Experiences and challenges implementing PoAs from the perspective of a Stakeholder

1. Experiences and challenges implementing PoAs from the perspective of a  Stakeholder Presentation at UNFCCC PoA workshop May 2011 by Felicity Spors (Fspors@worldbank.org) & MonaliRanade(Mranade@worldbank.org)

2. Contents • 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

3. PoA potential – Regional distribution • Number Crunching • 30% PoAsvs 73% CDM projects in BIC (Brazil, India and China) • 11% PoAsvs 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 PoAshavenotachievedscaleupof GHG mitigation in numberofPoAsnor in sizeofPoAs.

5. World Banks PoA Portfolio 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 • 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

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 (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. Two procedures for two different kinds of PoA Solution for PoA type B (micro CPAs): 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.

11. Key barriers in existing rules

12. Recommendations to address regulatory barriers facilitate larger CPAs

13. 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 PoAse.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?

14. Thanks for listening

15. 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).

16. Expansion of Micro-scale ruling to CPAs (source: UNFCCC)