experiences and challenges implementing poas from the perspective of a stakeholder

THE WORLD BANK CARBON FINANCE UNIT

Experiences and challenges implementing PoAs from the perspective of a Stakeholder PRESENTATION AT UNFCCC POA WORKSHOP MAY 2011

BY FELICITY SPORS ([email protected]) & MONALI RANADE ([email protected])


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


PoA potential – Regional distribution

Number Crunching

• 30% PoAs vs 73% CDM projects in BIC (Brazil, India and China)

• 11% PoAs vs 1.7% CDM projects in LDCs/SIDs

Source: UNEP Risoe CDM/JI Pipeline Analysis and Database, March 1st 2011


PoA potential – supporting sustainable development by supporting small dispersed HH/SME projects

EE demand side 29Waste 23Solar 12Hydro 5EE supply side 4Forestry & Agriculture 2Fossil fuel switch 2Biomass energy 2Agriculture 1CMM 1Transport 1Total PoAs 82

But PoAs have not achieved scale up of GHG mitigation in number of PoAs nor in size of PoAs.


• 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)

World Banks PoA Portfolio Under validation


• 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

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

A few Challenges (among many others)


Challenges: Complex and varied business structures

Hands-off Hands-on

Whole-seller

PoA Coordinating entity is the CPA entity• controls all CPAs• finances all projects• prepares all CPA-DDs• covers all monitoring costsPoA retains 100% revenue

PoA Coordinating entity• can influence CPAs• finances some projectsCPA entity• leads preparation of CPA-DD• covers own monitoring costsPoA retains major part of revenue

PoA Coordinating entity• communicates with EB• Support CPA developmentCPA entity• finances project directly• leads preparation of CPA-DD • covers own monitoring costsPoA retains minor part of revenue

PoA Coordinating entity• supports identification of CPAs• part finances all projects• covers monitoring costsCPA entity• prepares own CPA-DD• covers own monitoring costsPoA shares revenue

Retailer


“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.

Challenges are plenty – how to find a solution?


Two procedures for two different kinds of PoA

Solution for PoA type B (micro CPAs):

1.Only PoA PDD (i.e. not CPA-DD) to be prepared for registration. CPAs do not need to be validated at inclusion.2.PoA PDD validated by DOE. Should contain check list of eligibility requirements and must comply with additionality requirements for micro scale CDM projects3.Monitoring periodically undertaken for representative sample of CPA units.4.Verification - DOE ensure CPAs comply with eligibility criteria i.e. verification = “quasi validation”. Risk of liability much less than at point of registration. 5.Issuance of CERs with verification report once approved by EB.


Key barriers in existing rules


Recommendations to address regulatory barriers facilitate larger CPAs


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 PoAs e.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?

Solving regulatory rules is unlikely to “flood” the market with PoA CERs due to non regulatory barriers


Thanks for listening


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).

Challenges: Complex business arrangements


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

experiences and challenges implementing poas from the perspective of a stakeholder

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