GEF and CDM/JI: similarities, differences, linkages, synergies

GEF Training Workshop, Almaty, October 6-9, 2004

How your GEF experience can help in the world of carbon finance

UNFCCC and Kyoto Protocol, GEF and flexibility mechanismsProject-based mitigation: similarities and differencesLinkages and synergies between UNDP/GEF and CDM/JI projects“Green Investment” Schemes

UNFCCC, Kyoto Protocol and their mechanisms

UNFCCC, its objectivesGEF – financial mechanism of UNFCCCKyoto ProtocolKyoto Mechanisms – CDM (Art. 12), JI (Art. 6), IET (Art.17)Project-based mechanisms and cap-and-trade; fungibilityRBEC countries and KM – experience to date

GEF and CDM/JI projects: similarities

Objectives: reduction/avoidance of GHG emissionsIncrementality and additionalityNational priorities, national approval: OFP, DNAGEF and CDM – participatory preparationProject documentation – uniform formats

UNDP/GEF and CDM/JI projects: similarities (contd.)

Incremental costs, baseline assessment/GHG reduction costsM&E and M&VSTAP and CDM validationCDM/JI – incorporate GEF methodologies and experiencePublic and private participation

UNDP/GEF and CDM/JI projects: differences

Transfer of emissions reductions, additional revenue streamPublic vs. privateCER and ERU price – market driven, more or less than “incremental costs”“Market transformation” vs. ring-fenced quantifiable reductions2-party national approval/acceptance, international approval (CDM EB)Accredited validators (CDM)

UNDP/GEF and CDM/JI projects: differences (contd.)

Registration requirementsCDM – international certification (EB)Institutional – new approval authoritiesGHG assessment under KM – more detailed, more rigorous, more formulaicM&V plans and protocols (audits)

Linkages and synergiesGEF intervention improves enabling environment for CDM and JI – policies, awareness, market conditionsGEF helps to create capacity for development of CDM and JI projectsGEF fosters national review/approval and stakeholders participationGEF projects – CDM/JI replication?Carbon accountingCo-financing? Parallel? …?

CO UNDP/GEF experience – pathway to the CDM/JI world?

Access to government agencies – CDM/JI authoritiesContacts with project proponents, pipeline of project ideas/proposalsKnowledge of the country economy and development priorities and trends, contacts with public sector buyersProject development experience/capacity, including participatory

CO “value added” and possible roles

CDM/JI stampede – why join?Why UNDP CO – project sponsors and investors, sellers and buyers prospective: project development, finance, else?Why UNDP CO – government prospectivePossible roles: facilitation, capacity building (government, project developers, stakeholders), participation, advocacyCountry circumstances, RBEC experience to-date What can be done now?Capacity/infrastructure for CDM/JI? GEF role? Sources of funds and revenue models

“Green Investment” Schemes

AAU trading – possible economic growth constraints (deflation of “hot air” bubble)AAU trading – pressure to demonstrate further GHG reduction commitmentAAU trading reserveAAU trading – long-term considerations (beyound the first budget period)

“Green Investment” Schemes – contd.

Advance sale of AAUs with reinvestment of proceeds in projects (JI-like) and replenishment of AAUsClear criteria and proceduresFinancial intermediation – new mechanisms, existing environmental funds (debt-for-nature)

“Green Investment” Schemes – contd.

Bundling of small project, GHG reduction portfoliosGEF connection/parallels: joint mechanism, umbrella financing, revolving fund experiencePossible applications for CDM –PCF Central American RE Fund experience