Is the CDM delivering?Experiences in LAC

Christiana Figueres

for the

Annex I Expert Group on the UNFCCC

Paris March 21, 2005

Presentation

1. The good news- LAC has concrete CDM achievements

2. The tough question- What should the CDM catalyze?

3. The bad news- What cannot occur under current circumstances

4. Moving forward- 2005-12

- Post 2012

Figueres, 3-2005

LAC Achievements:

Institutional

• All countries have ratified UNFCC and KP• Most countries have DNA or are forming• Operational funding

– Public and international cooperation• Canada, Dutch, Finland, Germany, Japan, CAF, UNEP/Riso,

UNDP, WB

• MOUs – Austria, Canada, Finland, France, Italy, Spain,

Netherlands, others

Figueres, 3-2005

LAC Achievements: Capacity Building

• Major investment– $18 million over past 3 years (Canada, WB,

CAF, UNDP, UNEP, etc)

– Intra-regional capacity building• Consulting

• Lesson sharing

• Exchange of views on UNFCCC negotiation

Figueres, 3-2005

• 184 projects in some stage of preparation and under review on the part of DNA’s

• 39 have received some degree of national approval– 15 Letter of Endorsement– 24 Letter of Approval

LAC Achievements:

Project Pipeline

Source: IDB, 2004Figueres, 3-2005

LAC Achievements:

Project Advance

Projects under validation or registry

Latin America 33 62.3%

Asia 18 34.0%

Africa 1 1.9%

Other 1 1.9%

Total 53 100%

Source: www.unfccc.int updated Dec 1, 2004Figueres, 3-2005

LAC Achievements:

Market Share

2002-2003OECD19%

Transition Economies

15%

Africa5%

Asia21%

Latin America

40%

2003-2004 OECD10% Transition

Economies8%

Africa4%

Asia51%

Latin America

27%

Source: World Bank, State & Trends of Carbon Market, June 2004 Figueres, 3-2005

• 17 Small-scale – Smallest (by CERs) Zacapa/Honduras,

small-hydro; 1 kTonCO2/year; 10 years

• 16 Conventional– Largest (by CERs) Salvador de Bahia/Brazil;

landfill gas; 800 kTonCO2eq/year; 7x3=21 years

LAC Achievements:

Diversity in Size

Source: unfccc.int updated Dec 2004

Figueres, 3-2005

LAC Achievements:

Diversity of Sectors

Renewable energy 52%

Biomass 3%

Landfill gas 27%

Other methane recovery

15%

Fossil fuel switch 3%

Source for project information: CDM EB web page, Nov.2004

(Validation & Registration stages)

Figueres, 3-2005

Source: CDM EB web page,Nov.2004

private company

52%

public-private3%

n.a.6%

state-owned; local

government 16%

subsidiary of transnational

23%

(Validation & Registration stages)

LAC Achievements:

Diversity of Participants

Figueres, 3-2005

LAC Achievements:

Methodological Expertise

LAC based experts

68%

Annex 1 experts

19%

Multilateral funds: staff

13%

New methodologies proposed by

Source for project information: CDM EB web page, Nov.2004

Figueres, 3-2005

LAC based experts 49%

Annex 1 experts 24%

Multilateral funds: staff

18%

n.d. 9%

Source for project information: CDM EB web page, Nov.2004

PDD Development

LAC Achievements:

Technical Expertise

Figueres, 3-2005

• PDDs validated, methodologies submitted:

– Econergy– Ecoinvest– Ecosecurities Brazil– ICF Consulting do Brazil– MGM International– Poch Ambiental– Urquidi, Riesco, y

Compania

• PDDs in pipeline:

– CAEMA

– CC&D

– Servicios Ambientales

– Others

LAC Achievements:

Private Sector Engagement

Source for project information: CDM EB web page, November 2004; National CDM OfficesFigueres, 3-2005

• DNAs– Evaluate and approve projects– CDM promotion– Market enabling

• Applicant Entities– ICONTEC in Colombia – TECPAR in Brazil – 4 provisionally Designated Operational Entities have local

offices/representations in LAC

LAC Achievements:

Reduction of Transaction Costs

Figueres, 3-2005

• CAF (Andean Development Corporation)– 17 member countries, regional presence– Both public and private lending– Infrastructure focus

• Energy, transportation and industry

– Carbon finance program (PLAC) since 1999– ER intermediary since 2002– Mitigates risk– Has transacted 10MT, 18+ under evaluation

LAC Achievements:

Reduction of Transaction Costs

Figueres, 3-2005

• Greening energy mix

• Increasing access to energy in rural areas

• Introduction of new technologies

• Improving air quality

• Conserving natural resources

• Others

LAC Achievements:

Projects have Positive Impacts

Figueres, 3-2005

The Tough Question

Back to Basics• Assist industrialized countries in achieving

KP compliance

• Assist non A-1 in achieving sustainable development;

• Assist non A-1 in contributing to atmospheric stabilization

Figueres, 3-2005

“Achieving SD”and

“Contributing to stabilization”

require

integrating climate considerations into domestic policy of non A-1

in order to decarbonize growth trajectories

Figueres, 3-2005

CDM not helping to integrate cc into national policies in LAC

1. Institutional weaknesses of DNAsa. Min Env – except Br, Gua, Jam

b. Low level funding/ scarce staffing

c. Mandatea. Regulatory: project is congruent with existing policies

b. Promotional

Figueres, 3-2005

CDM not helping to integrate cc into national policies in LAC

IMP

AC

T

INTEGRATION

Integrate industry Sectoral policies Local project finance

SYSTEMLEVEL

Legal framework of DNA Evaluation criteria Approval procedures

INSTITUTIONAL LEVEL

Project preparation Baseline methodologies Additionality

INDIVIDUAL LEVEL

2. Limited impact of capacity building

Figueres, 3-2005

CDM not helping to integrate cc into national policies in LAC

3. Design of the CDM

A. Project-based instrument• Single isolated projects • Congruency with existing national policies

B. Interpretation of additionality/national circumstances excludes climate friendly policies.

Figueres, 3-2005

5 Case StudiesBrazil, Colombia, Costa Rica, Ecuador, Mexico

• History of mitigation activities

• Current institutional arrangements

• Experience to date with CDM

• Other sectoral initiatives with GHG emissions implications

• Assessment of integration of climate considerations into national policies

Figueres, 3-2005

5 Case StudiesBrazil, Colombia, Costa Rica, Ecuador, Mexico

• Conclusions:– DNA does not necessarily lead to CDM

projects– Country’s mitigation activities cannot be

measured by its involvement in carbon market– Integration of climate considerations into

national policies can disqualify projects from CDM

Figueres, 3-2005

Irony

Some countries are integrating climate considerations and national policies

But they are/will be disqualified by the CDM

Figueres, 3-2005

Perverse Incentive

• CDM most successful in those countries with climate damaging policies

• Non-A1 continue on an emission intense growth path, and implement a few isolated CDM projects

Figueres, 3-2005

LAC emissions are rising faster than global emissions

Source: WRI, CAITFigueres, 3-2005

Global CO2 intensity is declining; LAC intensity is rising

Source: WRI, CAITFigueres, 3-2005

Moving forward…2005-12

• Move capacity building to system level– Initiate more local banks in carbon finance

• Push for methodologies which help integrate cc into national policies

• Pilot one sector– Methane recovery from landfills in LAC

Figueres, 3-2005

Moving forward…post 2012

• Deepening of A -1 commitments

• Market mechanism for non A-1 participation– Sector wide

• Large scale initiatives which transform sector

– Policy based• Intentional SD policies

• Market pull for clean technologies

Figueres, 3-2005

Moving forward…post 2012

• Request WB to launch a “Carbon Adjustment” (DLP) initiative for larger non A-1– Energy/transportation policy reforms to reduce carbon

intensity– Policy pull for clean technologies– Appropriate financing instruments– Decarbonization of key sectors– Greening of the WB lending portfolio

Figueres, 3-2005

“ Institutional Capacity to Integrate Economic Development

and Climate Change Considerations: An Assessment of DNAs in LAC ”

Inter American Development Bank, October 2004

Christiana FigueresTel. +1-202-294-4898

christiana@figueresonline.com

www.iadb.org/sds/ENV/publication/publication_183_3901_e.htm