Elements of A NAMA for Indonesian Cities

1. Elements of A NAMA for Indonesian Cities Prepared by: Dennis Tirpak, Senior Fellow, World Resources Institute; Associate,International Institute of Sustainable Development December 4, 2010 Supported by GTZ

2. Why does a city NAMA Make Sense? • Cities currently account for approximately 50% of the global population and this is expected to increase to 60% by 2030 • Urban areas currently account for around 67% of world energy use and 71% of world greenhouse gas emissions from energy (IEA, 2008) • Approximately 80% of the growth in energy use and 89% of the growth in emissions by cities is expected to come from developing countries. • City administrations have responsibility for street lighting, government buildings, transportation networks, landfills, tree planting, and other systems that have impacts on GHG emissions.

3. Project Vision • By the end of 2013, 10 Indonesian cities will, with participation by civil society, have developed and agreed upon nationally approved integrated climate action plans

4. CLIMATE CHANGE INITIATIVES IN INDONESIATOWARD LOW CARBONDEVELOPMENT 2007: COP13 on Bali and National Action Plan on Climate Change (RAN-PI) 2009: Technology Needs Assessment (TNA) 2009: Indonesia Climate Change Trust Fund (ICCTF) 2009: President announces mitigation targets (-26% /-41%) 2010: Indonesia Climate Change Sectoral Roadmap (ICCSR) 2010: Indonesian Second National Communication (SNC) Emerging: Development of Indonesian NAMAs

5. The Indonesian Mitigation Target (2020) S -41% with international support -26% without international support REDD+

6. National Mitigation Action Plan (RAN-GRK): Dual approach RAN-GRK: Dual long-term approach for allocating mitigation efforts • Agriculture, forestry and • land use • Energy (Industry, transportation, electricity) • Waste Sectoral Regional • Develop local mitigation • action plans (RAD-GRK) incl. provincial targets

7. Major elements of A NAMA for cities

8. Some Important considerations • Standard Protocol – ICLEI, WRI GHG Protocol or others • Inventory – Boundaries, emission factors, IPCC 20006, sector tools • GHG Projections – Baselines, simple spread sheet/expert judgment, MARCAL, LEAP, sector tools • Target Setting – Criteria, tools (ESMAP Rapid Assessment Framework), Consultations • Financing – Fast track financing and long-term transformation of financing system

9. Factors Affecting the Use of Local fINancing • The motivation for long-term borrowing at market rates is very limited, the number and volume of loans taken is relatively low.  • Local governments do not want to create a burden for subsequent city administrations by long-term borrowing  • The process to receive a loan, from the central government, but also from commercial banks, is considered very burdensome.  • Interest rates for loans from commercial banks are considered to be too high. • Local governments are concerned that they will not be able to service new loans. • The regulations on issuing municipal bonds are restrictive.

10. Action Items to Address financial barriers • Provide educational material for mayors, financial management departments, sub-national Parliaments and other city officials on different types of financing mechanisms • Work with cities to issue municipal bonds; which can have significant benefits in productivity, the quality of life and the environment if used for infrastructure. • Help city officials to expand the types of fees that can be collected to service debt instruments • Educate regional banks (BPDs), development banks and commercial banks about the financial risks and opportunities of city NAMAs • Revise and reform local regulations that may inhibit local governments from using innovative financial instruments

11. Action Items to Address financial barriers • Build capacity within city administrations to prepare bankable projects that could be submitted to bilateral donors, national development banks, tenders from international development agencies, CDM, other financial mechanisms. • Help provincial governments to prepare ‘bankable’ project proposals to secure funding for projects needing to be aggregated from multiple cities and of a particular size • Work with the MOF to change regulations which limit the use of alternative financial instruments that can be used by cities • Change the approval processes imposed by the national government for long-term loans

12. Conclusions • Cities in Indonesia can play a major role in contributing to the goal of reducing GHG emissions by 26 per cent below business as stated in the RAN-GRK and can benefit if high-priority actions are funded. • Nationally Appropriate Mitigation Actions (NAMAs) by cities are an important policy tool in national efforts to reduce GHG emissions —feed in to subsequent revisions of RAN-GRK, including the national GHG inventory. • The most basic elements of a city NAMA consist of developing a GHG emission inventory using a widely accepted international methodology; developing projection of emissions; selecting a reduction goal; identifying specific actions, policies or projects; assessing financing options and securing funding; and implementing performance tracking. • There are many technical, administrative and financial barriers that will need to be overcome if city NAMAs are to become a source of significant emission reductions below BAU.

13. Conclusions • Financing is a significant challenge—a two-track approach should be considered: 1) fast track funding through the ICCTF and 2) sustainable and transformational long-term financing through a combination of administrative and policy reforms and domestic and international mechanisms • Technical and financial partners will need to work together to overcome many of the financial barriers • Performance tracking (MRV) for domestic purposes will be essential and could serve a number of purposes, such as, evaluating the effectiveness of the project and sharing information on how to overcome technical, administrative and financial barriers