Experiences and challenges implementing PoAs from the perspective
of a Stakeholder
PRESENTATION AT UNFCCC POA WORKSHOP MAY 2011
BY
FELICITY SPORS (FSPORS@WORLDBANK.ORG) & MONALI RANADE (MRANADE@WORLDBANK.ORG)
THE WORLD BANK CARBON FINANCE UNIT
Contents
•
•
•
•
•
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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
Number Crunching
90%
80%
80%
• 30% PoAs vs 73% CDM
projects in BIC (Brazil, India
and China)
70%
60%
60%
50%
• 11% PoAs vs 1.7% CDM
projects in LDCs/SIDs
40%
30%
20%
23%
16% 15%
10%
0% 1.1%
0%
Latin
America
Asia &
Pacific
Europe &
Central Asia
pCDM
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CDM
2.6%
Africa
1% 1.1%
Middle-East
Source: UNEP Risoe CDM/JI
Pipeline Analysis and Database,
March 1st 2011
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
29
23
12
5
4
2
2
2
1
1
1
82
Fossil fuel switch
2.4%
Biomass energy
2.4%
Agriculture
1.2%
Transport
1.2%
CMM
1.2%
Forestry & Agriculture
2.4%
EE demand side
35.4%
EE supply side
4.9%
Hydro
6.1%
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
• 10 small scale
–
–
–
–
–
Under validation
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 retains major part of
revenue
PoA Coordinating entity is
the CPA entity
• controls all CPAs
• finances all projects
• prepares all CPA-DDs
• covers all monitoring costs
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
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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
PoA PDD
only - by
CME
1.
Validation
by DOE
PoA
validated by
DOE
2.
Registration
EB
Registration
EB
3.
Monitoring
of CPAs
Monitoring
of CPAs
Verification
DOE
Verification
DOE
Issuance
CERs
Issuance of
CERs
4.
5.
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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.
Key barriers in existing rules
1
• 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
• Guidance on sampling. Can DOEs verify CPAs according to sample assessed? Not
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BANK CARBON
FINANCEto
UNIT
applied
yet (due
liability concerns)
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
• Define procedures for submissions from PP
• Top down definition of combinations key sectors
e.g. housing in consultation with stakeholders
Baseline
Identification
Sampling
guidance
• 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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Thanks for listening
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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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