CD4CDM Final Regional Workshop
Asian Institute of Technology
Bangkok, Thailand
19-21 October 2005
DNA Practicalities in CDM Project Approval
Latin American Experience
Miriam Hinostroza
UNEP Risoe Centre on Energy (URC)
Denmark
Energy, Climate and Sustainable Development
Content
• Institutional Structure
• Project approval process
• Sustainable development
criteria
• CDM and SD in LA
Energy, Climate and Sustainable Development
Institutional structure Ecuador
CDM National
Authority (DNA)
CDM Promotion Office
separate public-private entity
presided by
Ministry for Environment
Ministry for
Environment
Priority project
portfolio
Regulation
Strategic research
& studies
Promotion
Policy - making
Information
dissemination
Project assessment
& approval
National registry &
Project reporting
Capacity
building
Energy, Climate and Sustainable Development
Technical & commercial
assistance
Advantages
• Separation of regulatory and promotion functions
• Separation of functions enables to better address development of
a heterogeneous range of new capacities and skills
• CDM institutional arrangements have been agreed on by the
National Climate Change Committee (NCCC).
– The Board of Directors of CDM Promotion Office includes members from the
public, private & NGO sectors.
– The Ministry for the Environment is the DNA, but operates under overall guidance
of the NCCC.
• DNA and CDM Promotion Office are small technical units with
clear-cut responsibilities.
Energy, Climate and Sustainable Development
Disadvantages
• Financial sustainability of CDM entities is not granted.
• Permanence of installed capacities:
– DNA officials are not exclusively dedicated to CDM and still depend
on technical assistance provided by consultants.
– CDM Promotion Office officers are consultants hired by technical
cooperation programmes.
• Political instability at the M for the E affects working environment
at the CDM Promotion Office (regardless its public-private nature).
• CDM Promotion Office will have to address new challenges in
accordance to evolution of international emissions market.
Energy, Climate and Sustainable Development
Ecuadorian DNA
DNA
(Ministry for Environment)
Evaluation & Approval
Mechanism
Follow up &
National Registry
Legal Framework for
carbon trade
Inclusion of CDM
in sectoral plans
Energy, Climate and Sustainable Development
Project Approval Process
Energy, Climate and Sustainable Development
Approval Process: Advantages
• Cost-efficiency:
– Evaluation fee expected to be symbolic
• Time-efficiency:
– The approval process is designed to be a streamlined process.
in less than 20 working days
• Submission of PDD is requested:
– Project participants and DNA will benefit of dealing with a
consolidated project proposal.
Energy, Climate and Sustainable Development
Approval Process: Disadvantages
• Request of EIA, regardless of applicable law
• Subjectivism
• Pending legal issues related to CDM
• Presumption: ‘legal framework & development plans are
congruent with national sustainable development
objectives’: Current evaluation criteria are based on the
referred presumption.
• Lack of project-specific SD assessment of proposed
project activity
Energy, Climate and Sustainable Development
Institutional Structure - Bolivia
Ministry of
Sustainable
Development
Inter-institutional
Council of Climate
Change
Vice-ministry of
Natural Resources
and Environment
(DNA)
Nacional Program of
Climate
Change
Energy, Climate and Sustainable Development
Projects
Evalutaion
Commission
Clean
Development
Office (ODL)
Institutional structure: weaknesses
• ODL - CDM promotional office has several roles:
– Evaluation
– Technical assistance to the DNA, and
– Promotion of the CDM
• There is conflict of interests - the office is at the
same time judge and part
• Needs to be restructured to have separate
teams: one for evaluation, one for support
• Resources?
Energy, Climate and Sustainable Development
Project Approval Process - BOLIVIA
Project Proponent
ODL
DNA
PDD
Gets the nonobjection note
Technical Support
Recommendation
to DNA
Approval
Issuance of
letter of
approval
Presents to
the DOE
Energy, Climate and Sustainable Development
Approval Procedure - Advantages
• Cost-efficiency
– There is no evaluation fee.
• Time-efficiency:
– The approval process takes 15 working days
Energy, Climate and Sustainable Development
SD and the CDM
• Two-fold objective of the CDM:
– assist Annex I parties in achieving compliance with
their quantified emission limitation and reduction
commitments…
• helping to reduce compliance costs
– …and assist non-Annex I parties in achieving
sustainable development
• involving clean technology transfer
• investments flows from north to south
Energy, Climate and Sustainable Development
The Role of DNAs
• Host party’s prerogative to ‘confirm whether a CDM
project activity assists it in achieving sustainable
development’
• DNA has a key role in securing local development
benefits of CDM projects.
• SD assessment of CDM projects is an opportunity for
DNA to evaluate key linkages between national
development goals and CDM project interventions
Energy, Climate and Sustainable Development
Sustainable development
What to sustain?
• SD is about shifting carbon based energy economies to be
more dependent on renewable energy sources
• CDM is an instrument that promotes technology innovation
– Increment of EE in productive uses and final consumption
– Changes in consumption structures
– Introduction of new processes and energy transformation
equipments
– Alteration in agricultural practices and LU patterns
Energy, Climate and Sustainable Development
SD Context
•
•
•
•
National development plans
Sectoral plans
WSSD – Agenda 21
Country’s Strategy for Poverty
Reduction - PRSPs
• MDGs
Energy, Climate and Sustainable Development
SD criteria
• The most challenging issue for DNAs
• Most LA countries have adopted the checklist approach, to
check:
– Principles
• Accomplishment of national/sectoral legislation
• Contribution, relevance and coherence with national
development policy
• Contribution to improve long term social and economic
wellbeing of local communities
• Implementation of cleaner production systems
Energy, Climate and Sustainable Development
SD criteria
– Requirements
• Certification of non-environmental sectoral legislation
accomplishment applicable to the project
• Environmental Permits according to current legislation
– Criteria
• Description on how the project contributes to long term
development objectives and coherency with national,
regional, local and sectoral policies and strategies
Energy, Climate and Sustainable Development
SD criteria for CDM projects
Economic Criteria:
• Reduce economic burden
of energy impor ts,
provide financial returns to
local entities,
• positive impact on
Balance of Payments,
• technology transfer,
• generate employment,
• sound financial
Costs/cost-effectiveness
Social Criteria:
Environmental Criteria:
•
•
•
•
• GHG emission reductions,
• local environmental
benefits, related to e.g. air
pollution, water, soil, waste
• use of exhaustible
resources
• use of renewable
resources
• biodiversity
•
•
•
•
•
increase equity
reduce poverty
improve quality of living
increase energy access
gender issues
Health
education and training
legal framework
Governance
information sharing
Energy, Climate and Sustainable Development
SD and current CDM projects
• What kind of projects should CDM be financing?
– projects that help in the long-term transition of
developing country energy sectors towards RETs
Energy, Climate and Sustainable Development
Projects in the pipeline
Source: J.Fenhann, URC – 16-09-05
Type of Projects
Hydro
Biomass energy
Agriculture
Landfill gas
Fossil fuel switch
Wind
Energy efficiency, industry
Geothermal
Biogas
Energy distribution
Fugitive
HFCs
N2O
Latin America - Total
Number of Projects
40
35
27
21
5
3
2
2
1
1
1
1
1
140
2012 kCERs
11.2%
13.2%
0.8%
16.6%
0.3%
2.3%
0.6%
2.2%
0.1%
0.2%
1.6%
21.5%
29.4%
100.0%
Energy, Climate and Sustainable Development
Projects in the pipeline in LA
Source: J.Fenhann, URC – 16-09-05
Type of Projects
Renewables
Energy efficiency
Fuel switch
CH4 reduction
HFC & N2O reduction
Latin America - Total
Number of Projects
81
3
5
49
2
140
2012 kCERs
29.0%
0.8%
0.3%
19.0%
50.9%
100.0%
Note: The renewables category only includes hydropower projects below 10MW
Energy, Climate and Sustainable Development
Current status of the CDM
Source: J.Fenhann, URC – 16-09-05
35.0%
30.0%
25.0%
20.0%
15.0%
10.0%
5.0%
%Number of Projects
Energy, Climate and Sustainable Development
al
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Is CDM ‘working’?
• CDM is working perfectly in that it is directing funding to
projects delivering big volumes of CERs at the least cost.
• Current prices seem to grant cost-efficient emission
reductions for Annex I parties
Energy, Climate and Sustainable Development
Is CDM promoting SD?
• Is it promoting renewables and thus assisting in the
transition away from fossil fuels?
– CDM is not 'working', in that it is not driving SD and not funding
renewables
• CDM is a market = commanded by the least cost approach
• CDM is not a development fund
• CDM is not renewables promotion mechanism
Energy, Climate and Sustainable Development
Balance of two objectives of the CDM
• Lax additionality requirements increase availability of costefficient emission reductions.
• On the other hand, carbon prices likely to rise if strict
sustainability criteria were globally applied in host parties.
• Absence of (internationally agreed) sustainability
standards plus competition in the CDM supply side is
resulting in a trade-off for the cost-efficiency objective.
• Additional SD benefits by paying a premium for the credits
Energy, Climate and Sustainable Development
The potential of the CDM
• SD not merely a requirement of the CDM. It
should be seen as a main driver:
– SD criteria are a sovereign matter to be determined
by host countries
– National authorities can use SD assessment of CDM
projects to evaluate key linkages between national
development goals and CDM with the aim to select
and design projects in a way, where they exploit,
create and maximise local development synergies.
Energy, Climate and Sustainable Development
Challenges
• There is a role of DNAs - and of other local
stakeholders
– Develop market niche for ‘high quality’ CERs
(particularly relevant for marginal suppliers)
– credibility of the CDM system & the host country
– fundamental elements of a national/regional marketing
strategy
Energy, Climate and Sustainable Development
Conclusive remarks
• Contribution of projects to SD is not yet assured.
• Demand preferences on financially sound
business-as-usual projects
• CDM is a technology neutral mechanism
• Reduced interest for projects that have additional
environmental and social benefits but that need
financial returns from carbon finance market to
get implemented
Energy, Climate and Sustainable Development