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How to develop a NAMA by scaling-up ongoing programmatic CDM activities On the road from PoA to NAMAs. Berlin, April 2011. Prepared for: KfW Bankengruppe and Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (BMU) Prepared by: South Pole Carbon Asset Management Ltd.
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How to develop a NAMA by scaling-up ongoing programmatic CDM activitiesOn the road from PoA to NAMAs Berlin, April 2011 Prepared for: KfW Bankengruppe and Bundesministerium für Umwelt, Naturschutz und Reaktorsicherheit (BMU) Prepared by: South Pole Carbon Asset Management Ltd
Approach • Imagine you are the head of the DNA in a developing country. • Your Minister of Environment calls on you to please come up with a concrete design for a pilot NAMA for your country. • She wants something very concrete and workable. • You have never done this before but you then have a brilliant idea: • why not just look at the PoA that was submitted for approval recently and see whether you can use it and its operational design elements as a starting point for the design of a concrete NAMA. • What steps do I have to take to get there?
Introduction to the Study • Key Observation • A NAMA includes design elements that are structurally similar to PoA • Questions • How can PoAs act as starting points to scale-up mitigation actions within a NAMA framework? • Which PoA design elements are useful for NAMA design? • What concrete suggestions can we provide to a NAMA designer who is tasked with the development of a NAMA using key building blocks of an existing PoA? • Which recommendations can we provide going forward? • Approach • Develop a methodological framework for scaling-up PoA • Apply this method to four case-study • Analyze results and prepare recommendations
Methodological Framework for Scaling Up PoAGuidance for NAMA designers • Module 1: Understand the PoA: what is its scope, eligibility criteria, implementation arrangements, which GHG emission categories does it target? • Module 2: Analyze four key technical PoA design elements re: their suitability for scaling up: • eligibility criteria, • baseline setting procedure, • MRV process and • PoA management • Use the outcome of this process to identify if PoA design is a) already fully applicable, b) needs to be adjusted or c) needs to be developed for NAMA design. • Module 3: Evaluate the domestic policy and institutional framework to assess whether the existing framework is supportive of NAMA implementation or not. • Module 4: Identify follow-up actions for NAMA readiness based on the need for adjustments and new designs as identified in module 2.
Module 2: Guiding Key QuestionsEligibility Criteria • What are the PoA’s eligibility criteria? • Should the eligibility criteria be adjusted to include additional activities under a NAMA, such as expansion to other sectors and intervention-types? • Should the eligibility criteria be adjusted to be able to scale-up activities through the involvement of additional implementation entities? • Is the PoA limited to a region? Should its geographical coverage be increased to a national scale? • Should the eligibility be adjusted to target emission reductions from the same IPCC GHG emission categories under a NAMA?
Module 2: Guiding Key QuestionsBaseline Setting • How is the baseline set in the PoA? • Is the baseline setting applicable to a NAMA? • Can the baseline be adapted by introducing standardization elements? • Can the baseline be simplified in the context of a NAMA? • Can the PoA baseline be used to set targets for the NAMA?
Module 2: Guiding Key QuestionsMRV Procedures • What are the key monitoring requirements of the PoA? • Are the PoA monitoring requirements workable in a NAMA context or would they be too difficult to implement? • Can a NAMA-level GHG inventory and its related MRV system be upgraded and operated using the PoA as a starting point? • Who is responsible for monitoring and managing the verification process? • What is the capacity of the relevant entities in the PoA to estimate, collect and manage GHG emissions in a NAMA context?
Module 2: Guiding Key QuestionsPoA Management • How is the PoA management structure set-up? Who is managing the CME? • Could the CME play a crucial role in managing a NAMA? • If not, would it be possible to transform the PoA CME into an entity with the institutional capacity to manage a NAMA? • Are the current incentives/regulations sufficient to successfully manage a NAMA? If not, what additional incentives/regulations would be needed to successfully manage a NAMA?
Lesson-learnt & RecommendationPoA elements can serve as building blocks for NAMA design Recommendation: a systematic assessment of NAMA suitability of CDM methods.
Lesson-learnt & Recommendation Key Differences between PoA and NAMA
Lesson-learnt and RecommendationIntegration facilitates scaling-up, but avoidance of double-counting of ER must be managed using a robust approach • Strong integration of PoA and domestic policies facilitates scaling-up • Recommendation • Ensure strong policy integration in the design of PoAs to facilitate the scaling-up to NAMAs. • Co-existence of NAMAs and PoAs in the same sector is possible if double-counting is avoided using a robust approach • A NAMA (contributing to domestic targets) competes with PoA (contributing to third Party targets): how to differentiate which ER count towards domestic energy efficiency target vs. carbon credits? • Recommendation • The only and most robust solution in the short-term is to: • issue CERs to the PoA and then • deduct those issued CERs from the NAMA achievement. • PoA reform and NAMA design agenda need to connect to address double-counting (among other issues).
Lesson-learnt and RecommendationGain more practial experience with scaled-up PoA and pilot NAMA • More real life experience with PoA is needed to better understand key scaling-up issues and to inform PoA reform agenda • More practical experience with NAMA design will facilitate negotiation process to define operationalization of NAMA concept. • Recommendation • Launch pilot NAMA that are driven by existing and suitable PoA and examine their fit into the domestic policy landscape. • Examine how the role of PoA in NAMA framework contributes to PoA reform/streamlining of rules.
Open Issuesthat require further investigation • Double Counting • Coordination between PoA & NAMA procedures to ensure simplification and co-existence • Standardization potential • JI-style simplification • De-centralization of CDM EB authority for PoA under NAMA • Guidance for AWG LCA re NAMA design • Credited NAMA = supported NAMA plus PoA and/or new mechanism?
Thank You for Your AttentionIngo Puhli.puhl@southpolecarbon.comTel +66 2 678 8979
The Result: a NAMA that co-exists with a PoA= a supported NAMA with PoA to provide “crediting” function • PoA is established • Standard process • Host country defines NAMA • Through systematic scale-up of PoA using useful and adjustable PoA design elements • Clarifies procedure for avoidance of double-counting of emission reductions • NAMA and PoA operate • PoA: CDM MRV, NAMA: NAMA MRV • Using mix of (integrated) incentives • NAMA compliance management takes account issued PoA CER. • PoA is driven by NAMA policy objectives • This design provides full crediting functionality on NAMA level using existing (operational) mechanism Domestic & supported actions CPA PoA NAMA target sector emissions Sector emissions (BAU) in country A (monitored in accordance with intl. rules)
Introduction to Market Based MechanismsUsing price signals to identify & implement least-cost abatement options To reduce the cost of complying with a defined emissions cap
Context: Scaling up of baseline & credit mechanismsCDM Project-by-project approach Sector emissions in country A (not monitored (well)) • Every project needs to establish • Eligibility/additionality • Emission Baseline • MRV plan • Pass UN validation and registration • Monitor, report and complete verification of carbon credits • Driven by initiative of project owners, not policy • High complexity, high cost that create commercial risks and access barriers for small projects CDM projects
Context: Scaling up of baseline & credit mechanisms Programmatic Approach Sector emissions in country A (not monitored (well)) • Program needs to establish • Eligibility/additionality • Emission Baseline • MRV plan • CME Operating Structure • Pass UN validation and registration • Activities need to: • Complete inclusion • MRV of carbon credits • Driven by “aggregator” & public policy • Reduced complexity & cost for activities CPA PoA
Context: Scaling up of baseline & credit mechanisms Domestic, Supported, Credited NAMA • Host country defines: • Scope/coverage/activities • NAMA baseline and target • Requested support • Implementation arrangements • Crediting: Benchmarks/baselines for “surplus” actions (procedures not defined) • Host country registers & operates NAMA • Regular MRV of all NAMA sources • Implement mix of incentives, incl. carbon credits for surplus activities • Emissions “true-up” • Driven by domestic policy priorities • Implementation of activities facilitated by incentives and regulation • Discussion on credited NAMA postponed to December 2012 Actual NAMA emissions in country A (monitored in accordance with intl. rules) Domestic & supported actions Surplus actions NAMA target sector emissions Sector emissions (BAU) in country A (monitored in accordance with intl. rules)
Drivers for Scaling-Up from PoA to NAMA • EU limitation on importing CER from project-based approaches • Sector-baselines might open the door for “NAMA CER” • “Mainstreaming” international cooperation mechanisms into domestic policy • Potentially simplified PoA implementation modalities for PoA under a NAMA • Learning from existing mechanisms (vs. reinventing the wheel)
