Chile’s Transportation Sector and the Clean Development Mechanism: Project Overview

1. Chile’s Transportation Sector and the Clean Development Mechanism: Project Overview Inception Meeting, August 2002 Santiago, Chile

2. Project Partners • International Institute for Sustainable Development (IISD) • Cambio Climatico y Desarrollo (CC&D) • Center for Clean Air Policy (CCAP) • Canadian International Development Agency (CIDA)

3. IISD • an independent, not-for-profit corporation • governed by an international Board • carries out policy research and communications Our Vision – Better living for all – sustainably. • Our Mission – To champion innovation, enabling societies to live sustainably.

4. IISD • Canadian based, but international in scope • headquartered in Winnipeg, with offices in Ottawa, New York and Geneva. • focuses its research on five strategic objectives: Economic Policy, Trade and Investment, Natural Resource Management,Measurement and Indicators, and Climate Change & Energy

5. CC&D • Consulting firm specialized in the analysis, design and promotion in Chile of the market-based instruments under the UNFCCC • Established in 1994, and actively involved in the local and international climate change debate • Provides expertise on technical matters for organizations within Chile and to the UNFCCC negotiation process

6. CCAP • non-profit environmental think-tank that specializes in developing and implementing innovative solutions to environmental problems balancing environmental and economic interests. • extensive experience on transportation analysis and climate policy development inboth domestic and international settings.

7. CCAP – CDM Experience • Mexico—Investment in energy efficiency and renewable energy, identified CDM opportunities • Brazil—Analysis of CDM project opportunities in the industrial sector • Caribbean—Developed regional baseline for the power sector & held workshops to discuss potential CDM case studies • CDM Dialogue—Facilitate consensus among 40 countries re: CDM rules and implementation issues

8. CIDA • CIDA works to reduce poverty & contribute to a more secure, equitable and prosperous world • CIDA’s objective: facilitate the efforts of developing countries to achieveself-sustainable economic and social development

9. Project Overview

10. Canada – Chile Relationship • MOU for cooperation signed April, 2002 • Project is an investment in the relationship between Canada and Chile • Recognizes that cooperation on climate change issues, including CDM projects, can mitigateGHGs globally, and positively impact community, social and economic development

11. CDM & Chilean Transport • CDM will be an important opportunity for a more sustainable transportation sector for Chile through: • Increased funding flows • Enhanced capacity • Expanded technology

12. Background • In Chile, transportation represents largest source of man-made GHG emissions in the energy sector - approximately 33%

13. Goals The goalof this Project is to be of technical assistance to Chileans to reduce GHG emissions and promote involvement in the CDM, specifically in the transportation sector.

14. 5 Main Project Components Analyze Chile's transportation sector Prepare two in-depth case studies of potential transportation CDM projects Strengthen the technical capacity of relevant Chilean government authorities Conduct a capacity-building workshop Prepare a comprehensive final report and disseminate the project results

15. Benefits to Chile Local goals addressed by climate change projects: air quality, congestion, health, etc. 2. Opportunity to break new ground re: application of CDM to transport sector 3. Potential foreign investment in sustainable development technologies

16. Benefits to Canada Fulfils goals of the Canada – Chile MOU 2. Contributes to global reduction of GHGs Extends theoretical analysis of CDM project applicability 4. Identifies specific opportunities for CDM projects/credits in the transportation sector

17. Meeting Goals Provide CDM overview and update Gather input on what will be useful and complementary to ongoing initiatives Narrow down case study options Discuss data needs and potential areas of cooperation Adjust & gain approval for project workplan

18. Clean Development Mechanism (CDM)

19. Status of the CDM • Trades can happen now (after 2000) • Marrakech Accords set rules for verification, certification, baselines (offers 3 approaches to setting baselines) - Need guidelines for project developers and OEs on method selection/review • Small projects--EB/Panel establishing simplified baseline methods • Regular projects--EB/Panels will likely develop guidance as projects are approved (no resources for guidance in the nearer term)

20. Incentives for Participation • Certified Emission Reductions (CERs) present additional revenue stream for carbon reduction projects • CERs can increase a project’s internal rate of return

21. Project Cycle • Preparation of the project design document (PDD) • Key Aspects: baseline, project emission reduction estimates, monitoring plan • Approval by designated national authorities • Investor country approval • Host country approval • Validation • Registration • Monitoring and Verification • Certification and Issuance of CERs

22. Baselines Status of the Rules (based on Marrakech Accords) • The baseline is the scenario that reasonably represents GHG emissions by sources that would occur in the absence of the proposed project activity - Baseline is inherently speculative, since it attempts to predict what will not happen • Marrakech states baselines must be conservative. • Further guidance will likely be developed as projects are approved

23. Baseline Methods • Baseline methods must be approved by CDM EB • A credible baseline would include all BAU activities • Project developers can select most appropriate of 3 approaches: • Existing actual or historical emissions • Emissions from a technology that represents an economically attractive course of action, taking into account barriers to investment • Average emissions of similar project activities undertaken in the previous 5 years…and whose performance is among top 20 %

24. Additionality • A CDM project is additionalif anthropogenic emissions of GHGs by sources are reduced below those that would have occurred in the absence of the registered project activity • Financial additionality must prove CDM investment is additional to Official Development Assistance (ODA)

25. Certified Emission Reductions (CERs) • CERs are calculated based on the difference between project and baseline emissions - CERs not guaranteed over the entire project lifetime. - Choice between 7 yr crediting period with potential for renewal, OR, 10 yr period without renewal.

26. Transportation & CDM : Unique Issues • Developing quantification methodologies • - Issues of baseline, additionality, measurement • Modeling of travel demand/behavioral change

27. Future Impact This project, with its emphasis on technical assistance and groundbreaking analysis of methods for structuring and implementing CDM projects, can: • Provide a methodology for future use for other developing countries and • Help set precedent for transportation CDM projects

28. Gracias!