action, capacity build-ing plan and MRV system. In parallel, implementation andfinancing approaches are under elaboration, including na-tional and international resources.
Using First-Hand Experience in the Development ofPractical Guidance
These steps are supported and underpinned by a second setof activities oriented towards the development and dissem-ination of v-NAMA guidance. The project team is elaborat-ing this guidance on the basis of experience gained in thepilot measures. The guidance includes three pillars: The firstcomprises capacity development and mainstreaming issueslike training, advisory work and a range of learning prod-ucts, while the second pillar includes dissemination of andoutreach for the v-NAMA approach in the context of inter-national and national events. The third pillar focuses onknowledge management and lessons learned compiled in aweb-based toolkit and recommendations for policy makers.Elaboration of the proposed guidance goes hand in handwith discussions with national and sub-national decisionmakers and representatives from international technicaland financing institutions. Two questions already emerge ashaving particular importance for v-NAMAs: How to designa package of incentives and mandates to effectively mo-bilise sub-national actors in achieving national climate tar-gets, and how to design a practical MRV mechanism thatcaptures local level action and allows for its aggregation atnational level.
Contracted OrganisationDeutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Other Organisations InvolvedMinistry for National Development Planning (BAPPENAS), Indonesia
Department of Environmental Affairs (DEA), SouthAfrica
Project Duration2012–2015
Funding SourcesThe project is part of the International Climate Initia-tive (IKI) of the Federal Ministry for the Environment,Nature Conservation, Building and Nuclear Safety(BMUB). BMUB supports this initiative on the basis of adecision adopted by the German Bundestag.
ContactDeutsche Gesellschaft für internationale Zusammenarbeit (GIZ) GmbH
Axel Olearius
Email: axel.olearius@giz.de
Tobias Zeller
Email: tobias.zeller@giz.de
30 An Overview of German Initiatives
Advancing Carbon Markets
Enhancing Greenhouse Gas Management in Tunisia
In order to develop a robust national greenhouse gas inventory, emissions from different emission sources have to be measured and monitored.
With annual per-capita emissions of about 4.1 tCO2e,Tunisia’s GHG emissions are still below the global average.Over the past decades, however, the country’s emissionshave been constantly rising, mainly due to increasing en-ergy demand for cooling but also for industrial processesand transportation. The Tunisian government is aware ofthis challenge and became an active promoter of activitiesin the field of climate change. This engagement is not onlyseen as a contribution to the global GHG mitigation effort,but is also considered a strategy towards modernising thenational economy. Exploiting Tunisia’s large potential forwind and solar power is thus expected to foster employ-ment and income while investments in the public trans-portation sector could further enhance mobility and qual-ity of life in urban areas.
Two pivotal elements of the Tunisian climate change ac-tivities are the development of a national climate strategyand the National Plan for Renewable Energy and EnergyEfficiency (Tunisian Solar Plan). The Tunisian Solar Plan isa national strategy paper that builds the basis for the de-sign of comprehensive NAMAs in the renewable energy,housing and other sectors. While the major part of theoverall costs for the Tunisian Solar Plan will be providedfrom national resources, Tunisia is also seeking interna-tional support for its implementation.
A viable system to measure, report and verify the impactof NAMAs is a main prerequisite for obtaining financialsupport, transfer of technologies or capacity building fromthe international community as well as for the successful
An Overview of German Initiatives 31
implementation of climate policies in general terms. Thecurrent lack of technical and institutional capacity forgreenhouse gas monitoring and MRV is obstructing successful implementation of these activities.
A Solid MRV System for Tunisia
In the light of these challenges, GIZ, with the support ofBMUB, is developing a robust greenhouse gas inventoryfor reporting under the UNFCCC as well as an MRV sys-tem for the NAMAs in the energy sector. With these inplace, Tunisia is expected to be able to independently draftits biennial update report by 2014 and to measure, reportand verify the impacts of the Tunisian Solar Plan andother measures in the energy sector. This will further enable the country to actively participate in the designprocess of UNFCCC procedures.
Testing New Concepts with Local Institutions
The first major step in the project comprises a detailedanalysis and examination of the current situation. At tech-nical level, this task is being conducted through a gapanalysis of existing database systems, information systemsand policy monitoring systems. At institutional level, ex-isting procedures are being analysed, evaluated and thepotential for improvements identified. The procedures forthe development and maintenance of greenhouse gas in-ventories and MRV systems resulting from these activitieswill be documented to assist the local employees in theirfuture work.
Capacity building represents another cornerstone activityof the project. Through the implementation of trainingsessions and workshops, Tunisian employees in key insti-tutions will learn to deal with specific issues from a practi-
cal perspective. These capacity building activities furtherprovide opportunity for the exchange of experience between stakeholders from Tunisia and other countriesand international organisations.
The project collaborates with local partner institutions, including the National Agency for Energy Conservation,the Ministry for the Environment and the Ministry of Industry, Energy and Mining.
From Gap Analysis to Robust Inventories and MRV of NAMAs
The project started in September 2012 with the imple-mentation of an exhaustive gap analysis to identify re-quirements for the development of the national MRV sys-tem. In parallel, instruments for the documentation,analysis and communication of data are being developedthat will provide the basis for the MRV system.
Meanwhile, the national greenhouse gas inventory systemhas been successfully implemented and preliminary emis-sion calculations were finished in March 2014. While thedevelopment of a larger MRV system for NAMAs in theenergy sector is scheduled for 2014 and 2015, a small pilotMRV was applied to the PROSOL Elec photovoltaic pro-gram at the end of 2013. The outcomes and experiencefrom the project are fed into the international process onMRV, primarily via the International Partnership on Miti-gation and MRV. Through the organisation of an interna-tional workshop on MRV of NAMAs in December 2013, to-gether with Belgium and the International Partnership onMitigation and MRV, Tunisia was significantly involved inthe creation of an international working group on MRVfor francophone countries.
Contracted OrganisationDeutsche Gesellschaft für International Zusammenarbeit(GIZ)
Other Organisations InvolvedMinistry of Industry, Energy and Mining, Tunisia
Agence Nationale de la Maîtrise de l’Energie (ANME),
Ministère de l’Equipement, de l’Aménagement du Terri-toire et du Développement Durable
Project Duration2012–2016
Funding SourcesThis project is part of the International Climate Initiative(IKI). The Federal Ministry for the Environment, NatureConservation, Building and Nuclear Safety (BMUB) sup-ports this initiative on the basis of a decision adopted bythe German Bundestag.
ContactDeutsche Gesellschaft für International Zusammenarbeit(GIZ) GmbH
Anselm Duchrow (Tunisia)
Email: anselm.duchrow@giz.de
Emanuela Finke (Germany)
Email: emanuela.finke@giz.de
32 An Overview of German Initiatives
Advancing Carbon Markets
Energy Efficiency in Northern China’sResidential Buildings Sector – Developing Baselines for an EmissionTrading Scheme
Retrofitting of existing buildings is an important and efficient measure to reduce greenhouse gas emissions. The inclusion of residential build-ings in an emissions trading scheme could provide a financial incentive for these mitigation activities.
In 2009, China announced its target of a 40-45% cut in theintensity of carbon dioxide emissions per unit of gross do-mestic product by 2020 relative to 2005. Due to its enor-mous GHG reduction potential, the residential buildingssector plays a significant role in achieving this target. Ap-proximately 65% of China’s urban real estate consists ofresidential buildings. Around 40% of domestic energy useis accounted for by buildings in northern China, as heatingdemand is larger than in other regions. A large share ofbuildings were built before 2000 and urgently need reno-vation, comprising a reduction potential of 97 milliontonnes CO2eq. To date, no incentives or mechanismsspecifically target large-scale energy efficiency retrofittingin the Chinese building sector. The Chinese governmenthas a strong interest in establishing incentives for this pur-pose, especially favouring market based mechanisms.
Groundwork for an Emissions Trading Scheme inBuildings
The Chinese Government aims to include residentialbuildings in its nationwide emission trading scheme to be
developed from 2015 to provide a market incentive forretrofitting. However, a lack of basic data hampers the in-clusion of the building sector as a methodology is neededto determine baseline emissions and emission reductions.BMUB therefore agreed with the Chinese Ministry ofHousing and Urban-Rural Development (MoHURD) to ini-tiate a project, “Climate Protection through Energy Effi-ciency in Buildings”, to close this information gap and todevelop a comprehensive strategy for energy-efficientretrofitting of residential buildings.
Milestones
Since there were no reliable data on how much heatingenergy Chinese residential buildings really consume, theproject first conducted a study to determine the total in-ventory of targeted residential buildings in three selectednorthern Chinese cities. Over 22,500 buildings built up tothe year 2000 were surveyed. The gathered data was dis-cussed with local, national and international experts re-garding methodologies, results and possible implicationson occasion of several workshops. Based on the workshop
An Overview of German Initiatives 33
outcomes, the data was processed into heat energy base-lines for ultimately ten common and easily identifiableresidential building types.
These baselines are now available to be used as businessas-usual scenarios for comparison of energy consumptionbefore and after retrofitting. Furthermore, energy-efficientretrofitting concepts were developed in cooperation with the pilot cities, providing knowledge and feasibletechnologies with which to achieve the energy efficiencytargets.
Testing the Baselines
The application of the baselines using data from housingdevelopments that have already been retrofitted was usedto validate the methodology for prospective establishmentof an emissions trading scheme in the residential buildingsector.
The project concluded with an economic scenario assess-ment of the achievable emission reduction certificates atprospective certificate price levels, financial returns underthe envisaged emissions trading scheme and, finally, de-veloped materials to train actors who might want to applythe methodology in their cities.
Contracted OrganisationDeutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Other Organisations involvedMinistry of Housing and Urban-Rural Development(MOHURD), Department of Climate Change of the Na-tional Development and Reform Commission (NDRC),Building Wall Reform Office of the Tianjin Construction Commission and Tianjin Climate Exchange
Project Duration2010-2013
Funding SourcesThis project is part of the International Climate Initia-tive (IKI). The Federal Ministry for the Environment,Nature Conservation, Building and Nuclear Safety(BMUB) supports this initiative on the basis of a decision adopted by the German Bundestag.
ContactDeutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Volkmar Hasse
Email: volkmar.hasse@giz.de
Capacity Building for Emissions Tradingto Support Bilateral CooperationThe creation of a global carbon market has been a long-term goal of the German government for several years.Currently, a number of regional emissions trading systemsare in place, the first and largest of them being the Euro-pean Union Emissions Trading scheme. New Zealand andKazakhstan have also introduced ETSs at national level. Inaddition, a number of sub-national ETSs have been imple-mented. These include the Regional Greenhouse Gas Ini-tiative (RGGI) and the Californian emissions trading sys-tem in the US and the Tokyo Metropolitan GovernmentCap-and-Trade-Program in Japan.
More recently, a number of emerging economies have an-nounced their willingness to prepare ETSs. In its 12th five-year-plan, China announced the introduction of pilotETSs in seven major economic regions including Beijingand Shanghai, five of which already started operation in
2013. Building on experience from the pilot schemes,China aims to introduce a nation-wide emissions tradingscheme later on. South Korea intends its system to start in2015.
The German government aims to foster the developmentof such national ETSs. It therefore supports interestedcountries with capacity building and sharing of experi-ence with the EU ETS and its implementation in Germany,in order ultimately to work towards its goal of a globalcarbon market.
A Toolbox for Capacity Building
BMUB has contracted adelphi, a consultancy, to developand implement capacity building programmes specificallytailored to the needs of experts from developing countries
34 An Overview of German Initiatives
Advancing Carbon Markets
or emerging economies that are preparing for the imple-mentation of an ETS. The idea is to have structured capac-ity building programmes at hand that can be offered topartner countries in bilateral consultations and can be or-ganised at relatively short notice.
Experts Trained by Experts
A consortium including adelphi, DIWecon, FutureCamp,Öko-Institut and TÜV Süd (until 2013), together with keyinstitutions in Germany such as the German EmissionsTrading Authority, developed three different formats forinterested countries to help in the development of an ETS:
In the first option, experts and policymakers come to Ger-many for 1-3 weeks of training. The course includes exten-sive presentations on the functioning of the European ETSand its implementation in the German institutional land-scape. The experts from DEHSt have a leading role in thispart of the training. The programme also includes trainingsessions and discussions with companies that are coveredby the EU ETS as well as other companies involved inemissions trading such as finance and commodity profes-sionals.
The second format is a workshop carried out on-site in in-terested countries. An example is a three-day technicalworkshop and subsequent presentation and discussion forum prepared for Chile in 2013. The technical workshopincludes modules from DEHSt, adelphi, DIW econ and FutureCamp.
Thirdly, the programme offers in-depth consultation onspecific issues. For instance, a senior expert from the consortium assisted the Korean ETS task force with thedevelopment of the national allocation plan in July 2013.
To support the dynamic development of emissions trad-ing in China, two training sessions have been organisedfor Chinese experts. In the first, in April 2012, three high-level experts including the former chair of the CDM Exec-utive Board, Prof. Duan Maosheng, were invited to theprogramme. In September, a second training session wasorganised for two researchers from the China ShenzhenEmission Exchange (CERX), the designated market placefor emissions trading in the Shenzhen metropolitan area.Following the programme, Shenzhen became the first pilot region in China to start its ETS in mid-2013.
The initiative is not limited to China, however. Expertsfrom Kazakhstan attended training sessions in Berlin.Workshops have also been held in Seoul (South Korea), Astana (Kazakhstan) and Santiago de Chile (Chile). Gov-ernment representatives participated along with numer-ous stakeholders from the private sector.
In many developing countries the energy sector holds large emission reduction potentials. These can partly be tapped throughthe development of emission trading schemes.
Contracted Organisationadelphi, DIWecon, FutureCamp Climate GmbH, Öko-Institut e.V., TÜV Süd (until 2013)
Other Organisations involvedFederal Environment Agency (Umweltbundesamt),German Emissions Trading Authority (DEHSt),Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) GmbH
Project DurationFirst Phase: 2011–2013; Second Phase: 2013-2015
Funding SourcesThe project is funded as part of the budget for “measures to support international carbon markets”provided by the Federal Ministry for the Environment,Nature Conservation, Building and Nuclear Safety's(BMUB). The two visits of Chinese experts were sup-ported under the project “Capacity Building for the im-plementation of emissions trading systems in China”within BMUB’s International Climate Initiative (IKI).
Contactadelphi
Kristian Wilkening
Email: wilkening@adelphi.de
An Overview of German Initiatives 35
ACAD African Carbon Asset Development Facility
B-PMR Business Partnership for Market Readiness
BMUB Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety
CDM Clean Development Mechanism
CDM EB CDM Executive Board
CERX China Shenzhen Emission Exchange
Ci-Dev Carbon Initiative for Development
COP Conference of the Parties
CPAs CDM Programme Activities
DEHSt German Emissions Trading Authority
DNA Designated National Authority
DOE Designated Operational Entity
ECOWAS Economic Community of West AfricanStates
ETS Emissions Trading Scheme
EU ETS European Union Emissions Trading Scheme
GHGs Greenhouse Gases
GIZ Deutsche Gesellschaft für InternationaleZusammenarbeit GmbH
IETA International Emissions Trading Association
IGES Institute for Global Environmental Studies
IKI International Climate Initiative
JI Joint Implementation
JIKO Joint Implementation Coordination Unit
LDCs Least Developed Countries
MoHURD Chinese Ministry of Housing and Urban-Rural Development
MRPs Market Readiness Proposals
MRV Measurement, Reporting and Verification
NAMAs Nationally Appropriate Mitigation Actions
PMR Partnership for Market Readiness
PoAs Programmes of Activities
REDD+ Reducing Emissions from Deforestationand Forest Degradation
RGGI Regional Greenhouse Gas Initiative
SAPP Southern Africa Power Pool
SBs Standardised Baselines
UNDP United Nations Development Programme
UNFCCC United Nations Framework Convention on Climate Change
v-NAMA Vertically Integrated NAMA
Abbreviations and Acronyms
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