FOCUS: MITIGATIONA glance at post-kyoto

Louis Perroy, ClimatEkos1 September 2011, Vientiane, Lao PDR

MITIGATIONA glance at post-kyoto

• Programmatic CDM (Programme Of Activities-POA)• Nationally Appropriate Mitigation Actions (NAMAs) • Programmatic CDM to NAMAs• Green Fund

Programmatic CDM

•Traditional CDM: A project by project approach

•Emission reductions – from single project activities– in single locations – in certain sectors– in star countries

Many sectors + countries have significant potential untapped

Little or no effect on the carbon intensity of the economy

Little or no sustainable benefits for many projects

How to make the CDM incentivise GHG emissions reductions throughout entire sectors or large areas?

What is pCDM?

Programmatic CDM

pCDM: One programme + numerous project activities

Traditional CDM: One CDM project activity

What is pCDM?

Framework/programmeGHG reducing

actions

Programmatic CDM

pCDM examples

PoA>voluntary coordinated action by a private or public entity which coordinates and implements any policy/measure or stated goal (i.e. incentive schemes and voluntary programmes)

CPA> unlimited number of CDM Programme ActivitiesEB47 An 29 (version 3)

Obvious and typical examples:Efficient lighting programmeFuel switching programme in industrial facilitiesSolar water heaters in businesses / householdsLandfill programmeGreenfield electrification programmeAnd a lot more…

Installation of (compact fluorescent light) CFLs in a group of householdsFuel switch in one facility

Installation of a group of solar water heaters

Landfill gas flaring in one landfillNew biomass generator

Programmatic CDM

pCDM terminology

pCDM = Programmatic CDM

PoA = Programme of Activities (most commonly used term for the whole concept)

CPA = CDM Programme Activity (a project activities implemented under the Programme)

CDM-PoA-DD = Programme of Activities Design Document

CDM-CPA-DD = CDM Programme Activity Design Document

Programmatic CDM

Single Project Bundle of Projects Programmatic

Single location Multiple locations Multiple locations, across countries

Single project participant (PP)

Multiple PPs possible Multiple PPs possible

1 project activity (PA) at a time

A number of activities submitted as 1 PA at a time

A number of activities (CDM PA = CPA) submitted as a coherent groups

Project does not change over time

Composition does not change over time

An unlimited number of CPAs can be added to the PoA within 28 years

PP known prior to registration of project

PP known prior to registration of project

At least one PP is known prior to registration, rest join later

1 crediting period Uniform crediting period for all activities

Each CPA has its own crediting period

Programmatic CDM

Why is pCDM so exciting?Flexibility– Validation + registration of the PoA, along with one sample CPA– Addition of CPAs over time, without validation or new LoAs (“consistency

check”) No need to know the composition + magnitude of the project ex-ante Decreased registration time + transaction costs – see next slides

New opportunities– In underrepresented sectors (esp. where ERs are dispersed in space and

time + low ERs/unit small projects can make big PoAs) – see next slides

– In underrepresented countries – see next slides

Allows for replication of successful projects

Step towards NAMAs and sectoral mechanisms

Programmatic CDM

Opportunity 1:Extend CDM to micro-activities

• PoAs are ideal for CFLs, solar water heaters, cook stoves, household biogas, distributed energy, etc.

• Registered PoAs can generate recurring revenues to reduce need for working capital

Þ Over 50% of PoAs in validation cover household sector (<<1% for stand-alone CDM projects)

Þ To date only modest private sector activity in this segment

Opportunity 2: Bankable CERs under a PoAStand-alone RE projects• >2.5 ys until CDM revenues• Perceived high registration riskÞ CERs are not bankable at financial closure

Under registered RE PoA• ~15 months until CDM revenues• Low inclusion riskÞ CERs become bankable at financial closure

Project Developer Forum | UNFCCC Technical Workshop, Kiev Year -2 -1 1 2 3 4 5 Year -2 -1 1 2 3 4 5

Carbon finance

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utflo

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Cash

inflo

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Debt

Equity

Investment & construction expenditure

Debt servicingOperating expenditure

Operating revenues

??? CER revenues ???

Operating revenues

Investment & construction expenditure

Debt servicing

Cash

outf

low Operating expenditure

CER revenues

Equity

Debt

??Programmatic CDM

REDUCING EMISSIONS - VER TRANSACTION

Programmatic CDMin the region

Project name Location StatusInstalling Solar Water Heating Systems Southern Vietnam At Validation

Small Scale Livestock Waste Management Program

Thailand At Validation

Sustainable Small Hydropower Vietnam At Validation

Renewable Energy Development Program (REDP), hydro, wind, biomass

Vietnam At Validation

National Biogas Programme Vietnam At Validation

Green Brick Development INTRACO Vietnam At Validation

Biomass Power Development Programme Thailand At Validation

small scale biomass power generation at Mae Lee Forest Plantation

Thailand At Validation

energy efficiency improvement for street lightings

Thailand At Validation

Nationally Appropriate Mitigation Actions (NAMAs)

• Voluntary activities for emission mitigation in countries not subject to reduction commitments and another step towards increased mitigation efforts from the developing nations. Twofold objective:– Developed countries promise technical and financial support for

related programmes, whereas – developing countries are requested to develop and implement

mitigation actions, usually for a whole sector. This can also be seen as.

• NAMAs can supplement or incorporate carbon finance activities such as CDM projects, with the practical implications of how to do monitoring, reporting and verification (MRV).)

Nationally Appropriate Mitigation Actions (NAMAs)

• NAMAs distinguish between three different types: 1-        Unilateral NAMAs: mitigation actions independently funded and carried out by developing countries. 2-        Supported NAMAs: climate protection measures in developing countries are supported by technical assistance and / or direct funding from Annex I countries. 3-        Credited NAMAs: climate protection measures in developing countries that generate certified emission reduction credits to be sold on the international market. This type is similar to sectoral mechanism.

• There is a need to consider which category would suit a given country, and whether a gradual and stepwise approach could be applied progressing from supported to credited to unilateral NAMAs. Advanced developing countries or economies in transition could potentially directly start with credited NAMAs.

Step towards NAMAs & sect. mechanisms

PoAs establish operational features of NAMA, e.g.– Project identification & inclusion– Program finance– Carbon incentives for individual sites– Monitoring, reporting verification (MRV)

Implications for Governments:Þ Identify national development / GHG mitigation priorities that can be

implemented through PoAsÞ Promote PoAs to learn how to address NAMA challengesÞ Experiment with implementation models (public, private or PPPs)

Programmatic CDM to NAMAs

Thank You!

Louis PerroySenior Partner and CFOClimatEkosLouis.perroy@climatekos.com