110630 DNA Forum PoA2NAMA Final

8/3/2019 110630 DNA Forum PoA2NAMA Final

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PoA to NAMA: Possibilities for Evolution

Session 4: Programme of ActivitiesRegional African CDM DNA Forum

Palais des Congrs - Marrakech, 9 July 2011

Manuel Cocco

Business Development

Manager

South Pole Carbon Asset

Management Ltd.

[email protected]

Prepared by South Pole on the

basis of analysis conducted for:

PoA Support Center

Ingo Puhl

Managing Partner

South Pole Carbon Asset

Management Ltd.

[email protected]


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Presentation of Findings of a Recent Study for KfW/BMU On the Road from PoA to NAMA: How to develop a NAMA by scaling-up ongoing

programmatic CDM activities (to be published in July 2011)

Systematic analysis of four PoA case-studies

Step-wise instructions to NAMA design based on PoA

South Pole Case Study

Integrating Thailands Feed-in-Tariff Policy into a PoA (FiT PoA) to Strengthen

Renewable Energy Development

Integrating a FiT PoA into a Future Renewable Energy Target under a NAMA approach

Outlook

A Program of Work to Simplify the Implementation of PoA under sector-targets using

standardized baselines and/or NAMA frameworks

Overview


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Key Objectives Scaling-up mitigation action through carbon mechanisms to share the cost of mitigation

actions with the international community

Building on established mechanisms and existing capacities in developing countries, esp.

capacity of DNA (critical)

Approach/How?

Integrate PoA design with domestic policy frameworks by aligning key PoA design criteria

with relevant policies (i.e. eligibility criteria, baseline setting, MRV systems, management

and operation entities)

Develop standardized & aggregate approaches (for baselines and MRV) whenever

possible

Integrate PoA design with voluntary, appropriate targets (NAMA)

Benefits of this Approach

Build on operational mechanism (no need to wait for agreement on new mechanism)

De-centralize the operation of the CDM EB and reduce bottlenecks

Shift responsibility and authority to DNA (which will need to develop capacity)

Move from project/program to sector-level management, driven by domestic policy and

management of environmental integrity on sector-level

Increase net benefits to producers of the environmental benefits (as result of reducedtransaction costs and broad participation)

What Drives the Need to Scale-Up Mitigation Action

on the Basis of PoA Approach?


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Study

On the Road from PoA to NAMA

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How to Scale-up PoA(lessons learnt from the KfW/BMU analysis)

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Policy priorities should drive PoA design in relation to:

Eligibility criteria

Baseline setting

MRV

Implementation arrangements and management & operation procedures

DNA develop/submit standardized baselines for such policy-driven PoA

Upgrade from PoA to NAMA by building on key PoA design elements and

standardized baselines:

NAMA eligibility criteria based on PoA criteria plus additional relevant

activities that dont meet PoA requirements (i.e. in relation to additionality) NAMA baseline setting based on standardized baselines

NAMA target setting derived from NAMA baseline

NAMA MRV requirements based on aggregate MRV procedure and PoA

MRV requirements (top-down/bottom-up integration)

NAMA implementation arrangements in cooperation with PoA CME


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Which Existing CDM Procedures are Suitable to Design

Scaled-Up Mitigation Actions on Basis of PoA

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PoA DesignElement

Applicable for Scaling Up (standard baselines & NAMA)

Po

AElements

Eligibility Criteria Technical criteria that provide an objective basis to assess eligibility of afacility or activity (type of facility, unit sizes, type of intervention ..)

Baseline Setting Standardized elements that have been developed for CDM methodologies:

y large-scale benchmarks (carbon intensity of power grid, national orregional NRB usage rates)/ standardized (aggregate) baselines

y deemed savings (average per household biomass use)

y status-quo baselines

y modelled baselines

(can be used to determine NAMA baselines and NAMA targets)

MRV A number of CDM MRV procedures are directly applicable:

y deemed savings approach

y methods that focus on large emission sources with simple MRV

requirements that facilitate cost-effective MRV at facility level

Implementationand Operation

Some CME already operate at aggregate/sector scale and are also anintegral part of existing support mechanisms, could also manage NAMA.

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The Expanded Role of DNAs under Scaled-Up

Approaches

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Host country DNA are responsible for

Shaping design criteria for policy-driven PoA

Defining and submitting standardized baselines (COP decision 3/CMP 6)

Provide input to NAMA design (scope/coverage/activities/baselines/targets),

PoA integration and NAMA implementation arrangements

Requesting NAMA readiness support

Host country DNA play a key role in registering & operating scaled-upapproaches/NAMA

MRV of activities/sources within the system targeted by scaled-up mitigation

action (i.e. NAMA system)

Providing incentive schemes to targeted activities

Emissions true-up (environmental integrity)/enforcement

Capacity Building Needs

Regulatory Authority: to control eligibility criteria, strategic fit with domestic

policy objective & ensure environmental integrity of the system

More Autonomy: stronger role vs. CDM EB compared to current CDM to

facilitate host-country-lead approach


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Case Study

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Case Study: Thailand Feed-in-Tariff PoA

Feed-in-Tariff (FiT) Policy and RE Development

Introduction of FiTmade RE development

in Thailand successful

The cost of this REpolicy has been borne

by power consumers &tax payers

There is strong politicalpressure to reduce

these costs.

CDM didn't contributea significant benefit to

developers.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

0

5000

10000

15000

20000

25000

30000

35000

40000

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

RE kWh % of RE

Introduction of FiT

based incentives


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Carbon

revenue


Current FiT + Carbon vs. Integrated Payments

VSPP

adder

Carbon

revenue

Current CDM Structure

- High implementation cost

- Delayedincome

- High payment risk/uncertainty

- CER marketprice uncertainty

- Not bankable

- So far: 0.008 THB/kWh

- 0.3- 6.5 THB/kWh

- At fullexpense of

power users

- Criticism on rate

unfairness

Future structure for

participants in PoA

- Much reducedinclusion cost

increasenetpayments

- No approval risks/cost

- Access for all,incl. smallprojects- Could be 0.28 THB/kWh

- Lower rates meanless burden

onpower users: FIT POA can

reducenetadder to

consumers byapprox. 30%

- Easier to justifypoliticallythe

benefit oftheadder program

Net VSPP

adder

Consumerrelief

The red box could be up to 40 times larger then the green box !


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PoA Design: integrate FiT and Carbon payments

CCME

CDMEB

Intl. CER

purchaserDNA

PoA registrationandCER

issuance

Revenue from

Sale ofCredits

(PROFIT CENTER)

- Prepare PoA PIN

- Prepare PoADD

- PrepareCPADD

- Submit PoA PDDandCPA PDDs

- Submitto DOE to validate

- Submitto EBto register

Approvedand

authorized byDNA

Communication with EB

CPAs

(Program Participants)

- Signagreement with CME

- Prepareinclusiondocs

- Monitor theemission reduction

- Receive share oftheCER revenues

DOE

Pass Eligibility

Assessment

Against PoA

Transfer

Power Users

PEA

ServiceAgreement

A. Share of

CER Revenue

Tariff

+ FT Charges

+ Adder

+ CarbonAdder


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Contribution of FiT PoA to RE Development

Benefits of this Approach

To reduce the cost toThai power consumers

from 0.08 THB/kWh to

0.05 THB/kWh in 2016

To make sure that ALLemission reductions from

RE count (not only from

big projects that can

afford high quality CDM

service).

To reduce transactioncosts by reducing CER

origination costs.

-1%

1%

3%

5%

7%

9%

11%

13%

15%

0.0

2.0

4.0

6.0

8.0

10.0

12.0

2010 2011 2016 2022

Satang/kWh

Cost of FiT policy [Satang/kWh]

Net cost to consumer after taking into account ER value [Satang/kWh]

% RE in generation


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Integration of PoA with Future RE Targets

PoA would still work under a future RE target:

All emission reductions from new RE capacities are accounted for in the PoA.

A share of the emission reductions that are needed to meet the domestic

target are transferred to a national compliance account under sharing

agreement.

FiT is designed in anticipation of the sharing agreement (to ensure sufficientincentive is provided to developers).

PoA supports MRV of national RE target

PoA provides a fluent transition from current carbon market mechanism

into future (sector-based) mechanism.

A new mechanism (i.e. supported NAMA) could be added:

Additional support payments (output-based) to increase the share of costs

born by international community (and cap domestic contributions) and thus

allow increasing the share of RE in Thailand.

Key Issue: Criteria for the Setting of a National Target or Cost Cap


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Outlook


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The management of environmental integrity on sector-level

creates Annex I conditions that should be reflected in rules.

PoA that are located under a NAMA cap should benefit from simplification,in analogy to JI procedures

Streamlined Registration and Inclusion Process

Determination of eligibility, monitoring & verification subject to national rules

and procedures (track 1 only) OR streamlined determination & verification

process involving an AIE (DOE) and two J

ISC members advised by experts.

Streamlined Process to Determine Baseline and Additionality

Choose an appropriate method using traceable and transparent information

showing that the project will lead to reductions of GHG emissions below

baseline.

Simplified MRV requirements

Appropriate monitoring plan, allowing combinations of CDM methodologies.

Defined materiality thresholds.

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I.e. JI-style Pre-Conditions for PoA Simplification under NAMA

SectorTargets (also applicable to standardized baselines)

Parameter JI Scaled-Up Mechanism/NAMACountry Eligibility Party to KP Party to KP and submitted NAMA with UNFCCC

NAMA Registry

Target Has calculated and recorded

its assigned amount units.

Has determined NAMA baseline and target and

has registered the NAMA under the UNFCCC.

MRV system Has in place a national

system for estimating of GHG

emissions in compliance with

international rules.

Has established a NAMA MRV system

Register Has in place a national

register in compliance with

international rules

Has in place NAMA register in compliance with

international rules

Annual inventory

submission

Has submitted annually most

recent required inventory in

common reporting format

Has submitted latest NAMA inventory

Supplementary

info

Has submitted supp. Info on

assigned amount units

plus/minus issued ERU

Has submitted supp/info required to calculate

NAMA baseline and target emissions, issued

CER from nested activities

Minimum requirement for JI track 2 Additional requirements for JI track 1

1Source: JI Rulebook, Article 6http://www.jirulebook.org/3245


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Recommendations to DNA

Encourage host-country DNA to develop standardized baselines,

conduct case-studies and pilot projects to study the linkage between

NAMA design and scaled-up, policy-driven PoA procedures to facilitate

bridging from PoA to NAMA,

evolve & develop additional capacity for this new role, and

Seek integration of discussions on NAMA and scaled-up PoA under

sector targets.

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Thank You for Your Attention

Manuel Cocco, Business Development Manager

[email protected]

Documents

110630 DNA Forum PoA2NAMA Final