Italian Policy and Plan on CDM

1. Italian Ministry for the Environment and Territory Department for Environmental Research and Development Italian Policy and Plan on CDM Djerba CDM Investor Forum Claudia Croce September 23rd 2004

2. Structure of the presentation • The Italian context • The National Action Plan • The Role of the Flexible Mechanisms • Actions of IMET • Conclusions

3. Our context: energy intensity Energy / GNP ** (Toe / 1000xUS$) * Note: without Norway from 2002-2012 ** Note: 1995 PPP Source: Italy 2003 Review, International Energy Agency

4. Our context: carbon intensity Emissions /GNP ** (t CO2 / 1000xUS$) * Note: without Norway from 2002-2012 ** Note: 1995 PPP Source: Italy 2003 Review, International Energy Agency

5. Our context: a scenario Emissions – energy use (Mt of CO2)

6. 120 GDP 115 total energy consumption CO2 emissions 110 CO2 Intensity Index 1990=100 105 100 95 90 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 Our context: the whole picture

7. Our context: summary • Low energy and carbon intensity of the economic system • Peculiar energy mix (no nuclear energy by choice, importance of gas and renewable energy source) • Ambitious reduction targets (-6,5%)

8. National Action Plan: principles A climate change policy based on a few principles: • Maximizing economic efficiency • Exploiting synergies between climate change policies and other policies • Promoting technology innovation and diffusion • Integrating carbon finance activities in existing project finance activities • Facilitating global partnership

9. National Action Plan: figures Additional domestic reductions Additional use of the flexible mechanisms Italy’s Kyoto target

10. National Action Plan: role for the flexible mechanisms • Project-based carbon credits will add up to 10% - 50% of the national emissions reductions during the first commitment period • Flexible mechanisms will contribute to the overall reduction through: • Activities sponsored by public institutions • Activities carried out by private companies • The exact extent, to which flexible mechanisms will contribute, will depend on the evolution of both the carbon market as well as national abatement costs

11. Actions of the IMET Specific actions undertaken: • Exploring institutional settings for JI/CDM implementation • Experimenting with the JI/CDM project cycle • Investing in credit-generating facilities • Preparing for the increase in direct investments abroad

12. Exploring institutional settings for JI/CDM implementation • Italy has signed Memoranda of Understanding with China, Serbia, Moldavia, Croatia, Romania(LoI), Slovenia, Poland, Bulgaria, Morocco, Egypt, Algeria, Cyprus, Israel, Cuba, Salvador, and Brazil (LoI) • Italyhas enhanced international cooperation programmes with the Balkans and Southern Mediterranean countries through the MEDREP initiative

13. MEDREP, the Mediterranean Renewable Energy Programme • The Mediterranean Renewable Energy Programme (MEDREP) was launched as a Type II Initiative at the World Summit on Sustainable Development in Johannesburg, following the recommendations of the G8 Renewable Energy Task Force • The report outlines the goal of reducing renewable energy technology costs by expanding markets and building a strong market environment for renewable energy • The report recommends that countries should help to develop and demonstrate renewable energy projects where (i) renewables are a least cost option on a life cycle basis and/or (ii) renewables can achieve protection of local and/or global environment at reasonable costs Source: G8 Renewable Energy Task Force Report

14. MEDREP Partners • Tunisian Ministry for Industry and Energy (TMIE) • Tunisian National Agency for Renewable Energies (ANER) • The New & Renewable Energy Authority of Egypt (NREA) • The Centre for Renewable Energy Development (CDER) of Morocco • The Environmental General Authority of Lybia (EGA) • The Ministry for Resources and Infrastructure of Malta • The Ministry of Water and Environment of Yemen • The Agence de l’Environnement et de la Maîtrise de l’Energie (ADEME) • The International Energy Agency (IEA) • The Mediterranean Association of the National Agencies for Energy Conservation (MEDENER) • Observatoire Méditerranéen de l’Energie (OME) • The International Solar Energy Society Italy (ISES Italy) • The Regional Centre for Central and Eastern Europe (REC) • The United Nations Environment Programme (UNEP) • The World Bank (WB)

15. Why the Mediterranean Region? • Renewable sources can serve many of the regional needs • Strong regional, historical and cultural links between southern and northern Mediterranean countries • Numerous studies and on-going projects • RE potential measured with common tools, facilitates experience exchange and result comparison • Existing networks of government and renewable energy agencies (OME, MEDENER, etc..) • EU and IEA Member countries interest

16. MEDREP aims at developing asuitable RE market system • Tailoring of financial instruments and mechanisms to support projects • Strengthening of policy frameworks and removing barriers to projects development • Building a stronger private sector infrastructure, considering the positive role of “Tradable Renewable Certificates” and “Certified Emission Reductions”

17. MEDREP Projects • Training, information dissemination, networking and projects design (MEDREC Tunis centre) • Delivering electricity to isolated rural populations, based on village-scale mini-grids • Desalinating sea water, to increase drinking water • Supply and water availability for irrigation agricultural water pumping by solar, wind & biomass • Cooling systems for the food conservation, powered by renewable, in farms and fisheries

18. MEDREP Projects • The projects are being developed under the framework of bilateral agreements between IMET, Algeria, Egypt, Morocco and Tunisia • The pilot projects will represent best practices to be replicated • IMET has allocated 8 million € to support the start-up of the projects

19. Egypt Morocco Algeria Tunisia Italy On-going bilateral cooperation A new perspective for a new partnership

20. MEDREP Finance Based on UNEP assessment of existing barriers to investments in Morocco, Tunisia and Egypt. The Solar Water Heating System Loan Facility in Tunisia is intended to help local FIs to build loan portfolios in the SWH area by subsidizing a percentage of the interest rate loans for SWH technology, which will help to partially reduce the “equipment cost barrier”. The Facility will phase out over 2-3 years to allow smooth transition with the Tunisian Government subsidy, leading to 20,000 to 30,000 Solar Water Heating (SWH) system installations.

21. MEDREP Finance Based on UNEP assessment of existing barriers to investments in Morocco, Tunisia and Egypt. The Loan/Leasing Facility for Solar Water Heating in Morocco aims at installing collective SWH installations for an initial target of 100 to 200 hotels. It is intended to help local financial institutions build loan and leasing portfolio in the SWH area by subsidizing a percentage of the interest rate loans for SWH technology. The Facility would phase out over 3-4 years to allow smooth transition to an unsubsidized market leading to 100 to 200 big-scale SWH systems installations.

22. MEDREP Finance The Mezzanine Fund It is intended to spur investment in companies and projects in the Mediterranean region, with the objective of long-term capital appreciation, promotion of renewable energy, energy efficiency, sustainable development and improvement of environmental condition. The Fund will provide capital for innovative projects and small and medium enterprises that can be either on-going operating companies or special purpose companies created to develop, own and operate RE and EE projects. Carbon - Green Certificates Finance Where possible, MEDREP projects will be structured as carbon finance or green certificate transactions under the auspices of the Clean Development Mechanism or Green Certificate Trading regimes.

23. MEDREC Mediterranean Renewable Energy Centre MEDREC has been established in Tunis in January 2004 by a MoU among IMET, TMIE and ANER. It is now operational. The Tunis Centre is included in the framework of the Global Network on Energy for Sustainable Development, a UNEP facilitated knowledge network of developing world Centres of Excellence and network partners, renowned for their activities on energy, development and environment issues. It will be the focal point for MEDREP activities in North Africa.

24. MEDREC Tasks • Development and strengthening of human capacities in the area of REs Technologies • Identification and development of Renewable-CDM Pilot Projects and Technology Transfer • Training, capacity building and dissemination of projects results/information • Deployment of financing sources and mechanisms options for the financial support of REs

25. Forthcoming event September 27, 2004 - TUNIS:Official Launch of MEDREP and MEDREC in the occasion of the presentation of the MEDREC activities

26. Project Type Number of Projects Energy industries (renewable source) 23 Energy industries (non-renewable source) 8 Waste handling and disposal 7 Transport 4 Energy demand 1 Construction 2 Experimenting with the JI/CDM project cycles A number of projects opportunities are being explored under a variety of implementing conditions:

27. Investing in credit-generating facilities In order to explore the potentials of investment in credit-generating mechanisms, Italy has: • Signed an agreement to contribute US$7.7 million to the World Bank's Community Development Carbon Fund (CDCF). The Fund supports small-scale projects in the least developed countries and poor communities in developing countries which generate GHG emissions reductions • Signed an agreement to contribute US$2.5 million to the World Bank's BioCarbon Fund. The Fund supports afforestation and riforestation projects • Set up the Italian Carbon Fund with the World Bank for GHG emissions reductions

28. The Italian Carbon Fund • The fund supports projects eligible under the Kyoto Protocol’s CDM and JI mechanisms through the purchase of credits • The fund is a public-private partnership currently endowed with US$ 15 million, but with a target size of US$ 80 million • The fund will buy emissions reductions credits, but at the same time will assist host countries in achieving sustainable development by leveraging substantial investments in modern energy services and technologies, including investments from the private sector

29. The Italian Carbon Fund • The fund is operational since January 28th, 2004 • The income from payments received from the participants in the fund will be held in a separate trust and used for capacity-buildingand research — thus leading to the creation of supportive project approval systems in host countries • The Fund’s project portfolio includes support for a wide range of technologies and regions, including China, the Mediterranean Region, as well as the Balkans and the Middle Eastern countries www.italiancarbonfund.org

30. Conclusions • Italy has an ambitious emission reduction objective which would be difficult to achieve solely through domestic measures • Flexible mechanisms provide viable alternatives in the framework of global partnership • Italy will be a player and a reliable partner on the global carbon market • IMET has already taken some actions at international level, but much more is coming in the next future

31. Thank you for your attention! www.minambiente.it