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THE CLEAN DEVELOPMENT MECHANISM _CDM_-THE KYOTO PROTOCOL

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THE CLEAN DEVELOPMENT MECHANISM _CDM_-THE KYOTO PROTOCOL Powered By Docstoc
					    THE CLEAN DEVELOPMENT MECHANISM (CDM)-THE KYOTO
 PROTOCOL, SUSTAINABILITY CHALLENGES IN THE LOWER INCOME
            BUILDING AND CONSTRUCTION SECTOR
   IEEECO™ BROAD BASED SUSTAINABILITY TARGETING BASIC
                  SERVICES FOR THE POOR

                                      D Mothusi Guy (1), L Abron (2), H Annegarn (3)
                           1
                         PEER Africa (Pty) Ltd, Johannesburg 2 PEER Consultants PC, USA
       3
           Department of Geography, Environmental Management University of Johannesburg, South Africa


ABSTRACT

The paper presents a review of specific segments of the                  The UNEP report suggests the primary reason for the low
December 2008 UNEP (SBCI) Report findings. It                            registration of building sector CDM projects is a lack of a
explores the relevance of the report concerning the                      sustainable business case to justify the upfront
implications and application of the Clean                                interventions which could lead to the harvesting of the
Development Mechanism (CDM) in the South African                         carbon from so many small scattered projects. UNEP
low income human settlement development, sector. It                      researchers also make several recommendations for
highlights some of the challenges, barriers and                          resolving the situation on an international basis. They
opportunities relating to life cycle cost/benefit                        note that Programmatic/ Performance Based CDM will
assessments for many small energy consuming                              help to alleviate the problem by simplifying the
households. The assessment is made within the context                    registration process and allowing for many projects to be
of sustainable development in the self-help/informal                     included in a single CDM submission.
building and government assisted developmental
sector. The paper offers recommendations with                            2.     PROGRAMMATIC/                    PERFORMANCE
specific implications for scaled delivery of sustainable                        BASED CDM
domestic interventions for low cost government-
assisted housing and human settlement development                        In December 2005, the COP/MOP decided to include a
projects (incorporating energy related externality                       “Programmes of Activities” (PoA) in the CDM. The PoA
costs). The Witsand iEEECO™ Human Settlement                             has its origins in a decision of the COP/MOP that
Project in Atlantis, Cape Town is the basis of the                       local/regional/national policies or standards cannot be
references to lessons learned.                                           considered CDM project activities. The PoA concept
                                                                         makes it possible for a large number of interrelated
1.      MANY BUILDINGS, SMALL INDIVIDUAL                                 project activities (referred to as “CDM Programme
        SAVINGS                                                          activities or CPAs) in different locations, even in different
The UNEP Report references there are few building                        countries, to be registered as a single CDM project and
sector CDM projects listed on the international CDM                      implemented in a co-ordinated fashion. Because a PoA is
project database and explores reasons why that number is                 essentially a programme to co-ordinate individual CDM
under represented given 30% of the world’s GHG comes                     activities, it is commonly referred as “Programmatic
from buildings.       The report highlights “long tail                   CDM”. P29
distribution” of energy and other sustainability savings as
one of the main barriers in the application and relevance                The implementation of the iEEECO™ (broad-based self-
of CDM in the building sector. See the UNEP chart [1]                    help) clean development methodology as applied in the
(Figure 1).                                                              Witsand iEEECO™ Village Project, Cape Town exposes
                                                                         this problem is only one of the barriers preventing
                                                                         development of a sustainable business case for CDM in
                                                                         the lower income and informal sector in South Africa.
                                                                         There are several other factors that essentially undermine
                                                                         the application of CDM in this sector. This paper
                                                                         suggests that CDM (excluding externality costs
                                                                         considerations), no matter how it is packaged, is not the
                                                                         appropriate mechanism for addressing the clean energy
                                                                         needs of the poor in South Africa, although this may not
                                                                         be the case in developed countries such as the US.
Figure 3: Small savings from large numbers of end-use units constitute
the long-tail distribution of the building sector projecs (Source:
Adapted from hinostroza et al., 2007, and Figueres and Philips, 2007
                                                                2.     The paper reinforces the fact the CDM is not a
                                                                       replacement for direct foreign investment requied
                                                                       to facilitate the business case.

                                                                3.     The authors explore the viability and challenges of
                                                                       harvesting CDM risk reward and ring fencing the
                                                                       value of the externality costs savings as an asset
                                                                       for the poor. The CDM offers a revenue reward for
                                                                       projects that elect a more sustainable approach,
                                                                       given a documented degree of additionality2 and
Table 1 shows the difference a 30% reduction in energy                 appropriate level of verification and certification of
bills can make as a result of an energy efficiency                     reported savings. The CDM model requires
intervention in the New Orleans Katrina recovery process.              certification of the intervention as compared and
[2]                                                                    contrasted with the baseline/business as usual
                                                                       scenario.
South Africa’s poorest exist in the worst energy scenario.
                                                                4.     The paper sets out to disclose the CDM target
3.     OBJECTIVES                                                      audience basically does not have the same
                                                                       externality threats and project implementation
1.     The main objective of this paper is to suggest that             risks as in projects targeting the poor. The CDM
       a new category of the clean development                         seems to have been developed with commercial,
       mechanism has to be established for low income –                industrial and middle-to-high-end consumers in
       long tail projects that offer an improvement in the             mind, but inadvertently may have actually missed
       scaled delivery of basic services and poverty relief            the boat in terms of assisting the lower income
       for the poor.                                                   sector. This seems to be, in part, because of the
       a.      It proposes these types of projects offer               high value (less transition complexity and cost) of
               significant untapped (life cycle) externality           the business benefits associated with the single
               cost savings and cost avoidance, leading to             client/large green house gas savings per
               a greater relative impact on sustainability             transaction - in the current mainstream CDM
               and poverty reduction requirements in this              model.
               sector.
       b.      The paper proposes the South African low         5.     The authors highlight aspects of the report
               income sector dwells in buildings and                   relevant to the South African government-assisted
               human settlements that are an extreme                   building sector by reviewing practical application
               version of that noted in the report, with               of CDM as it relates to the Witsand iEEECO™
               extremely        low        electricity/energy          3
                                                                         Human Settlement Project Atlantis, Cape Town.
               consumption profiles1. The profiles of
               sustainability projects targeting the poor in    4.     APPLICATION OF CDM IN LOW COST,
               South Africa are inherently long-tail                   INFORMAL AND GOVERNMENT HOUSING
               developmental type projects. However, the
               reduction of energy systems related              The CDM faces a number of challenges in respect of the
               externalities costs (i.e. health and safety      low income sector in South Africa including:
               related) and improved basic service
               delivery, create a greater lifecycle cost        •      Numerous procurement related barriers to
               benefit than the carbon-focused CDM                     Implementation;
               model alone. These externality costs must        •      Uninformed programme design;
               be included in the UNEP/CDM programme            •      Complex CDM programme registration process;
               aimed to assist the poor.
                                                                •      Limited availability of experienced service
       c.      A similar finding was noted by the New
                                                                       providers;
               Orleans project team [3].
                                                                •      Small carbon saved over large client base
“While the environmental impacts alone are astounding,          •      Low-end beneficiary awareness/acceptance and
the impact on the residents and the local economy are just      •      Externality costs not included in the analysis.
as substantial. In Louisiana nearly 157 000 households
with incomes at 50% of the Federal Poverty Level must
spend more than half their income simply to pay home            2
                                                                  Additionality refers broadly to the additional effort and costs
energy bills” p9                                                associated with implementing the CDM interventions in projects
                                                                verses when compared to the baseline (no intervention) condition.
                                                                3
                                                                  iEEECO™ integrated Energy Environment Empowerment (Cost
1
 When compared to middle income households that are grid        Optimisation) is a sustainable human settlement implementation
connected.                                                      methodology developed by PEER Africa and associates
5.     WITSAND      IEEECO™                      HUMAN         Cape Town Witsand          Project    Meeting    Minutes,
       SETTLEMENT PROJECT                                      Unpublished 2002-2009).

The project deals with about 2 600 families living in an       The design of the interventions is to improve services,
informal settlement and 400 families living in formal          while reducing overall operating costs – (cost
government subsidy housing provided during the Phase 1         optimisation).
iEEECO™ pilot. The average household income is about
R1 500/$US150/month. An additional 1 675 families              A summary of         the    iEEECO™       implementation
qualify for government subsidies in Phase 2 and the            interventions are:
project is scheduled to begin in June 2009. This leaves an
additional 300 to 400 families that do not qualify for a       1.    Assemble appropriate technical and community
subsidy house, but who will be accommodated via the                  development support team.
sale of a serviced stand. Others will be accommodated in       2.    Complete integrated iEEECO™ awareness
rental units or temporary residential units on the site. It          workshops,      training    and    ongoing     SME
is expected the planned high density rental area will                development plan along with standard Department
accommodate many residents. In the interim, families                 of Housing community facilitation requirements.
will live in one of three temporary residential units. The     3.    Implement passive site planning and town plan
project includes state funding for both infrastructure and           designs.
building of top structures.                                    4.    Ensure northward orientation of houses where
                                                                     possible.
6.     GOVERNMENT SUBSIDY SCHEME(S)                            5.    Oversee passive solar house plan design to
                                                                     maximise use of sun and optimise the use of
The National Department of Housing will provide R80                  shadows for shading.
000/USD$10 000 to cover the cost of a serviced stand and       6.    Evaluate and select energy and water saving
the top structures for each qualifying household.                    appliances and fixtures as appropriate.
                                                               7.    Oversee modification of city tender documentation
Local government will provide free basic services                    and legal contract language to ensure certification
including 50 kwh/month and 6 000 litres of potable water             and enforcement of standards relating to
per month for all residents of Cape Town, not just the               workmanship of the sustainability features.
poor.                                                          8.    Arrange bridging finance where possible to ensure
                                                                     a smooth rollout of the project.
The National Department of Minerals and Energy offers          9.    Implement iEEECO™ embedded
policy incentives via additional national funding policy             community/beneficiary based monitoring to tract
for free basic alternative energy services and solutions             the actual performance of the agreed various
made available to the poor. This remains as a virtually              interventions.
untapped source of revenue to service providers with           10.   Make provision for independent monitoring and
viable solutions, and who need pre-finance before they               verification of interventions, especially those
can implement solutions at scale - but they need the                 offering sustainability and energy related rebates.
political sign-off from local municipality to use the funds
(ENERKEY Project Meeting, unpublished 2008).                   Government assisted human settlement development in
                                                               South Africa offers a framework to actually harvest the
7.     MINIMAL BUILDING STANDARDS                              externality benefits outlined and to recover the savings
                                                               found in long tail projects based on the following
Today’s South African national housing subsidy                 observations:
programme minimum building standards (2008) include a
40m2 basic house with kitchen, bathroom, two bedrooms          1.    Government also pays for the health and safety
and a lounge.     The government provides a 10 AMP                   related externalities (i.e. fire, emergency services,
electrical connection, which can be upgraded if the                  free basic electricity and water) resulting in the
beneficiary pays extra. (Ceiling, insulation paint and               baseline business-as-usual scenario. There is an
plaster became standard in 2004).                                    increase in these costs directly linked to observed
                                                                     defective energy/water consumption patterns and
8.     iEEECO™ INTERVENTIONS                                         systems. This includes defective fuel distribution,
                                                                     inefficient and defective open flame, cooking
The iEEECO™ integrated human settlement business                     stoves, lighting and space heating systems, lack of
plan is based on capacitating the end beneficiary and                sanitation, uncontrolled fire and chronic
establishing community-based iEEECO™ committees in                   respiratory illness.
phases. The approach attempts to create an enabling            2.    The upfront capital for the construction of houses
environment offering free basic services and improving               is provided by the government for the housing
service levels for the end beneficiary via passive solar and         project with some beneficiaries making a small
other renewable and energy savings interventions (City of            contribution.
3.     Government technically owns the house for eight            Long tail projects spread sustainable benefit of a given
       (soon to be reduced to five) years. So there is a          intervention over an extended period via many small
       vested interest to continue to monitor units over          projects, which more often than not, fall outside the
       this period.                                               acceptable risk profile and target profit margin of carbon
4.     Government pays for the basic services (6 000              as envisioned by carbon brokers, funders, developers and
       litres of potable water, 50 kw of electricity, or its      investors.
       equivalent, per qualifying household).
5.     There is also significant damage to the natural            This situation creates an even greater bridging
       environment from uncontrolled consumption of               finance/pre-finance gap between the capital cost outlay
       firewood and in large informal settlements,                and the operational cost savings (spread out over the life
       contamination of rivers and streams.                       of the intervention) for both private sector developers and
6.     Finally, the poor pay more for defective and               self-help practitioners.
       inefficient energy systems that are available.
                                                                  Simultaneoously (contrasted) against the iEEECO™
This means the state has much to gain by enabling and             approach are increasing energy related threats and
setting aside bridging finance for iEEECO™                        counterproductive community social behaviour over the
interventions as it is essentially acting as the developer        came period due to non or under-delivery of basic
(capital risk) and banker (operating risk) based on ever-         services and increased informal settlement density levels
increasing state payment for free basic services and state        in urban areas.
welfare grants provided for the poor. The state assumes
capital risk upfront by providing the housing subsidy and         Considerations recommended are:
is essentially covering the largest portion of the ongoing
operating costs for services for as long as the family            •      Incorporate an externality impact index offering a
remains poor.                                                            greater relative value to the CDM rating of
                                                                         iEEECO™ type projects that target the poor. Eg.:
The state essentially receives the greatest overall benefit              add special incentives for energy efficient cooking
from iEEECO™ interventions that address defective                        stoves, other replacements to inefficient and unsafe
energy, water and other systems linked to long tail                      open flame lighting systems and heating systems
distribution projects impacting on basic service delivery.               that provide significant health and safety benefits,
                                                                         not included in the CDM rating to any relevant
This is not the case given a normal private sector CDM                   degree;
development project. The contractor does not cover                •      Use existing successful models and establish new
operating costs, nor are they willing to finance sustainable             CDM parameters based on self-help approach,
intervention.                                                            including a set list of interventions, based on
                                                                         climatic region and income level in South Africa;
9.     CONCLUSIONS                                                •      Allow for self-registration of projects and create an
                                                                         enabling environment for self-reporting by linking
The programmatic approach to CDM type projects                           with large national and international NGOs such as
appears on the surface to be the best of the options under               Shack and Slum Dwellers International SDI.
the structures available in respect of the lower income           •      Create self-help risk reward system for successful
sector.                                                                  post construction rebates proved to have met
                                                                         requirements for sustainable additionality and
The benefits and impact of clean development                             where NGOs, for example, acting as delivery
interventions for the poor can be life changing mainly                   agents, may demonstrate completion of the
because of the indirect impact of correcting domestic                    training and delivery of solutions to their
energy and water systems defects. Findings from work by                  members;
PEER Africa4, suggests most energy and other integrated           •      Use regional random monitoring and verification
human settlement systems in poor communities as                          for those that apply for the rebates and
inefficient and often creating a chain reaction of extensive      •      Project and household performance based
health and safety-related costs. The mitigation of these                 iEEECO™ approaches are preferred over single
costs is not adequately valued in the present CDM                        technologic based interventions such as solar water
registration, verification and certification processes.                  heating or light bulb replacement                only
There is a cause and effect relationship between defective               programmes.
energy systems addressing the poor’s basic service
requirements and large scale externality costs linked to          10.    RECOMMENDATIONS
the “business-as–usual” scenario.
                                                                  1.     Externality, health and safety costs associated with
                                                                         defective     energy     systems     may      impact
4
 PEER Africa is working throughout South Africa with Shack and           catastrophically on the urban poor. This is
Slum Dwellers International assisting with self-help government          partially because of defective energy and other
housing development
        systems required to address basic services. The                       Nations Environment Programme, Paris, France,
        overcrowding typically found in poor urban                            2008.18
        communities, a lack of ventilation, restricted
        access to safe and efficient alternatives, presence            [2]    Canfield, K., Agard, T., Guide for Energy
        of highly combustible building material and poor                      Efficient, Rapid rebuilding of Single Family
        consumer awareness contribute to the problem. An                      Homes, 2009.
        absence of enforcement of fire and safety building
        standards leads to a disastrous situation with many            [3]    Canfield, K., Agard, T., Guide for Energy
        trigger points to health and safety disasters.                        Efficient, Rapid rebuilding of Single Family
                                                                              Homes, 2009.
2.      A-well     managed,       designed    performance
        based/programmatic CDM structure creates an                    12.    BIBLIOGRAPHY
        enabling environment to recover the upfront
        capital investment for iEEECO™ interventions                   Cheng, C., Pouffary, S., Svenningsen, N., Callaway, M.,
        based on the overall benefits gained. [These                   The Kyoto Protocol, The Clean Development Mechanism
        calculations must include the externality cost                 and the Building and Construction Sector – A Report for
        factor5]. Essentially this means the state and end             the UNEP Sustainable Buildings and Construction
        beneficiary must begin addressing energy-related               Initiative, United Nations Environment Programme, Paris,
        poverty from a more holistic perspective, which is             France , 2008.
        inclusive of the externality cost savings and
        avoided health and safety risks. These costs are               Canfield, K., Agard, T., Guide for Energy Efficient,
        borne by the state and the end beneficiary, not the            Rapid rebuilding of Single Family Homes, 2009.
        developer.
                                                                       Abron, L.A., et el, ‘Housing as if People Mattered, The
3.      There are a number of lifecycle cost savings                   Story of Kutlwanong, 1997.
        models proving that the NPV of most
        recommended sustainability interventions benefit               13.    AUTHOR
        the state (Municipality Lifecycle Modelling Tool
                                                                       Principal Author: D. Mothusi Guy, MBA has more than
        development Discussions with Stellenbosch
                                                                                        25 years of international technical
        Sustainability Institute, unpublished, 2009).
                                                                                        project management and business
        However the challenge remains of a lack of
                                                                                        development experience. He and Thami
        capacity at provincial and local government level
                                                                                        Eland (along with the SMME teams)
        to implement life-cycle oriented development
                                                                                        served as the project “implementing
        projects that extend beyond the political life
                                                                                        agents” and worked closely with the
        expectancy of the decision makers involved.
                                                                                        Eskom Cape Crisis project management
                                                                       structures. They also collaborated with business partner
4.    The challenge is to find an appropriate funding
                                                                       and founder Dr. Lilia A. Abron, Ph.D., P.E. DEE and
      mechanism to allow developers and service providers
                                                                       together they have worked extensively with community
      offering sustainable solutions for the poor to include
                                                                       organisations, NGOs, government and the private sector
      sustainable interventions (that go beyond state
                                                                       for the past decade in South Africa (and internationally).
      funding) with reduced risk or to provide a risk reward
                                                                       They have privately funded numerous domestic energy
      to be paid after successful installation and
                                                                       and environmental research projects in a quest to establish
      certification of the intervention.
                                                                       an informed “grass roots” awareness movement and have
                                                                       focused on generating demand for integrated energy,
11.     REFERENCES
                                                                       environment, and empowerment human settlement
                                                                       projects.
[1]     Cheng, C., Pouffary, S., Svenningsen, N.,
        Callaway, M., The Kyoto Protocol, The Clean
                                                                       D. Mothusi Guy
        Development Mechanism and the Building and
                                                                       PEER Africa (Pty) Ltd
        Construction Sector – A Report for the UNEP
                                                                       Email: dlguysr@mail.ngo.za]
        Sustainable
        Buildings and Construction Initiative, United
                                                                       Co-author: Prof Harold Annegarn, Department of
                                                                       Geography, Environmental Management and Energy
5
  PEER Africa uses the term ‘cost optimisation’ to essentially
                                                                       studies, University of Johannesburg. He is a researcher in
describe the process of capturing and leveraging all relevant cost     atmospheric pollution, urban and regional, and in energy
savings associated with a given sustainability intervention. The       efficient low cost housing. Prof Annegarn provide
aim is to present the linkage to these externalities and to harvest    consultation to the project team during the
the overall benefit on behalf of the state (and the end beneficiary)
so as to optimise the use of all available resources that can be
                                                                       implementation of the project
assessed on behalf of poverty alleviation. Without this                Email: hannegarn@gmail.com
mechanism, the CDM leaves a valuable resource out of the life
cycle cost model which is to the detriment of this sector.
Dr. Lilia Abron is distinguished as America’s first
recognized African-American Ph.D., in chemical and
environmental      engineering.   Her      specialty     is
environmental engineering and she has more than 30
years of business and teaching experience. She is also the
owner and founder of PEER Consultants, P.C., an
environmental and civil engineering firm headquartered in
the Washington, D.C., area.


Presenter: The paper is presented by D. Mothusi Guy

				
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