METHODOLOGY FOR ASSESSING INVESTMENT AND FINANCIAL FLOWS TO ADDRESS CLIMATE CHANGE IN ST. LUCIA

1. METHODOLOGY FOR ASSESSING INVESTMENT AND FINANCIAL FLOWS TO ADDRESS CLIMATE CHANGE IN ST. LUCIA Grupo del PNUD sobre Medio Ambiente y Desarrollo

2. INTRODUCTION

3. Agenda • Day 1 • Introduction and project context • Benefits of doing an I&FF Assessment • General methodology • Day 2 • Sectoral working groups • Day 3 • Reporting • Elaboration of workplan

4. INTRODUCTION Training Objectives Train national teams in the use of UNDP Methodology for Assessing I&FF to address Climate Change. Define final Workplan (outputs and timeframe). EXPECTED LOCAL BENEFITS: Incorporate new Government areas into Climate Change analysis. Develop local capabilities to identify key issues.

5. PROJECT CONTEXT

6. Why consider Climate Change in planning Why consider Climate Change in development planning Climate change impacts different sectors, cross-cutting If not addressed in long-term action, climate change costs will be high Countries may want to position themselves To ensure that the negotiation outcomes are coherent with national interests & priorities To be able to participate in the mechanisms that will be created

7. Context of climate change negotiations Bali Road Map Focus on 4 building blocks: • Mitigation • Adaptation • Technology development & transfer • Financial resources and investment

8. Adaptation & Mitigation What is Adaptation? • Closely linked to development • Will require adjustments across every aspect of society, environment & economy • Linked to economic development, poverty alleviation, disaster risk management • Requires capacity for short- & long-term planning Process of sustainable & permanent adjustment to changing circumstances

9. Adaptation & Mitigation What is Mitigation? • Bali Action Plan suggests nationally appropriate mitigation actions by developing country Parties in the context of sustainable development, supported and enabled by technology, financing and capacity-building, in a Measurable, Reportable and Verifiable manner (MRV) • International agreement will be major challenge • “An anthropogenic intervention to reduce the sources or enhance the sinks of greenhouse gases.” (IPCC, 2009)

10. Context of climate change negotiations Bali Road Map – Important outcomes • Actions toaddressclimate changeare linked to economic growth & sustainable developmentgoals • Shared understanding for the necessity of common efforts, by all countries • Deadline for negotiations by 2009 • New mechanisms & new demands to countries

11. Context of climate change negotiations Key messages of negotiations • Importance to show flexibilityto support any new agreement & new financial architecture • Focus on nationalcapacitiesfor • Broader participation of various decision makers • Longer term planning • Implementing broader programmatic approaches • Understanding the finance & technology opportunities

12. Project context Importance of planning tools To identify national priorities To facilitate cooperation among different ministries To build strategies to deal with climate change To create a coherent base of information of climate change impacts on and opportunities in key sectors The project tries to address these points

13. Why an I&FF assessment An assessment of I&FF is important to • Understand the magnitude & intensity of efforts needed nationally to address climate change in key sectors • Facilitate the integration of climate issues into national development & economic planning • Expand the information & knowledge base • Contribute to the elaboration of negotiating positions for international climate negotiations

14. PROJECT STAGES & SUPPORT

15. Project goals & outcomes Goals Development of national policy options to address climate change in key sectors Increased capacity to co-ordinate negotiating positions at national level & participate in the UNFCCC process Outcomes National awareness raised Investment & financial flows assessed for key sectors Web-based knowledge platform populated http://www.undpcc.org/

16. Sequencing of national activities Preparation stage Implementation stage Reporting stage National workshop on Bali Action Plan, national issues National workshop to present results, policy options Assessment of I&F flows to address CC mitigation/adaptation options for up to 3 key economic sectors (6-8 months) Pre-workshop preparation (2 months) • Key line ministries engaged • Key sectors identified • National issues papers prepared • National workshop on: • Bali Action Plan • Adaptation, mitigation, technology transfer, financing + LULUCF • Key sectors UNDP methodology on assessing I&F flows Backstopping from regional centres of excellence • Update on Bali Action Plan negotiations • I&F flows assessments presented • Post-2012 preparation

17. Preparation stage (1- 2 months) Define & agree National objectives/goals Key sectors/scope I&FF team Capacities/needs: methods, information… Institutional arrangements On workplan/budget Available scenarios

18. Implementation stage (5 – 6 months) Conduct I&FF assessment in key sectors selected by the country using the UNDP I&FF methodology and the sector specific guidance & reporting guidelines Guidance & procedures for Documentation & archiving Spreadsheet management Quality control & quality assurance procedures

19. Reporting stage Ongoing activity, not starting at the end of the assessment Define outcome (decision making tool, policy tool), target group (internal/external) to draft report Ensure good drafter for preparation of report(s) Purpose: documentation of steps and processes for interpretation of outcomes & for later follow-up work

20. Guidance available + support provided Support to the 3 stages of the project • Work plan guidance • Methodological guidance • Reporting guidance Regional Centres of Excellence • Training on assessment of I&FF • 20 days of technical backstopping incl. • Review of workplan, draft and final assessments • Guidance on scenarios, data, approach

21. Guidance available + support provided Knowledge platform Public space • Database of documents on climate change • Information on the project • Dynamic: Users can upload resources; results and updates “pushed” to site visitors Member space • Faciliate sharing of experiences in groups (country groups, thematic groups) • Private access for national project activities

22. Checklist Country checklist • Sectors selected • Major information background • Draft work plan • Key deadlines? • Roles? • Team • In place? • All recommended persons/groups in? • Institutional arrangements in place • To share data • To collaborate

23. Team composition

24. I&FF ASSESSMENT: MAIN CONCEPTS

25. What are Investment and Financial Flows? I&FF: Monetary flows needed to implement policy options in key sectors from the national perspective. Investment Flow (IF): capital cost of a new physical asset (buildings, equipment, software, etc.) with life of more than one year. Financial Flow (FF): expenditure not related to the purchase of physical assets (typically programmatic expenditures, e.g. vaccination campaign). Operation & Maintenance Costs (O&M): are estimated for physical assets (salaries, raw materials, taxes, insurance, etc.)

26. I&FF: Example

27. Who invests? Who finances? Entities and sources

28. What is a scenario? An internally consistent and plausible characterization of future conditions over a specified time period (2005-2030). Baseline Scenario: reflects business-as-usual conditions. Describes what can occur without new policies to address climate change. Mitigation Scenario: incorporates measures to mitigate GHG emissions. Adaptation Scenario: incorporates new measures to respond to the potential impacts of climate change. Note: Only one climate and socio-demographic scenario is considered. The only difference between M/A and BL scenarios is that the former consider new measures to tackle CC.

29. Scenarios and policies - Example Example - Water Sector Baseline Scenario: provide water to a growing population extracting it from an aquifer (usual practice in the last years). Adaptation Scenario: Climate Change will reduce aquifer refill, so it is decided to build a dam. The additional investment flows will be the costs of building the dam (versus the investment needed to keep on extracting water from the aquifer)

30. Expected product

31. I&FF METHODOLOGYSTEP BY STEP

32. Methodology: General Vision 1. For each sector, evaluate investments and financial flows for two policy scenarios: • Baseline Scenario • Adaptation/Mitigation Scenario 2. Estimate the additional flows needed to implement new adaptation/mitigation measures (difference between flows in both scenarios).

33. Methodology helps define/identify… What are IF, FF and O&M costs. Procedures to avoid double counting, compute additional I&FF and present results. Preferrable information sources. Additional I&FF needs for key measures in key sectors (no inventory). METHODOLOGY What guidance does it provide? National teams should identify themselves… • Key mitigation/adaptation measures from a national perspective. • Key trends/policies to consider in each scenario. • Analytical approach. • How to define sector scope and how to define boundaries if sector overlaps arise. • What policies are needed to implement CC policies.

34. METHODOLOGY Steps to conduct sectoral I&FFAssessment

35. Step 1: Establish key parameters of the Assessment

36. 1. Establish key parameters of assessment • The team should decide: • Sector scope (activities, geographical areas, etc.) and overlaps avoidance • Analysis period • Key mitigation/adaptation measures (preliminary list) • Analitical approach for defining future scenarios

37. 1. Establish key parameters of assessment Define sector scope - Analize overlaps Water pollution Hydraulic Energy BIODIVERSITY WATER Lake overflow Glaciers Oil and gas ENERGY Biofuels Transport Electricity TOURISM Coastal zones FORESTRY AGRICULTURE REDD Stockbreeding Mangroves

38. 1. Establish key parameters of assessment Identify preliminary adaptation/mitigation measures • Preliminary measures were identified in National Issues Papers and discussed in the Interministerial Dialogue. • Now measures need to be: • Prioritized (according to national criteria) • Made quantifiable (“How much does it cost to implement it?”) • Benefits of the measures need to be identified qualitatively (the assessment is not a cost-benefit analysis - it is not asked to estimate benefits quantitatively).

39. 1. Establecer los parámetros clave de la evaluación 1. Establish key parameters of assessment Define base year and assessment period Suggestions: • Base year: 2005 • Horizon: 2030 • Use constant 2005 US dollars (and discount flows) • Use up to 2 discount rates per sector: - Public rate (used in public projects) - Private rate - When analysing Climate Change impacts, theory suggests not to use a discount rate higher than 3%. • Subsidies: optional

40. 1. Establish key parameters of assessment Define analytical approach for projections Suggestions: • Use analytical models only if they are usually applied within the sector. • Projection alternatives: • Sectoral plans • Observed tendencies • Scenarios included in National Communications or strategic studies • Current situation

41. 1. Establish key parameters of assessment What should we have at the end of Step 1? • Precise definition of sectoral scope (including overlaps analysis). • List of key adaptation/mitigation measures to value. • Analytical method to estimate/project sectoral tendencies (model, current scenario projection, existing development plan, etc.)

42. Step 2: Compile historical I&FF data and other inputs for scenarios

43. Compile annual I&FF data 2. Compile historical I&FF data and other input data for scenarios • Compile historical annual data (I&FF and O&M) to address the following questions: • How much was invested in each sector (in recent years)? • What are the main types of investment in each sector? • Who has undertaken the investment? • What is the usual life of investments and duration of programmes? • Suggested period: 1995-2005 (and 2006-2008 if information is available). • Data should be collected for 3 - 10 years.

44. Step 3: Define Baseline Scenario

45. 3. Define Baseline Scenario • Describe what is likely to occur in the absence of ADDITIONAL policies to address climate change • Baseline scenario should reflect • Current sectoral & national plans • Expected socioeconomic trends • Expected investment trends (for each subsector)

46. Step 4: Derive I&FF and O&M for baseline scenario

47. 4. Derive I&FF for baseline scenario • Estimate I&FF for the sector up to 2030 • Information should be disaggregated by: • Year • Investment entity (Corporations, Government) • Source of funds (national, FDI, official development assistance)

48. Expected product (example Water sector– year 2010) 4. Derive I&FF for baseline scenario

49. Step 5: Define Mitigation/ Adaptation Scenario

50. 5. Define Adaptation/Mitigation scenario • Describe a situation where new measures are taken to adapt to/mitigate Climate Change.