Ancha Srinivasan, Ph.D. and Tae Yong Jung, Ph.D. Climate Policy Project, IGES

1. Integrated Capacity Strengthening for the Clean Development Mechanism (ICS-CDM) – Project Overview, Strategy and Initial Findings Ancha Srinivasan, Ph.D. and Tae Yong Jung, Ph.D. Climate Policy Project, IGES

2. Climate Policy Project • Strategic research: Domestic policies; Kyoto mechanisms; Beyond Kyoto issues; Vulnerability and adaptation issues • Other Functions: Organized several multi-stakeholder • policy dialogues and workshops in Asia; • Published many academic and policy-relevant • publications; Contributed to capacity building efforts • through hosting Eco-Frontier Fellows, visiting • researchers, interns, and holding training seminars.

3. Major Activities/Outcomes of the Climate Policy Project on CDM • Previous emphasis was on methodological issues • Baseline setting (http://www.iges.or.jp/en/cp/report3.html) • Additionality aspects • First approved methodology by the CDM Executive Board http://cdm.unfccc.int/Validation/publicPDD • Several introductory workshops on CDM • Current emphasis is on implementation aspects - Scope for CDM cooperation between China and Japan - CDM capacity building needs assessment - Barrier analysis (institutional/social/technological/ financial/legal) - Initiation of ICS-CDM • COP 9 (Milan, Dec. 2003) - Side event “CDM in Asia: Opportunities and Obstacles”

4. CDM Potential in Asia • Region accounts for 20% GHG emissions; 40% of global economy • Emissions increasing (~32% by 2030) due to increasing population and economic growth rates • Region uses several outdated technologies and offers considerable low-cost opportunities for abating GHG emissions (e.g., energy efficiency improvement, retrofitting, fuel switch, etc.) – leading to a large potential share in CDM market • Positive Factors: High economic growth, large FDI, proximity to Japan

5. Rationale for ICS-CDM • Despite huge potential, Asian countries are lagging behind Latin America in preparing good CDM projects. • One of the main reasons for inadequate progress is lag in institutional and human capacity building for CDM.

6. Main Barriers for CDM Capacity Building in Asia • Institutional and policy barriers (e.g., Lack of appropriate institutions, lack of CDM policy) • Social barriers (e.g., Lack of awareness; Inadequate local capacity) • Technological/methodological barriers • Financial barriers (e.g., lack of money for training institutions) • Legal barriers (e.g., Inefficiencies in project approvals or legal complications leading to long lead time between project conceptualization and CER agreement)

7. Primary Objective To develop institutional and human capacities in Asia for implementing CDM within the context of sustainable development through • Raising awareness on CDM opportunities among various stakeholders (policy-makers, private sector, NGOs/academia) • Implementing actions to support institutional networks for CDM • Enhancing competitiveness of Asia within the CDM market trough training and human resource development • Supporting CDM project identification, development and implementation activities

8. Secondary objectives • Bring together Asian non-Annex 1 and Japanese CDM project participants and assist in forming partnerships for the future • Improve mutual understanding among the public and private sectors – good projects, project structure and finance • Assist in the development of project design documents and guide future project selection • Capture clear insight for CDM

9. Principles, Sectors and Duration Basic principles: Synergy, Simplicity and Sustainability Sectors: Waste to Energy; Biomass and other renewable sources; Small scale integrated CDM projects Duration: From October 2003; expected to last for 3 years (and beyond) Host countries: • FY 2003 : Cambodia, India, Indonesia and the Philippines • To be expanded to other countries in 2004 & 2005 ICS-CDM is One of several CDM promotion initiatives by MOE-Japan

10. MOE’s JI/CDM Promotion Programmes Collection of Basic Information Kyoto Mechanism Promotion Initiatives CDM Information Office CDM/JI F/S Support Programme Identification of Projects CDM Project Cycle Formulation of PDD 　（Project Planning） Model Validation Programme Validation & Verification CDM Capacity Building Program　（ICS－CDM） Approval by Host Countries CDM/JI equipment subsidy Kyoto Mechanism Promotion Fund Project Implementation National Registry Program Acquisition of Credit Voluntary Emission Trading Programme Emission Trading（Domestic）

11. Unique Features • Country-driven, comprehensive approach • Emphasis on SD – Focus on sectors that received less investor attention so far in Asia • Emphasis on reducing transaction costs & risks • Flexibility to adjust CB initiatives in response to changing CDM rules • No linkage with CER purchases • Not a one-off WS, but aims to create a self-sustaining mechanism with a clear definition of expected outcomes and monitoring

12. Typical Tasks • Awareness raising and information outreach • Development of the capacity of • Policy-makers and Government officials • DNA for CDM • Project developers • Project financiers • NGOs, Local communities, research organizations and Academia • Facilitation of the development of CDM-eligible projects in priority sectors • CDM Investment promotion activities • Research on CDM policy development

13. ICS-CDM Framework Advisory & Evaluation Committee Japan Host Countries Institutional & Systemic CB • IGES • ICS-CDM UNIT • Project management • Network Facilitation • Technical Support 1. Activities for establishing and supporting DNA Task team CB Needs Assessment • CDM Training Services • 1.Project Identification • . Training for Investors 2. Activities for promoting Investment Project Identification, Priority Sector Assessment, Project Evaluation Gov. Staff (MOE) Gov. Staff (MOE, MOF and others) 3. Activities for supporting Operational Entities Dialogue Human CB JICA experts Investor Survey Policy-maker Survey 1. Support for CDM Policy Design (Gov., Private, NGOs, Academia) Support to Pilot Project PrivateSector Dialogues Private Sector Consulting firms/ Think-tanks 2.CDM Information Services a. Public Awareness raising b. Training Course Material c. Working Groups d. Dialogues/Seminars e. Discussion Facilitation Consulting firms Outcomes Investor’s Guide Negotiation Guide Skill Building Guide NGOs Approach: Participatory & Consultative

14. Activities so far • Needs assessment survey in 4 countries – August 2003 • Launch of the programme – October 2003 • Workshop in Indonesia – Surabaya – Oct. 2003 • Workshop in India at Climate Technology Bazaar – Nov. 2003 • Workshop in Cambodia – Dec. 2003 • COP9 side event on CDM in Asia – Dec. 2003 • Participation in UNEP CDM Advisory group – Dec. 2003 • Negotiation mission – Jan 2004 • Two Workshops in Cambodia – Feb. 2004 • Small scale industry CDM side event – Delhi Feb. 2004

15. Activities in March 2004 • Region-wide Expert level training workshop – (in cooperation with ESCAP) – 10-12 March • Regional workshop with UNEP-RISO – Cambodia – 24-26 March • Additional 7 workshops in Indonesia, India Cambodia and the Philippines

16. Needs Assessment Survey Findings Interviews with various stakeholders, such as government, private sector and NGOs/ Academia (about 140 people in Asia) • To look at CDM-CB initiatives by other donors • To assess priority needs by various stakeholders • To find out gaps to be addressed by ICS-CDM

17. Level of capacity is considerably different among countries and stakeholders. Several CB initiatives are going on without much coherence. Awareness and understanding of both risks and opportunities is still limited within focal point organizations, financial institutions, and even NGOs. Even when awareness is high, detailed and practical knowledge of CDM project development experience is seriously lacking. Stakeholder-specific and country-specific approach is necessary. Duplication must be avoided; Synergy among initiatives is vital. Further awareness-raising and training of key stakeholders, such as other ministries and financial institutions is required. Practical “learning-by-doing” training to formulate projects is necessary; Sector-specific CB initiatives might help. Survey Findings - Implications

18. State/provincial level awareness-raising and training is still limited. CDM Potential and expectations in terms of financial and technology flows are high, but investment is limited. Sectors with community development interests have not attracted attention. Research on country-specific CDM priorities and legal issues is still limited. CB for stakeholders at local level in local languages may help. Linkages with investors abroad are vital; Technology partnerships are crucial. Skills in developing and promoting small scale CDM projects must be improved. Research collaborations with institutions in developed countries may be useful. Survey Findings - Implications

19. Country-Specific Issues - Cambodia • General: Inadequate legal regulations and administrative mechanisms • Government: Awareness is limited to the focal point government agency, and low among other ministries • Industry: CDM potential in local small scale industry exists; Awareness-raising and training at local level in local language is necessary to make them understand CDM opportunities. • NGO/academia: Some active NGOs in waste management and RE exist, but not in the CDM context.

20. Indonesia General Barriers: Lack of capacity and adequate technologies to deal with climate change; Absence of experience negotiating with, and attracting investors; Need for simpler CDM guidelines Government: Institutional capacity building of the central government is relatively advanced, but awareness and detailed knowledge of CDM procedure is still limited; CDM awareness of other relevant ministries should be raised. With increasing decentralization, CB for local governments is necessary. Private sector: Practical training to make PDD, including baseline setting, and to assess benefits and risks of CDM project is necessary. Sector-specific awareness raising and training for small scale industries and financial institutions at local level is necessary. NGOs/Academia: Awareness-raising of local NGOs is necessary.

21. India General: Absence of real investors; Wait and see attitude Government: Awareness and institutional capacity in central focal point agency is high, awareness-raising of other relevant ministries, municipality and local governments is necessary. Demand for financial and technology transfer is more than CB; Private sector: General awareness is there, but very few projects have materialized yet and a few stakeholders have detailed knowledge of how to prepare CDM projects. Practical training to know modalities & procedure and to assess benefit and risk of CDM project is required. - awareness-raising of financial institutions is necessary. - country-wide potential of biomass, waste management, and RE sector-specific awareness-raising and training for small scale industries at local level is required. Linkage between investors and local entities necessary. NGOs/Academia: studies on “bundling” of small scale projects and application of SD criteria.

22. Country-specific approachEx: The Philippines • Complementary role with UNEP-RISO activities • 2 CDM training workshops for policy makers in PDOE – Dec. 2003/Jan. 2004 • CDM potential in Japan and the Philippines – March 2004 • CDM training manuals for PDOE • Focus group training activities for DENR

23. Countries under consideration for inclusion in 2004 • China • Malaysia • Thailand • Sri Lanka/Nepal • One or two South Pacific countries

24. Outcomes of ICS-CDM to date • Priority needs assessment in selected sectors • Establishment of partnerships in host countries • Active collaborations with UNEP, UN ESCAP, UNDP, World Bank, UNIDO, GTZ, HIIE, etc. • Increased awareness of CDM opportunities in various localities • Informative technical inputs and proceedings • Concise guidance to kick-start CDM in host countries • New partnerships – in progress

25. Reflections for the future • How can we increase synergy among various initiatives and promote intra-regional cooperation? • How can we enhance efficiency and cost-effectiveness of our initiative? • How can we match our limited resources to host country’s CB needs more effectively? • How far are the “distance learning programs” and “South-south dialogues” relevant in CDM capacity building?

26. Thank you.