Options to Foster the Development Dividend
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Transcript of Options to Foster the Development Dividend
Options to Foster the Development Dividend
Meeting of the Expert Task Force of the IISD Development Dividend Project
March 27-28, 2006 Vancouver
Deborah Murphy, IISD
Outline of Presentation• Objective of the Paper
• Options– Additionality– Programmatic CDM– Small-scale CDM projects– Expanding the roles for sinks projects
• Brazilian case study
– Improved regional distribution
Options for Fostering the CDM:Objective of Paper
• Explore options, with an emphasis on improving the Development Dividend (quality and quantity) of CDM projects
• Address the concerns noted in the original paper – business noting that there were too few projects at too high a price, with developing countries and civil society noting that projects did not meet SD priorities
Additionality
• Actions taken to address controversy surrounding this issue – EB has requested input and will report back at COP/MOP2
• EB ruling in Nov. 2005 attempts to address perverse incentive related to additionality and the CDM – countries not penalized for enacting progressive policies/ regulations as baseline can account for situation prior to adoption of KP
Additionality – Challenges/Barriers
• Methods to address additionality have been criticized for their complexity, high cots, resistance to standardization, weak environmental integrity and susceptibility to gaming
• A key criticism – additionality consideration has focused on “intent”
Additionality – Challenges/Barriers
• Additionality tool – reaction mixed.
• Criticized for its project-by-project approach and a focus on investment additionality
• May have led to a narrow interpretation of additionality and many believe the use of the tool is mandatory in practice.
Additionality – Options for Fostering the Development Dividend
Short-term• Development of tools/assessment methods
based on environmental additionality
Medium to Long-term• Additionality assessment through multi-project
baselines based on benchmarks or performance standards
Programmatic CDM
• Decision to includes programs in CDM, coupled with decision on national/sectoral policies may have opened door to increased development dividend
• Programmatic CDM is similar to single-site projects, as must comply with all procedures and modalities of the CDM.
Programmatic CDM – Challenges/Barriers
• Immediate concern – obtaining approval for methodologies from the EB
• Specific methodological requirements may pose challenges – project boundary, leakage, baselines, additionality, free riders, double counting, crediting period, monitoring
Programmatic CDM – Options for Fostering the Development Dividend
Short-term• Timely approval of programmatic CDM
methodologies • Analysis of the nature of opportunities presented
through programmatic CDM
Medium- to Long-Term• Capacity building to develop programmatic
baselines and additionality tools
Small-scale CDM ProjectsType Total # Projects Total # SS
Projects% of Total
Projects that are SS
% of Type of Total SS Projects
Biomass energy 154 89 57.80% 29.70%
Hydro 109 76 67.90% 24.70%
EE industry 82 41 50% 13.70%
Wind 76 32 44.70% 11.30%
Agriculture 70 19 27.10% 6.30%
Biogas 24 14 58.30% 4.70%
Fossil fuel switch 28 11 39.30% 3.70%
Solar 5 5 100% 1.70%
Landfill gas 52 4 7.70% 1.30%
Other 54 9 3.00%
Total of all project types 654 300 45.90% 100%
Small-scale CDM ProjectsLevel of Development/ Total
Country for CDM Number 2012 kCERs
Projects Total SS % of SS total SS % of SS
Least Developed Countries 9 6 66.70% 3877 1279 33.00%
Other Low Income Countries 277 169 61.00% 236405 36930 15.60%
Lower Middle Income Countries 223 87 39.00% 184256 25231 13.70%
Upper Middle Income Countries 133 35 26.30% 335941 7853 2.30%
More Advanced Countries 12 3 25.00% 75787 242 0.30%
World 654 300 45.90% 836266 71535 8.60%
Small-scale CDM Projects – Challenges/Barriers
• High transaction costs relative to expected emission reduction benefit and upfront nature of costs
• Rules for bundling may limit the number of CDM projects in a bundle and not allow developers to meet critical mass
• Definition of projects – renewable energy, energy efficiency and other projects may not be equitably defined
Small-Scale CDM Projects– Options for Fostering the Development Dividend
Short-term• Redefine Small-scale projects to focus on environmental
impacts• Simplified procedures for Small-scale projects based on
Development Dividend criteria
Medium- to Long-term• Develop a positive list of Small-scale projects/sectors
that do not require an Additionality Test
Expanding Sinks Projects
• Two A/R projects, China and India, at the validation stage
• One approved methodology for large-scale projects, one for SS A/R projects
• May be an important area for the Development Dividend, as opportunity to involve countries with few energy-based CDM projects
Expanding Sinks Projects – Challenges/Barriers
• Sinks projects expected to play a minor role in the 1st commitment period – technical difficulties, long-term nature of investments, and controversial
• Concern that sinks projects divert resources from urgent task of reducing fossil fuels related to GHG emissions
• “Bad” projects (e.g., monoculture plantations with few community benefits)
• Expiring nature of tCERs and lCERs• EU-ETS at present excludes forestry projects
Expanding Sinks Projects – Avoided Deforestation: Case Study from Brazil
• A/R projects can contribute to DD, but avoided deforestation has potential to make large contribution.
• Potential for Brazil’s principle contribution toward GHG emission reductions through control and avoidance of deforestation in the Amazon – releases 200 M tons of CO2/yr
Sinks Case Study: Brazil
• Proposed economic development plans in the Amazon could convert 120,000 to 270,000 km2 in in next 25-35 years. In the order of 2.5 to 6 billion tons of C in the same time period.
• Development projects such as PROAMBIENTE, could help to control deforestation and frontier expansion through sustainable economic alternatives.
Sinks Case Study: Brazil• Based on reformulation of government program of
agricultural credit. Credit provided to farmers who invest sustainable forms of agriculture and forest conservation.
• 3 pools of money – Agricultural credit fund for agricultural investments
• Environmental fund will compensate farmers for investments in environmental protection, up to 40% of total agricultural loan value.
• Support Fund will be used to set up regional centres that provide outreach, training, including monitoring of carbon
Sinks Case Study: Brazil• Phase I expected to result in 960,000 tons of
avoided CO2 emissions per year and 150,000 tons of sequestered carbon
• Environmental benefits: lower incidence of fire, lower sedimentation, increased biodiversity values
• Socio-economic benefits: increased employment, higher income, lower incidence of water-related illness, improved nutrition
Expanding Sinks Projects – Options for Fostering the Development Dividend
Short-term• Encourage the inclusion of credits from sinks
projects in the EU-ETS
Medium- to long-term• Expand the definition of CDM Sinks projects to
include avoided deforestation
Improved Regional DistributionLevel of Development/Country In Pipeline Reg. request Registered
Number % Number Number
Least Developed Countries 9 1.60% 4
Bangladesh 3 0.50% 1
Bhutan 1 0.20% 1
Cambodia 1 0.20%
Nepal 2 0.30% 2
Tanzania 1 0.20%
Uganda 1 0.20%
Other Low Income Countries 277 42.60% 4 34
India 260 39.80% 3 30
Other Low Income Countries 17 2.80% 1 4
Lower Middle Income 223 34.20% 9 56
Upper Middle Income 133 20.30% 10 39
Other More Advanced 12 1.80% 1 3
World 654 100.00% 24 136
Improved Regional Distribution of CDM Projects – Challenges/Barriers
• Lack of capacity – 18 of 48 have DNAs• Market-based nature of mechanism determines
that many LDCs not attractive to investors• Nature of opportunities – many investors
seeking short-term rapid generation of CERs, many opportunities in LDCs are in renewables and A/R, which create relatively few emissions over a long time period.
Improved Regional Distribution – Options for Fostering the Development
Dividend
Medium to Long-term• Establish the fundamentals to ensure LDCs are
sources of CERs in the post-21012 regime
Options for Fostering the Development Dividend
Short-term• Development of Additionality Tools based on
environmental additionality• timely approval of Programmatic CDM methodologies • Analysis of the nature of opportunities presented through
programmatic CDM• Redefine Small-scale Projects to focus on environmental
impacts • Simplified procedures for Small-Scale Projects • Encourage the inclusion of credits from Sinks projects in
the EU-ETS
Options for Fostering the Development Dividend
Long-term• Capacity building to develop programmatic baselines and
additionality tools • Additionality assessment through multi-project baselines based on
benchmarks or performance standards • Develop a positive list of Small-scale projects/sectors that do not
require an additionality test• Expand the definition of CDM Sinks projects to include avoided
deforestation • Public procurement programs to purchase CERs from LDCs• Establish the fundamentals to ensure LDCs are sources of CERs in
the post-2012 regime