Experiences and challenges implementing PoAs from the perspective of a

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Experiences and challenges implementing PoAs from
the perspective of a  Stakeholder
Presentation at UNFCCC PoA workshop May 2011
by Felicity Spors (Fspors_at_worldbank.org)
Monali Ranade (Mranade_at_worldbank.org)

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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

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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

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PoA potential supporting sustainable
development by supporting small dispersed HH/SME
projects
EE demand side EE demand side 29
Waste 23
Solar 12
Hydro 5
EE supply side 4
Forestry Agriculture Forestry Agriculture 2
Fossil fuel switch Fossil fuel switch 2
Biomass energy Biomass energy 2
Agriculture 1
CMM 1
Transport   1
Total PoAs   82
But PoAs have not achieved scale up of GHG
mitigation in number of PoAs nor in size of PoAs.
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World Banks PoA Portfolio
Under validation

• 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)

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A few Challenges (among many others)

• 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

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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

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Challenges Complex and varied business structures
Whole-seller

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

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

Hands-on
Hands-off

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

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

Retailer
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Challenges are plenty how to find a solution?

• 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.

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Two procedures for two different kinds of PoA

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

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Key barriers in existing rules
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Recommendations to address regulatory barriers
facilitate larger CPAs
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Solving regulatory rules is unlikely to flood
the market with PoA CERs due to non regulatory
barriers

• 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?

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Thanks for listening
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Challenges Complex business arrangements

• 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).

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