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Sven Schimschar
20 th October 2011, 23 rd ICP Workshop Malta

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 The building sector accounts for more than 40% of the global energy consumption and 30% of global greenhouse gas (GHG) emissions worldwide
 In 1997 the Kyoto protocol has been adopted with the aim to reduce global greenhouse gas emissions and simultaneously encourage sustainable development
 Today, just a few CDM/PoA projects relate to the building sector
 „Sustainable Development‟ goal of the Kyoto Protocol has not been reached in most projects in a satisfying manner
 New Post 2012 mechanisms are currently discussed. One of them is the NAMA mechanism

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 What are the main barriers for the applicability of CDM and PoA for reducing the space heating demand in the building sector?
 Are there carbon mechanisms, notably the so called NAMAs, which are more appropriate for this purpose, in terms of possible emission savings and simultaneously reaching sustainability?

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 Very dispersed sector, characterised by large numbers of buildings, widespread locations, diverse technologies, many different stakeholders etc
 The building sector has direct impact on the living conditions of people as it provides a specific indoor climate, influencing their well-being
 Approximately 61% of the global floor area is located in developing countries. But this share just relates to about 44% of the emissions in the global building sector
 DC‟s buildings sectors grow more significantly than in those of developed countries
 Space heating activity is the most dominant energy purpose in the present and more in the future
 Therefore, climate financing mechanisms should also be able to reduce the space heating demand in order to achieve significant improvements in the building sector

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 By far not all potential CDM project initiatives can meet all requirements for acceptance and implementation  despite its big potentials – the CDM has very inhomogeneous coverage concerning host countries and technologies
 Over time it became evident that the existing methodologies had to be improved and expanded to allow for dispersed energy efficiency projects  In 2005 it was decided to start the “Program of Activities” (PoA)
 Aim to reduce transaction costs in the CDM, expand the mechanism‟s applicability to micro project activities and thus, make it more attractive also for the energy end use sectors

 In total, 3183 projects have been registered in the CDM
 just 26 of those projects are registered in the building sector
 Just 4 projects also, at least partly, consider insulation measures
 In total, only 8 PoAs are yet registered
 Three of these eight projects relate to the built environment
 Just three CDM projects out of the 29 registered building related
CDM and PoA projects achieved the issuance status so far (no PoA project)
 No CDM or PoA project exists that includes measures to reduce the space heating demand of a building and finally really issues
CERs
Registered / share of building related projects
CDM
3183 / <1%
PoA
8 / ~40%
Under Development / share of building related projects
CDM
8635 / <1 %
PoA
97 / ~30%
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 Rules and requirements for the proof of additionality, baseline identification, and monitoring approach is laid down in technology specific methodologies
 There are two different approaches for assessing buildings energy related quality: Either using the energy demand or the energy consumption. Both approaches to define the baseline and to conduct the MRV process are possible but none of these is optimal
 Energy demand: problematic whether the theoretically reduced energy demand does finally really lead to reductions of the energy consumption (highly influenced by occupant‟s behaviour)
 Energy consumption: is influenced by many different factors and therefore it is not possible to explicitly substantiate which part of the lower energy consumption is the result of which measure

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 Methodology AMS-II.E
 not appropriate to handle the complexity to clearly calculate the emission reductions resulting from an insulation measure
 Very narrow project boundaries are defined
 no clear guidelines on how to define the baseline or measure and monitor the emission reductions
 Methodology AMS-III.AE
 limited to new residential buildings
 just comprise measures reducing the grid electricity consumption
 Not possible to clearly distinguish them from the resulting reductions of other measures
 An appropriate methodology for reducing the emissions of existing buildings in the stock is not existent
 the whole CDM with its currently available methodologies is not able to significantly cut emissions in the building sector

Administrative costs
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CDM (small scale) PoA
Up-front costs [€] 100,000
Operation costs per annum [€] 30,000
150,000
85,000
Necessary number of CERs for project developers to start CDM/PoA process
Number of annual CERs to make small scale CDM projects attractive to project developers
Number of annual CERs to make PoA projects attractive to project developers
CER price=10€
12,000
30,000
CER price=15€
8,000
20,000
 Is it possible to produce the necessary amount of CERs just by reducing the final space heating demand?

 Calculations of the useful space heating demand of a multifamily reference building
CER price=10€ CER price=15€
Ulan Ulan
Beijing Beijing
Bator Bator
Break even small scale CDM
(CER revenues against costs,
44 / 115 37/ 96 30 / 77 25 / 64 risks etc) [MFH/1000 m² living area
]
Break even PoA (CER revenues against costs, risks etc) [MFH/1000 m²
living area
]
111 / 289 92 / 239 74 / 192 61 / 160
 The revenues resulting from energy savings are between 5 and 8 times higher than the CER revenues. (payback period through energy savings 14 years to breakeven the technical installation costs, through CER revenues between 70-100 years )
 investment into the building and the simultaneous administrative costs for
CDM respectively PoA cannot be compensated just with CER revenues
 Additionally, the investments in energy efficiency in buildings are very high compared to other CDM-projects and are therefore not competitive in the CDM market
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“ Nationally appropriate mitigation actions by developing country Parties in the context of sustainable development, supported and enabled by technology, financing and capacity building, in a measurable, reportable and verifiable manner.
” (Bali Action Plan 2007)
 In the COP15, NAMA was one of the main negotiation focuses and potentially will become a new mechanism to support mitigation efforts in developing countries
 In the international climate negotiations preceding Cancún in December
2010, NAMAs were seen as the solution to many open issues
 Negotiations have so far failed to clearly define what NAMAs actually are
 No clear procedure for how to submit a NAMA and how to match these actions with international finance
 Developed countries committed to jointly mobilize US$ 100 billion per year by 2020 for actions in developing countries
 First funding is available through „fast start financing‟ of US$ 30 billion for
2010–2012 for adaptation and mitigation
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 Definition of NAMA is very broad  an „action‟ can in principle be any kind of activity (from local projects to national strategies policies, at project or sector level, action plans, sectoral approaches, technology-oriented actions, actions primarily aiming at sustainable economic and social development or poverty eradication)
 Policy measures in the building sector often take most effect in the long-term, due to the long lifetime of buildings and low replacement and refurbishment rates
 These long-term options are very important to lead to a transformational change
 The NAMA concept explicitly considers these transformational changes and allows supporting long-term processes and indirect effects
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 Views differ on the ways to measure, report and verify actions
 Although emission reductions of supported NAMAs will need to be quantified within the proposal to give an indication of the magnitude of expected results, the MRV must not necessarily be based on emissions.
 MRV metrics will probably follow the setup of the underlying
NAMA. Especially for more indirect actions or in cases where quantification is difficult (as, for instance, awareness campaigns), they can also be based on other (process) indicators
 Process indicators are necessary to also allow indirect and long term reductions and thus, achieve transformational changes and sustainable development
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 Non-Annex I Parties were first invited to submit NAMA proposals to the UNFCCC in the Copenhagen Accord in 2009
 So far, 29% of all Non-Annex I Parties have submitted proposals and approximately 79% of these proposals do also consider actions in the building sector
 We see this large share explained in the fact that the building sector is typically governmentally influenced and thus, NAMAs seem to be very appropriate for this sector as they can support the governments during this process with financing, technology and capacity building
 Nevertheless, no country has implemented a NAMA yet
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Element
Type of activity
Money flow
Carbon credits
Sustainable development benefits
Emission reduction potential
Monitoring, reporting, verification requirements
NAMA
Scaling up of projects up to a national strategy
To government
No
Very important
Very high (transformational change )
Pragmatic (no offsetting)
CDM
Projects only
To project developer
Yes
Prerogative of host country
Comparably small (punctual)
Stringent (offsetting emissions)
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 Financing to be provided for NAMAs has a significant doublecounting potential if it exists at the same time as the CDM
 Effects of broader NAMAs in a certain sector are likely to overlap with emission reduction efforts of CDM projects in the same sector. This would lead to a situation in which developed countries pay twice for the same emission reductions, once in the CDM and one via financial support for NAMAs.
 The simple solution is to declare that no individual CDM projects can be proposed in a policy area covered by a NAMA policy or
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Energy performance based model showing the interfacing of
NAMA financing and carbon credit based financing
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 So far, only a limited number of CDM/PoA projects got registered and just three projects finally issued carbon credits
 Reasons for that are
 The currently available methodologies are not appropriate to handle the complexity to clearly determine the emission reductions resulting from a specific measure
 it is quite ambitious to produce sufficient CERs just by insulation measures in order to compensate the high administrative costs
 In contrast, NAMAs seem to be more suitable as they are
 Are very flexible (many types of mitigation actions are possible)
 Are proposed by a developing country‟s government, they can precisely be adjusted to the really occurring needs of the respective country
 Allow transformational changes, supporting long-term processes and indirect effects
 we clearly assess NAMAs as a more appropriate tool for the building sector than the CDM
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Am Wassermann 36
50825 Köln
Germany
T: +49 (0)221 270 70 396
E: S.Schimschar@ecofys.com
W:
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