CDM Programmes of Activities : Opportunities to improve implementation

1. CDM Programmes of Activities : Opportunities to improve implementation Presentation at HCC Meeting, May 31, 2011 by MonaliRanade (Mranade@worldbank.org ) [With Felicity Spors and Klaus Oppermann]

2. Current situation versus the vision? • Actual situation • Limited private sector involvement in PoAs due to market and regulatory barriers. • Regulatory uncertainty (regulations, procedures, eligibility criteria, liability etc) • Complexity in applying methodologies and tools • PoA implementation largely with public finance and capacity building support. • PoA Vision: • Reduce transaction costs and facilitate dispersed projects. • Small projects targeted particularly from under-represented or LDC countries to participate in CDM • Scale-up and accelerate emission reduction activities

3. PoA potential – Regional distribution • Number Crunching • 30% PoAs v/s 73% CDM projects in BIC (Brazil, India and China) • 11% PoAs v/s 1.7% CDM projects in LDCs/SIDs • Source: UNEP Risoe CDM/JI Pipeline Analysis and Database, March 1st 2011

4. PoA potential – supporting sustainable development by supporting small dispersed HH/SME projects But PoAshavenotyet achievedscaleupof GHG mitigation in numberofPoAsnor in sizeofPoAs.

5. World Banks PoA Portfolio 2 registered; 12 Under validation • 10 small scale • 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)

6. A few Challenges (among many others) • Additionality of PoA • Justifying programs supported by public funds • Assessing 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 and monitoring • Survey methods • Sample size • Monitoring systems • Building appropriate monitoring structure and database without over-burdening the CME and at a rational cost • Yet unknown verification challenges

7. 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 (partly resolved) • Other minor issues • DOE Liability • Trustees‘ dilemma • Buyers‘ dilemma • CME financial capacity and credit-worthiness

8. 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 • 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 Retailer

9. 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.

10. Key barriers in existing rules

11. Recommendations to address regulatory barriers facilitate larger CPAs

12. Simplified additionality for micro RE projects

13. Simplified additionality for micro EE projects

14. Simplified additionality for Type III projects

15. In conclusion General experience with CDM PoA? • Programs are complex • CDM-specific regulatory complexities pose additional challenge • Need highly capable coordinating agency • Even the simplest POAs can be tough to monitor • Each PoA is unique in its combination of national circumstances, technology, beneficiary and financing • However, rules are getting better defined and • knowledge is being generated through the experience of a wide-range of PoA developers in different sectors and countries.

16. Thank you