South Pole Company Presentation

How to develop a NAMA by scaling-up ongoing
programmatic CDM activities
On the road from PoA to NAMAs
Prepared for:
KfW Bankengruppe and Bundesministerium
für Umwelt, Naturschutz und
Reaktorsicherheit (BMU)
Berlin, April 2011
Prepared by:
South Pole Carbon Asset Management Ltd
• Imagine you are the head of the DNA in a developing country.
• Your Minister of Environment calls on you to please come up with a concrete
design for a pilot NAMA for your country.
• She wants something very concrete and workable.
• You have never done this before but you then have a brilliant idea:
– why not just look at the PoA that was submitted for approval recently and see
whether you can use it and its operational design elements as a starting point for
the design of a concrete NAMA.
• What steps do I have to take to get there?
Introduction to the Study
• Key Observation
• A NAMA includes design elements that are structurally similar to PoA
• Questions
• How can PoAs act as starting points to scale-up mitigation actions within a NAMA
• Which PoA design elements are useful for NAMA design?
• What concrete suggestions can we provide to a NAMA designer who is tasked with the
development of a NAMA using key building blocks of an existing PoA?
• Which recommendations can we provide going forward?
• Approach
• Develop a methodological framework for scaling-up PoA
• Apply this method to four case-study
• Analyze results and prepare recommendations
Methodological Framework for Scaling Up PoA
Guidance for NAMA designers
• Module 1: Understand the PoA: what is its scope, eligibility criteria,
implementation arrangements, which GHG emission categories does it target?
• Module 2: Analyze four key technical PoA design elements re: their suitability
for scaling up:
eligibility criteria,
baseline setting procedure,
MRV process and
PoA management
Use the outcome of this process to identify if PoA design is a) already fully applicable,
b) needs to be adjusted or c) needs to be developed for NAMA design.
• Module 3: Evaluate the domestic policy and institutional framework to assess
whether the existing framework is supportive of NAMA implementation or not.
• Module 4: Identify follow-up actions for NAMA readiness based on the need
for adjustments and new designs as identified in module 2.
Module 2: Guiding Key Questions
Eligibility Criteria
• What are the PoA’s eligibility criteria?
• Should the eligibility criteria be adjusted to include additional activities
under a NAMA, such as expansion to other sectors and interventiontypes?
• Should the eligibility criteria be adjusted to be able to scale-up
activities through the involvement of additional implementation
• Is the PoA limited to a region? Should its geographical coverage be
increased to a national scale?
• Should the eligibility be adjusted to target emission reductions from
the same IPCC GHG emission categories under a NAMA?
Module 2: Guiding Key Questions
Baseline Setting
• How is the baseline set in the PoA?
• Is the baseline setting applicable to a NAMA?
• Can the baseline be adapted by introducing standardization
• Can the baseline be simplified in the context of a NAMA?
• Can the PoA baseline be used to set targets for the NAMA?
Module 2: Guiding Key Questions
MRV Procedures
• What are the key monitoring requirements of the PoA?
• Are the PoA monitoring requirements workable in a NAMA context or
would they be too difficult to implement?
• Can a NAMA-level GHG inventory and its related MRV system be
upgraded and operated using the PoA as a starting point?
• Who is responsible for monitoring and managing the verification
• What is the capacity of the relevant entities in the PoA to estimate,
collect and manage GHG emissions in a NAMA context?
Module 2: Guiding Key Questions
PoA Management
• How is the PoA management structure set-up? Who is managing the
• Could the CME play a crucial role in managing a NAMA?
• If not, would it be possible to transform the PoA CME into an entity
with the institutional capacity to manage a NAMA?
• Are the current incentives/regulations sufficient to successfully
manage a NAMA? If not, what additional incentives/regulations would
be needed to successfully manage a NAMA?
NAMA Draft Design Sheet
Country: Uganda
Scope and target
Eligibility criteria
Fit with existing
act. / value-add
MRV procedures
Sub sector: Grid-connected RE Development in East Africa
Scope: grid-connected renewable energy generation through a feed-in-tariff and
carbon credit generation.
Target: increase share of RE in the generation mix above baseline levels.
• All grid-connected RE technologies (not only small-scale),
• Large-scale interventions, including hydro,
• Fuel-switching activities.
• Strongly supports existing support mechanisms
• The NAMA baseline is identical to the PoA baseline
• NAMA MRV can be based on CDM MRV requirements.
• Data is generally available.
• CME is experienced to provide NAMA relevant support services but not NAMA
coordinator, i.e. Uganda Electricity Board
Incentive system/ • Negotiated feed-in-tariffs (usually low). Additional support could be:
- Concessional financing for the construction of new RE facilities and/or
- Supplemental payments to feed-in-tariffs (per green kWh) to increase financial
attractiveness of new RE development
Link NAMA –
• LDC status: eligible for post 2012 EUETS.
Carbon market
• No pressure to scale-up to NAMA unless for perceived additional benefits, i.e.
support payments above financed through international support mechanism
Lesson-learnt & Recommendation
PoA elements can serve as building blocks for NAMA design
Technical criteria that provide an “objective” basis to
assess eligibility of a facility or activity (type of facility,
unit sizes, type of intervention ..)
Standardized elements that have been developed for
CDM methodologies::
 large-scale benchmarks (carbon intensity of power
grid, national or regional NRB usage rates)
 deemed savings
 status-quo baselines
 modelled baselines
Based on deemed savings and inventory of
activities/interventions (Nepal)
Focus on large emission sources with simple MRV
requirements that facilitate cost-effective MRV on
facility level (e.g. India, Uganda case study)
Implementation CME already operating at same scale as NAMA and is
and Operation integral part of existing support mechanisms
PoA Elements
Applicable for NAMA
Non-applicable for
Criteria that are subject to
interpretation, i.e. driven by
additionality assessment.
Baseline setting procedures
that are very specific to single
installations or based on
baseline option ranking.
Project-level accounting of
leakage (e.g. Tunisia case
Project-level accounting of
small emission sources
CME involved in small subset of NAMA scope.
Recommendation: a systematic assessment of NAMA suitability of CDM methods.
Lesson-learnt & Recommendation
Key Differences between PoA and NAMA
Managed on the sectorlevel
Managed on the activity level
For all GHG sources that
meet eligibility criteria
Participating GHG sources only
Carrots (different flavors)
and sticks
Carrots only (one type only (CER))
Political: “appropriate”
Pseudo-technical: “additional”
Lesson-learnt and Recommendation
Integration facilitates scaling-up, but avoidance of double-counting of ER must be
managed using a robust approach
• Strong integration of PoA and domestic policies facilitates scaling-up
• Recommendation
• Ensure strong policy integration in the design of PoAs to facilitate the scaling-up to NAMAs.
• Co-existence of NAMAs and PoAs in the same sector is possible if double-counting is
avoided using a robust approach
• A NAMA (contributing to domestic targets) competes with PoA (contributing to third Party targets):
how to differentiate which ER count towards domestic energy efficiency target vs. carbon credits?
• Recommendation
• The only and most robust solution in the short-term is to:
issue CERs to the PoA and then
deduct those issued CERs from the NAMA achievement.
PoA reform and NAMA design agenda need to connect to address double-counting (among other
Lesson-learnt and Recommendation
Gain more practial experience with scaled-up PoA and pilot NAMA
• More real life experience with PoA is needed to better understand key
scaling-up issues and to inform PoA reform agenda
• More practical experience with NAMA design will facilitate negotiation
process to define operationalization of NAMA concept.
• Recommendation
• Launch pilot NAMA that are driven by existing and suitable PoA and examine
their fit into the domestic policy landscape.
• Examine how the role of PoA in NAMA framework contributes to PoA
reform/streamlining of rules.
Open Issues
that require further investigation
• Double Counting
• Coordination between PoA & NAMA procedures to ensure simplification and coexistence
• Standardization potential
• JI-style simplification
• De-centralization of CDM EB authority for PoA under NAMA
• Guidance for AWG LCA re NAMA design
• Credited NAMA = supported NAMA plus PoA and/or new mechanism?
Thank You for Your Attention
Ingo Puhl
Tel +66 2 678 8979
Back-Up Slides
The Result: a NAMA that co-exists with a PoA
= a supported NAMA with PoA to provide “crediting” function
• PoA is established
– Standard process
• Host country defines NAMA
– Through systematic scale-up of PoA
using useful and adjustable PoA
design elements
– Clarifies procedure for avoidance of
double-counting of emission reductions
Domestic &
• NAMA and PoA operate
– Using mix of (integrated) incentives
– NAMA compliance management takes
account issued PoA CER.
• PoA is driven by NAMA policy
NAMA target sector emissions
This design provides full crediting
functionality on NAMA level using
existing (operational) mechanism
Sector emissions (BAU) in country A
(monitored in accordance with intl. rules)
Introduction to Market Based Mechanisms
Using price signals to identify & implement least-cost abatement options
To reduce the cost of
complying with a defined
emissions cap
Context: Scaling up of baseline & credit mechanisms
CDM Project-by-project approach
• Every project needs to establish
Sector emissions in country A
(not monitored (well))
– Eligibility/additionality
– Emission Baseline
– MRV plan
• Pass UN validation and registration
• Monitor, report and complete verification
of carbon credits
Driven by initiative of project owners, not
High complexity, high cost that create
commercial risks and access barriers for
small projects
Context: Scaling up of baseline & credit mechanisms
Programmatic Approach
• Program needs to establish
Sector emissions in country A
(not monitored (well))
Emission Baseline
MRV plan
CME Operating Structure
Pass UN validation and registration
• Activities need to:
– Complete inclusion
– MRV of carbon credits
• Driven by “aggregator” & public policy
• Reduced complexity & cost for activities
Context: Scaling up of baseline & credit mechanisms
Domestic, Supported, Credited NAMA
• Host country defines:
Domestic &
Actual NAMA
emissions in
country A
(monitored in
accordance with
intl. rules)
NAMA baseline and target
Requested support
Implementation arrangements
Crediting: Benchmarks/baselines for
“surplus” actions (procedures not defined)
• Host country registers & operates NAMA
– Regular MRV of all NAMA sources
– Implement mix of incentives, incl. carbon
credits for surplus activities
– Emissions “true-up”
• Driven by domestic policy priorities
• Implementation of activities facilitated by
NAMA target sector emissions
incentives and regulation
Discussion on credited NAMA postponed
to December 2012
Sector emissions (BAU) in country A
(monitored in accordance with intl. rules)
Drivers for Scaling-Up from PoA to NAMA
• EU limitation on importing CER from project-based approaches
• Sector-baselines might open the door for “NAMA CER”
• “Mainstreaming” international cooperation mechanisms into domestic
• Potentially simplified PoA implementation modalities for PoA under a
• Learning from existing mechanisms (vs. reinventing the wheel)
PoA Case Studies and their NAMA Scale Equivalent
PoA Scope
NAMA Scope
Small Scale Hydro
Energy Efficiency in
SME Steel Industry
Integrated payments of carbon
credits and FiT for grid
connected RE development
Energy Efficiency in Energy
Intensive SME Industries
Domestic Biogas
Energy Efficient Roofs
Low Carbon Rural Development
Low Carbon Housing
Next Steps
Strengthen NAMA readiness
Country: Uganda Sub sector: Grid-connected RE Development
Fit with existing
activities / valueadded
MRV procedures
Proposed structure
Incentive system/
Link NAMA –
Carbon market
To prepare a concrete design of a supported NAMA based on supplemental payments for
RE and associated supporting activities.
Improve the quality and efficiency of data collection (including automation), develop
country-specific fuel emission factors.
See above under “fit with existing activities”
See above under “fit with existing activities”
To conduct a high-level policy dialogue with the Government re: their interest to
participate in a pilot NAMA in relation to the development of grid-connected renewable
Next Steps
Strengthen NAMA readiness
India EE for Energy-Intensive SME Industries
Follow-up Action for NAMA Readiness
Eligibility criteria • Evaluate/assess the potential for expansion of furnaces and burners in similar energy-intensive
SME industrial sectors, including power and steam generation, fertilizer, cement, aluminum,
textile, pulp & paper, glass, etc.
• Create a useful classification system/ categories of equipments (size, etc) for the development of
category-specific benchmarks.
Fit with existing • Obtain detailed information on the applicability of the Indian energy efficiency scheme (current
phase) and its planned future expansion.
activities /
• Assess the potential interaction between a PoA, the NAMA and the EEC scheme.
• Develop standardized baselines for this equipment type based on CDM method AMS II.D,
applicable version.
MRV procedures • Develop MRV procedures for collecting and analyzing activity data for this equipment type, (e.g.
energy use fuel requirements, output) and design MRV infrastructure (e.g. who collects what,
how often, and under what mandate).
Link NAMA –
Carbon market
• Assess coordination between NAMA and PoA coordinating entities (capacity building needs).
• Evaluate take-up of EE investment activity and assess performance of the existing PoA incentive
system after first year of PoA operation.
• Offer support to the Indian Govt. to design a conceptual framework for a NAMA in this sector and
explore its interaction with a PoA.
NAMA Draft Design Sheet
Country: India
Sub sector: EE in SME Productive Industries
• Scope: to improve the energy efficiency of furnaces and burners in energy-intensive SME
industries throughout India.
• Target: to reduce energy consumption by at least 20% per unit of production.
Eligibility criteria
• All furnaces & burners operating in energy-intensive SME industries that are not covered
under the India EEC scheme incl. measures that do not comply with AMS II.D.
Fit with existing
• Contributes to 20-25% emission intensity reduction target per unit of GDP by 2020.
activities / value-add • Supplements energy efficiency certificate mechanism (currently for large energy users only)
• NAMA-level baseline data for SME is currently missing.
• NAMA baseline should be established retroactively and be disaggregated to the facility level.
• CPA contribute a share of its CER to NAMA target.
MRV procedures
• Mandatory reporting of activity data for all facilities covered by this NAMA (BEE managed)
• CPA already report to CDM requirements.
Scope and target
Proposed structure
Incentive system/
Link NAMA –
Carbon market
• NAMA coordinated under National Mission for Enhanced Energy Efficiency (i.e. by BEE)
• NAMA-level monitoring and reporting by BEE
• Technical advisory and financial support by ISTSL and SIDBI
• All activities shall be eligible for the financial support provided under the 2001 Energy
Conservation Act and SIDBI EE financing facility (plus CER for PoA eligible activities).
• NAMA shall not encumber the CER granted to the PoA
• Issued CER need to be deducted from NAMA achievements when determining NAMA target
• NAMA could purchase CER from this PoA (or any other) to cover an eventual shortfall of
emission reductions on the NAMA level.