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Is the CDM delivering? Experiences in LAC

Is the CDM delivering? Experiences in LAC. Christiana Figueres for the Annex I Expert Group on the UNFCCC Paris March 21, 2005. Presentation. The good news - LAC has concrete CDM achievements The tough question - What should the CDM catalyze? The bad news

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Is the CDM delivering? Experiences in LAC

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  1. Is the CDM delivering?Experiences in LAC Christiana Figueres for the Annex I Expert Group on the UNFCCC Paris March 21, 2005

  2. Presentation • The good news - LAC has concrete CDM achievements • The tough question - What should the CDM catalyze? • The bad news - What cannot occur under current circumstances • Moving forward - 2005-12 - Post 2012 Figueres, 3-2005

  3. LAC Achievements:Institutional • All countries have ratified UNFCC and KP • Most countries have DNA or are forming • Operational funding • Public and international cooperation • Canada, Dutch, Finland, Germany, Japan, CAF, UNEP/Riso, UNDP, WB • MOUs • Austria, Canada, Finland, France, Italy, Spain, Netherlands, others Figueres, 3-2005

  4. LAC Achievements: Capacity Building • Major investment • $18 million over past 3 years (Canada, WB, CAF, UNDP, UNEP, etc) • Intra-regional capacity building • Consulting • Lesson sharing • Exchange of views on UNFCCC negotiation Figueres, 3-2005

  5. LAC Achievements: Project Pipeline • 184 projects in some stage of preparation and under review on the part of DNA’s • 39 have received some degree of national approval • 15 Letter of Endorsement • 24 Letter of Approval • Source: IDB, 2004 Figueres, 3-2005

  6. LAC Achievements: Project Advance Projects under validation or registry Latin America 33 62.3% Asia 18 34.0% Africa 1 1.9% Other 1 1.9% Total 53 100% Source: www.unfccc.int updated Dec 1, 2004 Figueres, 3-2005

  7. LAC Achievements: Market Share Source: World Bank, State & Trends of Carbon Market, June 2004 Figueres, 3-2005

  8. LAC Achievements: Diversity in Size • 17 Small-scale • Smallest (by CERs) Zacapa/Honduras, small-hydro; 1 kTonCO2/year; 10 years • 16 Conventional • Largest (by CERs) Salvador de Bahia/Brazil; landfill gas; 800 kTonCO2eq/year; 7x3=21 years Source: unfccc.int updated Dec 2004 Figueres, 3-2005

  9. LAC Achievements: Diversity of Sectors (Validation & Registration stages) Source for project information: CDM EB web page, Nov.2004 Figueres, 3-2005

  10. LAC Achievements: Diversity of Participants (Validation & Registration stages) Source: CDM EB web page,Nov.2004 Figueres, 3-2005

  11. LAC Achievements: MethodologicalExpertise New methodologies proposed by Source for project information: CDM EB web page, Nov.2004 Figueres, 3-2005

  12. LAC Achievements: Technical Expertise PDD Development Figueres, 3-2005 Source for project information: CDM EB web page, Nov.2004

  13. PDDs validated, methodologies submitted: Econergy Ecoinvest Ecosecurities Brazil ICF Consulting do Brazil MGM International Poch Ambiental Urquidi, Riesco, y Compania PDDs in pipeline: CAEMA CC&D Servicios Ambientales Others LAC Achievements: Private Sector Engagement Source for project information: CDM EB web page, November 2004; National CDM Offices Figueres, 3-2005

  14. LAC Achievements: Reduction of Transaction Costs • DNAs • Evaluate and approve projects • CDM promotion • Market enabling • Applicant Entities • ICONTEC in Colombia • TECPAR in Brazil • 4 provisionally Designated Operational Entities have local offices/representations in LAC Figueres, 3-2005

  15. LAC Achievements: Reduction of Transaction Costs • CAF (Andean Development Corporation) • 17 member countries, regional presence • Both public and private lending • Infrastructure focus • Energy, transportation and industry • Carbon finance program (PLAC) since 1999 • ER intermediary since 2002 • Mitigates risk • Has transacted 10MT, 18+ under evaluation Figueres, 3-2005

  16. LAC Achievements: Projects have Positive Impacts • Greening energy mix • Increasing access to energy in rural areas • Introduction of new technologies • Improving air quality • Conserving natural resources • Others Figueres, 3-2005

  17. The Tough Question Back to Basics • Assist industrialized countries in achieving KP compliance • Assist non A-1 in achieving sustainable development; • Assist non A-1 in contributing to atmospheric stabilization Figueres, 3-2005

  18. “Achieving SD” and “Contributing to stabilization” require integrating climate considerations into domestic policy of non A-1 in order to decarbonize growth trajectories Figueres, 3-2005

  19. CDM not helping to integrate cc into national policies in LAC • Institutional weaknesses of DNAs • Min Env – except Br, Gua, Jam • Low level funding/ scarce staffing • Mandate • Regulatory: project is congruent with existing policies • Promotional Figueres, 3-2005

  20. SYSTEM LEVEL INSTITUTIONAL LEVEL IMPACT Legal framework of DNA Evaluation criteria Approval procedures Integrate industry Sectoral policies Local project finance Project preparation Baseline methodologies Additionality INDIVIDUAL LEVEL INTEGRATION CDM not helping to integrate cc into national policies in LAC 2. Limited impact of capacity building Figueres, 3-2005

  21. CDM not helping to integrate cc into national policies in LAC • Design of the CDM • Project-based instrument • Single isolated projects • Congruency with existing national policies B. Interpretation of additionality/national circumstances excludes climate friendly policies. Figueres, 3-2005

  22. 5 Case StudiesBrazil, Colombia, Costa Rica, Ecuador, Mexico • History of mitigation activities • Current institutional arrangements • Experience to date with CDM • Other sectoral initiatives with GHG emissions implications • Assessment of integration of climate considerations into national policies Figueres, 3-2005

  23. 5 Case StudiesBrazil, Colombia, Costa Rica, Ecuador, Mexico • Conclusions: • DNA does not necessarily lead to CDM projects • Country’s mitigation activities cannot be measured by its involvement in carbon market • Integration of climate considerations into national policies can disqualify projects from CDM Figueres, 3-2005

  24. Irony Some countries are integrating climate considerations and national policies But they are/will be disqualified by the CDM Figueres, 3-2005

  25. Perverse Incentive • CDM most successful in those countries with climate damaging policies • Non-A1 continue on an emission intense growth path, and implement a few isolated CDM projects Figueres, 3-2005

  26. LAC emissions are rising faster than global emissions Source: WRI, CAIT Figueres, 3-2005

  27. Global CO2 intensity is declining; LAC intensity is rising Source: WRI, CAIT Figueres, 3-2005

  28. Moving forward…2005-12 • Move capacity building to system level • Initiate more local banks in carbon finance • Push for methodologies which help integrate cc into national policies • Pilot one sector • Methane recovery from landfills in LAC Figueres, 3-2005

  29. Moving forward…post 2012 • Deepening of A -1 commitments • Market mechanism for non A-1 participation • Sector wide • Large scale initiatives which transform sector • Policy based • Intentional SD policies • Market pull for clean technologies Figueres, 3-2005

  30. Moving forward…post 2012 • Request WB to launch a “Carbon Adjustment” (DLP) initiative for larger non A-1 • Energy/transportation policy reforms to reduce carbon intensity • Policy pull for clean technologies • Appropriate financing instruments • Decarbonization of key sectors • Greening of the WB lending portfolio Figueres, 3-2005

  31. “ Institutional Capacity to Integrate Economic Development and Climate Change Considerations: An Assessment of DNAs in LAC ” Inter American Development Bank, October 2004 Christiana Figueres Tel. +1-202-294-4898 christiana@figueresonline.com www.iadb.org/sds/ENV/publication/publication_183_3901_e.htm

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