Experiences and challenges implementing PoAs from the perspective of a Stakeholder P RESENTATION AT UNFCCC P O A WORKSHOP M AY 2011 BY F ELICITY S PORS ( F SPORS @ WORLDBANK .

ORG ) & M ONALI R ANADE ( M RANADE @ WORLDBANK .

ORG )

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Contents

• • • • • • Potential of PoAs Overview of World Banks PoA portfolio Spot the difference – two kinds of PoA. Summary of key regulatory barriers Recommendations for overcoming these barriers Implications for PoAs if barriers overcome

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PoA potential – Regional distribution

% comparison of regional distribution of pCDM and CDM

90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 16% 15% Latin America 60% 80% 0% 1,1% 23% 2,6% Asia & Pacific Europe & Central Asia pCDM CDM Africa 1% 1,1% Middle-East

Number Crunching

•

30% PoAs vs 73% CDM

projects in BIC (Brazil, India and China) •

11% PoAs vs 1.7% CDM

projects in LDCs/SIDs Source: UNEP Risoe CDM/JI Pipeline Analysis and Database, March 1st 2011

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PoA potential – supporting sustainable development by supporting small dispersed HH/SME projects

PoA distribution by type

EE demand side Waste Solar Hydro EE supply side Forestry & Agriculture Fossil fuel switch Biomass energy Agriculture CMM Transport Total PoAs 2 2 2 1 1 1 82 29 23 12 5 4 Fossil fuel switch 2,4% Forestry & Agriculture 2,4% EE supply side 4,9% Hydro 6,1% Biomass energy 2,4% Transport 1,2% Agriculture 1,2% CMM 1,2% EE demand side 35,4% Solar 14,6% Waste 28,0%

But

PoAs have

not

achieved scale up of GHG mitigation in number of PoAs nor in size of PoAs.

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World Banks PoA Portfolio

•

Under validation

10 small scale

– – – – – Household RE in Bangladesh (ASM I.A) Household EE in Senegal, Bangladesh (AMS II.C) Supply side EE in China, Yemen, India, (AMS II.A) Waste in Uganda, Phillipines, Thailand (AMS III.F & III.D) Transport in Egypt (AMS III.C) •

4 large scale

– – LFG in Brazil, Phillipines, Morocco (ACM0001) Hydro in Vietnam (ACM0002) •

CME categories

– – – Financial Institutions (e.g., Bangladesh, Brazil, Phillipines) Government agencies (e.g., Uganda, Vietnam, Senegal) Power companies (China, India, Yemen)

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A few Challenges

(among many others)

• • • •

Additionality of PoA

– – How to justify programs supported by public funds?

How to assess PoAs that support mandatory laws?

Defining eligibility criteria for additionality of CPA

– – DOEs requiring very precise criteria Too many criteria so restrictive that only 1st CPA may be eligible

Setting baseline

– Survey methods – Sample size

Monitoring systems

– Building appropriate monitoring structure and database without over-burdening the CME and at rational cost – Yet unknown verification challenges

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A few Challenges

(among many others)

• • •

Structuring program

– – – Upfront cost of structuring programs (seed funds) Building capacity of CME Designing programs to incorporate future sources of revenue

Procedural issues

– – – Start date of PoA and CPA (partly resolved by the 31 Dec 09 rule) Focal point designation in MOC (resolved) Other minor issues

DOE Liability

– – – Trustees‘ dilemma Buyers‘ dilemma CME financial capacity and credit-worthiness

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Challenges: Complex and varied business structures

Whole-seller

• • PoA Coordinating entity can influence CPAs finances some projects • • CPA entity leads preparation of CPA-DD covers own monitoring costs PoA Coordinating entity is • • • • the CPA entity controls all CPAs finances all projects prepares all CPA-DDs covers all monitoring costs

PoA retains major part of revenue PoA retains 100% revenue Hands-on Hands-off

• • PoA Coordinating entity communicates with EB Support CPA development • • • CPA entity finances project directly leads preparation of CPA-DD covers own monitoring costs

PoA retains minor part of revenue T HE W ORLD B ANK C ARBON F INANCE U NIT Retailer

• • • PoA Coordinating entity supports identification of CPAs part finances all projects covers monitoring costs • • CPA entity prepares own CPA-DD covers own monitoring costs

PoA shares revenue

Challenges are plenty – how to find a solution

?

“ We can't solve problems by using the same kind of thinking we used when we created them." – Albert Einstein

• Based on experience it is possible to identify two kinds of PoAs in general

:

–

PoA type A

– individual units for each CPA (poss. different owners of CPAs). –

PoA type B -

small/micro activities or technologies e.g. lighting, cooking stoves often located in LDCs or countries with less than 10 CDM projects. •

Recommendation to increase scale up

– Different procedures and regulations required to support PoA types A and B, critical for ensuring regional representation addressed, and SD projects scaled up to achieve potential GHG reductions.

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Two procedures for two different kinds of PoA

PoA type A PoA type B

Solution for PoA type B (micro CPAs):

PoA & CPA PDD CME Validation by DOE Registration EB Monitoring of CPAs Verification DOE Issuance CERs PoA PDD only - by CME PoA validated by DOE Registration EB Monitoring of CPAs Verification DOE Issuance of CERs

1.

2.

3.

4.

5.

Only PoA PDD (i.e. not CPA-DD)

to be prepared for registration. CPAs do not need to be validated at inclusion.

PoA PDD validated by DOE

. Should contain check list of eligibility requirements and must comply with additionality requirements for micro scale CDM projects

Monitoring

periodically undertaken for representative sample of CPA units.

Verification -

DOE ensure CPAs comply with eligibility criteria i.e. verification = “quasi validation”.

Risk of liability much less than at point of registration.

Issuance

of CERs with verification report once approved by EB.

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1

Key barriers in existing rules

•

Additionality_

i) Lack of clarity on key criteria for additionality demonstration and ii) proving CPA would not occur without PoA is asking DOE to prove something counterfactual. Micro scale guidelines will help alleviate some issues for microscale.

2 •

DOE liability and definition of erroneous CPA inclusion.

( SEE Presentation later) 3 •

PoA start date definition.

CPA cannot start prior to publication of PoA on the UNFCCC website. Institutional structuring of PoA can require more time than is needed to prepare the first CPA. 4 •

Methodology combinations.

No clear process for approving combinations and each combination has to be assessed. EB60 – Secretariat to define procedure. 5 •

Baseline identification:

Guidance on how to define baseline emissions when PoA supports law enforcement

.

E.g. Egypt Vehicle Scrapping PoA 6

T HE

•

W Guidance on sampling. ORLD B ANK C ARBON F INANCE U NIT

Can DOEs verify CPAs according to sample assessed? Not

Recommendations to address regulatory barriers facilitate larger CPAs

Additionality • What is “good enough” for eligibility criteria • Type B PoA – PoA not CPAs assessed at registration. DOE verifies conform to eligibility criteria at verification PoA start date • Allow notification of PoA start with letter, do not require publication of final PoA-DD on website. Methodology combinations Baseline Identification Sampling guidance • Define procedures for submissions from PP • Top down definition of combinations key sectors e.g. housing in consultation with stakeholders • Standard approach to determining baseline i.e. reg = x% enforced as identified by x,y,z. • Consultation with DNAs • Provide guidance on sampling of CPAs • Clarify standardized approach for SD assessment by DNAs

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Solving regulatory rules is unlikely to “flood” the market with PoA CERs due to non regulatory barriers



Institutional framework with interrelations and dependencies.

Time consuming to identify right partners and secure government approval.



Setting up a business model which enables a high participation and being operable

. i.e. Need for seed or upfront financing often deters private sector involvement.



High level of standardization required to ensure simplicity in calculations for complex PoAs

e.g. housing, transport and agriculture

.

Standardisation approaches must be defined and must be politically acceptable to DNAs.



Awareness raising via stakeholder interaction.

DNAs can play role to increase awareness of PoA potential, but they must first understand the issues and be able to recognize best practice. PoA working group?

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T HE W ORLD B ANK C ARBON F INANCE U NIT Thanks for listening

Challenges: Complex business arrangements

 PoA - Incentive or policy implementation program as CDM project:     Program operator receives CDM revenues; Program participants receive incentive payment; Incentives are provided against carbon ownership; Market based private sector driven and bottom-up approach to sustainable sectoral transformation (difference to sectoral crediting);   Addressing small and micro activities; Core target group: households, SMEs, municipalities.

 Economics and Finance:  Appropriate type and dimension of incentive (grant, soft loan..);  Core deal: incentive against carbon ownership (appropriate contracts); 

Funding of the programme (in particular seed funding).

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Expansion of Micro-scale ruling to CPAs (source:

UNFCCC

)

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