1 st Capacity Building Workshop – 24/5/2013, Graz, Austria

1. 1st Capacity Building Workshop – 24/5/2013, Graz, Austria Structure and content of a Step-by-step manual for the development and implementation of low carbon policies Sebastian Mirasgedis Elena Georgopoulou Yannis Sarafidis NATIONAL OBSERVATORY OF ATHENS

2. Background – Aim of the Manual (I) • Efficient climate change mitigation requires the development and implementation of an integrated set of low carbon policies and measures, encompassing all sectors • Continuously challenging framework - drastic GHG emissions cuts are required for reaching the 2 oC target • Requirements: significant background scientific and technical work, involvement of several stakeholders, co-operation between administrative divisions, clear targets and timelines, continuous adaptation to emerging legal requirements and technological development • EU is very active in climate change mitigation => countries joining the EU have to develop all necessary infrastructure and actions

3. Background – Aim of the Manual (II) The Manual aims to assist SEE countries (but also other countries) in the process of joining the EU to develop, implement and monitor low carbon policies and measures • Guide describing the basic steps to follow • Takes into account real problems and barriers faced in the SEE region • Concise and readable (does not enter into too much technical detail on each topic/ sub-topic, but provides examples and references for further reading)

4. Structure of the Manual • Chapter 1: Introduction • Chapter 2: Analyzing the broader scene regarding climate change • Chapter 3: Background analysis – Examining past trends and current situation of GHG emissions • Chapter 4: Assessing the potential and impacts of low carbon measures • Chapter 5: Developing projections of GHG emissions • Chapter 6: Selecting low carbon targets and appropriate measures and policies • Chapter 7: Implementation and monitoring of policies and measures

5. Chapter 2: Analyzing the broader scene on climate change Basic categories of commitments: (a) Commitments deriving from international agreements (UNFCCC, Kyoto Protocol, others) EU enlargement (b) Commitments deriving from EU legal acts (e.g. the ’20-20-20 Climate and Energy Package’, which has transformed EU pledges for the 2013-2020 period of the Kyoto Protocol into a legally binding target)

6. Chapter 2: Analyzing the broader scene on climate change

7. Chapter 2: Analyzing the broader scene on climate change EU framework of actions on climate change: • 20-20-20 Climate and Energy Package • Green Paper on the 2030 framework for climate and energy policies • Roadmap for moving to a competitive low-carbon economy in 2050

8. Chapter 2: Analyzing the broader scene on climate change EU legal acts on: • GHG monitoring and reporting • Emissions Trading Scheme (EU-ETS) • Carbon Capture and Storage • Transport and Fuels • Renewable Energies • Energy Efficiency (incl. CHP) → Challenging and demanding set of commitments, both for now as well as for the mid-term future

9. Chapter 3: Examining past trends and current situation of GHG emissions Key references • Intergovernmental Panel on Climate Change (IPCC) • 2006 IPCC Guidelines • Good Practice Guidance (general and LULUCF) • 1996 IPCC Guidelines • United Nations Framework Convention on Climate Change (UNFCC) • Decision 14/CP.11: Current reporting guidelines • Decision 15/CP.17 : Revised reporting guidelines • For trial use up to May 2013 • For use as of 2015 submission (2013 data) • European Commission, GHG monitoring mechanism • Decision 280/2004/EC and implementing provisions (Decision 166/2005/EC) • New documents revising the monitoring mechanism have been approved by European Parliament

10. Chapter 3: Examining past trends and current situation of GHG emissions Basic principles in developing GHG emissions inventories • Transparency • Assumptions and methodologies used should be clearly explained to facilitate replication and assessment of the inventory by users of the reported information • Consistency • The same methodologies are used for all years • Consistent data sets are used to estimate emissions or removals • Comparability • Use of methodologies and formats agreed by the COP for estimating and reporting inventories • Completeness • Cover all potential sources and sinks, and all gases • Accuracy • Estimates should be accurate in the sense that they are systematically neither over nor under true emissions or removals, as far as can be judged, and that uncertain ties are reduced as far as practicable

11. Chapter 3: Examining past trends and current situation of GHG emissions Greenhouse gases to be considered • Minimum requirements • CO2 • CH4, change of GWP • N2O, change of GWP • HFCs & PFCs, additional gases have been included and GWP values have changed • SF6, change of GWP • NF3, additional gas • Additional elements • Information on precursor gases (CO, NOx, NMVOC and SO2) • Indirect CO2 emissions from the atmospheric oxidation of CH4, CO and NMVOCs • Indirect N2O emissions from other than the agriculture and LULUCF sources • Other elements • Hydrofluorethers (HFEs) and perfluoropolyethers (PFPEs)

12. Chapter 3: Examining past trends and current situation of GHG emissions Sources / Sinks of GHG emissions / removals • Energy • Fuel combustion • Fugitive emissions from primary fuel extraction, production, transportation, etc. • Non-energy use of fuels • Industrial processes • Emissions due to chemical reactions in manufacturing processes • Use of F-gases • Non-energy use of fuels • Solvents and other products use • Agriculture • Agriculture activities • Livestock activities • Land Use, Land Use Change and Forestry (LULUCF) • Waste • Solid waste management • Wastewater treatment

13. Chapter 3: Examining past trends and current situation of GHG emissions Changes / additions introduced by 2006 IPCC Guidelines • Improved coverage of emissions sources • Revisions in estimation methods • Guidance on Carbon Dioxide Transport, Injection and Geological Storage is introduced in the Energy sector • Industrial processes and Solvents and Other product use have been combined into a new sector, named Industrial Processes and Product Use (IPPU) • Non-energy use of fuels is to be reported under this sector only • Agriculture and LULUCF have been integrated into one sector, named Agriculture, Forestry and Other Land Use (AFOLU)

14. Chapter 3: Examining past trends and current situation of GHG emissions GHG emissions / removals estimation methods • Basic equation: (Emissions) = (Activity data) * (Emission factors) • IPCC Guidelines provide methods for estimating GHG emissions at different levels of complexity (tiers) • Tier 1 : Combination of readily available data from national and / or international data sources with default emission factors and additional parameters provided by the IPCC Guidelines • Tier 2: Similar to Tier 1 methods but based on country-specific parameters • Tier 3: Detailed methods, simulating the process generating emissions • Tier 2 and 3 methods are generally considered more accurate and are more data and resource demanding

15. Chapter 3: Examining past trends and current situation of GHG emissions How to select appropriate estimation methods • Key category • Introduced by IPCC Good Practice Guidance (2000) • Categories that have a significant influence on a country’s total inventory of greenhouse gases in terms of the absolute level of emissions and removals, the trend in emissions and removals, or uncertainty in emissions and removals • Prioritization in terms of • Resources allocated • Selecting higher tier methods • Developing specific procedures for quality control and assurance • Approaches to identify key categories • Approach 1: Key categories are those that, when summed together in descending order of magnitude, add up to 95% of the total level and trend of the national inventory • Approach 2 identifies key categories according to their contribution to uncertainty • Additional to those identified by Approach 1

16. Chapter 3: Examining past trends and current situation of GHG emissions How to select appropriate estimation methods Mainly Tier 1 methods Higher tier methods Higher tier methods cannot be applied due to data availability

17. Chapter 3: Examining past trends and current situation of GHG emissions Data sources • National Statistics Agencies • Sectoral experts, stakeholder organisations • International organisations publishing statistics e.g., United Nations, Eurostat, the International Energy Agency, OECD and the IMF • Reference libraries (National Libraries) • Scientific and technical articles in environmental books, journals and reports. • Universities • Web search for organisations & specialists • National Inventory Reports from Parties to the United Nations Framework Convention on Climate Change • Reporting schemes developed under the provisions of other legislative acts

18. Chapter 3: Examining past trends and current situation of GHG emissions Dealing with data sources and data availability • Dealing with data sources • Data sets maintained by national statistical agencies have been developed for purposes other than the compilation of GHG emissions inventory • Preliminary vs. final data • Confidentiality issues (mainly related to industry) • Lack of data • To work in close cooperation with the identified data provider, to whom all requirements should be specified • Generate new data sets by means of measurements, surveys, etc. • Apply techniques such as • Interpolation, extrapolation • Generation of inventory parameters from a cluster of countries with comparable national circumstances • Use of surrogate data

19. Chapter 3: Examining past trends and current situation of GHG emissions Calculation tools • Archiving and documentation of primary data per source / sink category • Elaboration of primary data to generate activity data as needed for the estimation of emissions • Archiving and documentation of emission factors per source / sink category • Calculation of emissions per source / sink category • Generation of output in the appropriate format • Key category analysis • Uncertainty analysis

20. Chapter 3: Examining past trends and current situation of GHG emissions The IPCC inventory software application • In 2012 IPCC launched an inventory software application to assist Parties in implementing 2006 IPCC Guidelines • Current version is 2.11, released on the 5th of April 2013 • The tool and its manual are freely available at http://www.ipcc-nggip.iges.or.jp/software/index.html • It is a database application that • Can be used for the whole inventory or just individual categories • Is a stand alone software with modest hardware requirements • Provides default data from 2006 IPCC Guidelines but gives users the flexibility to use country-specific information; • Includes Uncertainty and Key Category Analysis; • Aids QA/QC activities; • Enables the simultaneous work of an inventory team

21. Chapter 3: Examining past trends and current situation of GHG emissions Reporting • Common Reporting Format (CRF) tables • Excel file that comprises a series of standardized data tables • To report activity data, parameters, emissions estimates • National Inventory Report (NIR) • Institutional arrangements & overview of methodological issues • Assessment of trends • Detailed information per inventory sector • Information related to Kyoto Protocol requirements • Annexes with detailed technical information • Indicators • Foreseen within the context of the EU GHG monitoring mechanism • Priority indicators • Supplementary indicators • Additional indicators • Assessment of trends and comparability between member states • Identification of areas where mitigation measures need to be considered

22. Chapter 3: Examining past trends and current situation of GHG emissions Recalculations • Recalculation: the application of new methods and / or the generation of emission estimates for a new category for the whole time series • Recalculations are closely related to • The capacity (human and/or financial) for inventory preparation • Data availability • Methodological change or refinement => to improve accuracy • Data availability has been improved • The previous method applied was not consistent with IPCC guidelines • A category has become key and therefore higher tier method should be applied • The previously used method is insufficient to reflect mitigation activities in a transparent manner, as for example a uniform emission factor is applied • New inventory methods become available • Correction of errors • New categories and/or new gases => to improve completeness • A new emission or removal activity is occurring or identified by IPCC Guidelines • A rapid growth in a previously very small category has now made this category worth estimating and reporting

23. Chapter 3: Examining past trends and current situation of GHG emissions National Inventory System A national system includes all institutional, legal and procedural arrangements made for estimating GHG emissions / removals, and for reporting and archiving inventory information. • Establish and maintain the institutional, legal and procedural arrangements necessary to perform the functions of inventory planning, implementation and management, between the government agencies and other entities responsible for the performance of these functions • Ensure sufficient capacity for the timely performance of the above mentioned functions, including data collection for estimating GHG emissions and arrangements for the technical competence of the staff involved in the inventory development process • Designate a single national entity with overall responsibility for the national inventory • Prepare national annual GHG inventories in a timely manner in accordance with the reporting guidelines in place and relevant decisions of the COP, and provide the information necessary to meet the reporting requirements defined in the reporting guidelines in place and in relevant decisions of the COP • Undertake specific functions relating to inventory planning, preparation and management

24. Chapter 4: Assessing the potential and impacts of low carbon measures Measures vs. Policies • Measures are technologies, processes, and practices that reduce GHG emissions below anticipated future levels. • The development of a wind farm, the installation of double glazed windows in a building, etc. • Policies are taken and/or mandated by a government - often in conjunction with business and industry within its own country, or with other countries - or local authorities to accelerate mitigation measures. • The implementation of feed-in tariffs for enhancing the penetration of RES, the implementation of building thermal regulation, etc.

25. Chapter 4: Assessing the potential and impacts of low carbon measures Review of measures • A review of the most important mitigation technologies per sector. • Basic characteristics for selecting mitigation measures: • Effectiveness (potential for reducing GHG emissions). • Cost-effectiveness (economic performance) • Implications on the society, the economy and the environment (co-benefits and co-risks) • Other issues related to the ease of application, social acceptance, etc.

26. Chapter 4: Assessing the potential and impacts of low carbon measures Effectiveness • Released amount of GHG g in a year t by a specific source: • Mitigation measures aim to reduce : • The activity data A (e.g. the energy conservation measures in buildings) • The corresponding emission factors C (e.g. the substitution of fossil fuels with renewables) • Both

27. Chapter 4: Assessing the potential and impacts of low carbon measures Cost-effectiveness • Basic steps for evaluating the cost-effectiveness of mitigation measures. • Definition of technological project parameters and evaluation assumptions • Determination of the project cost and benefit components • Calculation of the net present value of costs / benefits (and if possible associated externalities) as well as emissions • Evaluation indicators (NPV, IRR, B/C ratio, levelised costs of mitigation measures) • Sensitivity analysis

28. Chapter 4: Assessing the potential and impacts of low carbon measures Cost-effectiveness • Description of the process for developing national and sectoral carbon marginal abatement cost curves (simplified approach and also taking into account the interactions between various mitigation options).

29. Chapter 4: Assessing the potential and impacts of low carbon measures Co-benefits & co-risks • Implementation of mitigation measures results in broader impacts: • Health effects, such as reduced mortality and morbidity from the improved indoor and outdoor air quality. • Ecological effects, such as reduced impacts on ecosystems due to the improved outdoor environment, reduced use of nitrogen fertilizers, reduced production of wastes, etc., as well as increased risks due to unresolved disposal of wastes associated with nuclear power. • Economic effects (job creation, economic growth, increase of income, improvements in security of energy supply, productivity increases). • Social effects, such as fuel poverty alleviation due to the implementation of energy conservation measures, risks of food security due to increased role of energy cultivations, etc. • A review of the most important co-benefits and co-risks associated with key mitigation technologies is performed.

30. Chapter 4: Assessing the potential and impacts of low carbon measures SWOT analysis • A strength, weakness, opportunity, threat (SWOT) analysis has been historically used by firms in order to match market opportunities to their company’s strengths. • It could be used to assist in finding the best package of measures for reducing GHG emissions in an economy.

31. Chapter 5: Developing projections of GHG emissions Introduction • Aim: • To analyze future evolution of GHG emissions at national / sectoral level through scenarios. • Scope: • To estimate the combined effects of mitigation measures. • To evaluate the effectiveness of various policies aiming at promoting specific GHG mitigation technologies. • To estimate the total and marginal costs on the economy associated with mitigation actions. • To investigate the role of carbon markets or the opportunities to mobilize market forces in order to implement low cost mitigation actions.

32. Chapter 5: Developing projections of GHG emissions Scenarios to be considered • With Measures, With Additional Measure & Without Measures • Other scenarios (Frozen technology, High / Low economic growth, High / Low energy prices, etc.).

33. Chapter 5: Developing projections of GHG emissions Methodologies / tools – Energy sector • What policy questions are answered by each modeling approach. • Short presentation of the most popular models used for energy analysis and GHG emissions projections (MARKAL, MARKAL-MACRO, EFOM, WASP, ENPEP/BALANCE, LEAP, NEMS, PRIMES, GACMO, STAIR) (source: Duerinck et al. 2008)

34. Chapter 5: Developing projections of GHG emissions Methodologies / tools – non-Energy sectors • Focus on spreadsheet models. • For Agriculture sector more sophisticated models can be used (CAPRI, AGLINK-COSIMO). • For LULUCF sector usually the approach used for the Inventory is also used for undertaken the projections. Also, more detailed models can be used (EFISCEN , YASSO, GLOBIOM/G4M).

35. Chapter 5: Developing projections of GHG emissions Data requirements • GHG emissions inventory for past years • Macro-economic parameters • Population growth and number of households • Economic growth (GDP, GVA) • Energy prices and energy taxation • Income elasticities of energy demand • Demand for transport work • Technological developments concerning mitigation actions • Technical characteristics (fuel, efficiency, capacity, load factor, maximum penetrations, etc.) • Economic parameters (investment cost, O&M costs, economic lifetime, etc.) • Policy priorities and constraints

36. Chapter 5: Developing projections of GHG emissions Presentation of results • Structure of the report on projections (on the basis of European Commission, 2012): • Executive summary (key findings of the analysis) • Introduction (background information on GHG emissions in the country, the projection process and procedures and a summary of the results). • Assumptions (basic assumptions about the economic scenario, population, technologies considered, as well as the scenarios analyzed). • Projected emissions (data used, methodologies / tools, results, QA/QC activities undertaken, other useful information). • Uncertainty analysis • List of useful indicators at national and sectoral level.

37. Chapter 6: Selecting low carbon targets and appropriate measures and policies Rationale in setting low C targets: • Approach 1: Improving to some extent the present situation • Approach 2: Fulfillment of legal commitments • Approach 3: Moving fast towards a low carbon economy

38. Chapter 6: Selecting low carbon targets and appropriate measures and policies Timeframe for C targets: • the cost of reaching a target at a specific point in time is influenced by the trajectory followed • as specific investments have a long lifetime (e.g. in the power sector), some emission paths delaying the start of drastic GHG emissions reductions may be very difficult (if not impossible) to follow • different emissions trajectories for reaching a target at a specific point in time influence also the evolution of emissions after that point

39. Chapter 6: Selecting low carbon targets and appropriate measures and policies Form and type of targets: • Targets need to be measurable and reportable so that the progress towards their achievement can be monitored - It is usually preferable to use targets expressed in physical units (e.g. ktons of CO2-equivalent) as these are easily understandable by decision-makers and stakeholders and can be measured • Targets can be intensity or absolute; Absolute targets are explicit and thus easier to measure and communicate; Intensity targets can be useful in comparing countries, regions, or sectors across carbon emissions • Targets can be legally binding or indicative • Overall targets should be accompanied by disaggregated (sectoral) targets

40. Chapter 6: Selecting low carbon targets and appropriate measures and policies Methodological steps for setting targets: • The marginal cost curve can be a good starting point

41. Chapter 6: Selecting low carbon targets and appropriate measures and policies Step 1: Examine the marginal cost curve when only private costs and benefits are included in the economic analysis Step 1.1: Identify measures having a negative unit cost (i.e. net benefit)  ‘win-win’ measures • Win-win under all circumstances (‘Solid’ win-win measures) • Win-win under a high interest rate regardless of the rest remaining conditions (‘Solid private’ win-win measures) • Rest measures (‘Uncertain’ win-win measures) Step 1.2: Explore measures having a positive unit cost • Becoming win-win under favorable conditions and a high interest rate (‘Promising private measures’) • Presenting a net private cost regardless of the interest rate and conditions faced (‘Low priority measures’) • In between these 2 groups (‘Medium priority measures’) Step 2: Examine the performance of potential GHG emission reduction measures by considering also external costs and benefits

42. Chapter 6: Selecting low carbon targets and appropriate measures and policies Developing appropriate policies for the efficient implementation of measures selected: (a) Economic policies that support directly low carbon measures (e.g. investment subsidies, interest-free loans, subsidization of loan interests) (b) Economic policies that support indirectly low carbon measures by ‘penalizing’ conventional alternatives (e.g. increasing taxes on conventional fuels) (c) Policies where the financial burden implied by some low carbon measures is transferred to/ shared with third parties (third-party financing) (d) Regulations and standards favoring/ imposing low carbon technologies

43. Chapter 6: Selecting low carbon targets and appropriate measures and policies Mixing policy tools: • Regulations and standards must always be applied • If low carbon markets are very limited at present, then policies providing direct economic subsidies to low carbon measures must also be applied at least in the beginning; then, gradually they can be replaced by other policy tools (e.g. green tariffs) • Economic disincentives must be very carefully considered since they may deteriorate the living conditions of the poorer if not properly designed and introduced • There is not a single tool that covers all cases – clever combinations are needed

44. Chapter 6: Selecting low carbon targets and appropriate measures and policies Formulating an Action Plan for achieving a target: • Selected target and set of policies and measures • Detailed time schedule for the implementation of selected measures • Definition of the coordinator and the stakeholders to be involved in the implementation of each measure • List of preparatory actions per measure • Milestones per measure • Indicators of progress per measure • Methodology for calculating GHG emissions reductions achieved per measure during its implementation

45. Chapter 6: Selecting low carbon targets and appropriate measures and policies Public consultation – Communication with stakeholders: • Phase A: Selection of carbon targets, measures and policies – Compilation of draft Action Plan • Phase B: Finalization of carbon targets, measures, policies, and Action Plan • Phase C: Implementation of Action Plan for GHG emissions reduction Adoption process: • Different legal formats of targets depending on the legal commitments of the country/ region/ sectors in question • Quantitative targets, Action Plan: law (Parliament) or simply a decision of the administration? • Voluntary Agreements - Memorandum of Understanding • Timing is important; the process must not be too long → risk of losing the momentum gained with stakeholders and target groups

46. Chapter 7: Implementation and monitoring of policies and measures Institutional arrangements:

47. Chapter 7: Implementation and monitoring of policies and measures Proper monitoring requires: • A Monitoring Plan, which contains suitable indicators of progress per selected measure, concrete procedures for collecting necessary input data, and a methodology for estimating GHG emissions reductions achieved per measure applied • A Monitoring Team, which checks the implementation of selected policies and measures on a regular basis • A Monitoring Report, which is compiled regularly by the Monitoring Team and presents its findings for each specific monitoring period

48. Chapter 7: Implementation and monitoring of policies and measures Evaluating progress and results achieved so far: • Timeframe for the evaluation • Data collection sources and process • Methodological tools to be used for the evaluation • Indicators reflecting the progress (expressed in physical terms) in implementing the selected low carbon measures (progress indicators) • Indicators showing the GHG emissions reduction achieved through the implementation of selected low carbon measures (result indicators)

49. Chapter 7: Implementation and monitoring of policies and measures Progress indicators

50. Chapter 7: Implementation and monitoring of policies and measures Result indicators