Clean Development Mechanism CDM Introduction

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					Ecology, Economy and
  Social Responsibility




                  Carbon Finance Capacity Building Programme



                          Carole Küng, ecos, Project Leader
                             CFCB Sao Paulo Workshop
                           São Paulo City Hall, 4 May 2010
Ecology, Economy and
  Social Responsibility




  ecos


  • Is an internationally working consultancy based in Basel,
    Switzerland.
  • Since 1987 ecos develops, realises, supports and evaluates
    processes, projects and products that harmonise the needs of
    the economy, the environment and society.
  • Is a facilitator and manager of public and business innovation
    processes for sustainable development.

  • ecos initiated the CFCB programme together with its partners.




Sao Paulo Carbon Finance Workshop, April 26, Carole Küng             2
Ecology, Economy and
  Social Responsibility




  Agenda

 Starting position
 1. Why capacity building: CDM – a rewarding path for cities after
        Copenhagen?
 2. What is capacity development?
 3. How can Carbon Finance capacity be integrated in Cities?
 4. The CDM survival kit for city officers




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Ecology, Economy and
  Social Responsibility




  Why capacity building?
  CDM - a rewarding path for cities after Copenhagen?
       Carbon Finance                                 Other climate related financing:
       (with focus on CDM)                            Climate Finance, Namas...
  F
  a
  c
  t
  s •Bottom up market approach                        •Continuous top-down political
     accessible through regulatory
                                                       process.
     mechanisms such as CDM
                                                      •Dependent on donor countries.
    •CDM can continue after 2012
                                                      •(Up-front) financing or co-financing
     even without a treaty (ETS
                                                       of infrastructure reducing CO2
     based on EU reduction targets)
                                                       (closing of financing gaps, technology
    •Co-financing of infrastructure
                                                       transfer)
     based on actual CO2 reduction
                                                      •Not finalised near-term -> future
     and its market price (risks)
                                                       opportunity
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Ecology, Economy and
  Social Responsibility




  Why capacity building?
  CDM - a rewarding path for cities after Copenhagen?
  • Investment in CDM is considered risky. Depends on:
       Reforms of the mechanism (no agenda yet)
       Development of supply (e.g. REDD) and demand (EU, Japan,
        Australia, other new markets)
  • Trend towards high quality CDM projects (e.g. gold standard), but
    overall decline of registration of new projects
  • Probably neither Carbon nor Climate Finance (...) will dominate
    future climate mitigation efforts completely.
  • A mix of both is most likely and promising, the complexity of
    financing through Carbon or Climate Finance will rise in the short
    term.


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Ecology, Economy and
  Social Responsibility




  Why capacity building?
  Summary: CDM - a rewarding path for cities after Copenhagen?


  • There will be financing options.
  • A city task force/ cross-sectoral committee on climate which closely
    observes the developments to seize opportunities is recommended.

  => Put the city as major emitter into the position to assess
   opportunities and to drive the processes.




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Ecology, Economy and
  Social Responsibility




  Carbon Finance Challenge for a city administration



                              Changing environment/framing conditions
                                  •Interdisciplinary, global challenges
                          •Financial- , Environmental-, and Social questions...


                    Technical know-how:                    Organisational Development:
                   Project as such + CDM                   Strategic, dynamic structures



                                                  Tasks




The 3 building blocks of capacity development in a dynamic environment.
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Ecology, Economy and
  Social Responsibility




  Why capacity building?
  What happens in cities without structured Carbon Finance
  capacity? An example
                                                  Law
                                                               Economy
              Environment

        Waste                               Carbon Finance/
       Manager                                   CDM

  Municipal Services                                                   Finance


                                        Welfare            Transport

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Ecology, Economy and
  Social Responsibility




  Why capacity building?
  What happens in cities without structured Carbon Finance
  capacity? An example
                                                                       Revenue
                                                                         15%
                                                           (of estimated 200‘000t CER/year)

          Waste           CDM solid                           15% of 20‘000t CER/year
         Manager            waste
                                                                      Contract

             Ltd




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Ecology, Economy and
  Social Responsibility




  Why capacity building?
  Lessons learned
    City
                    Law

     Environment
                              Economy           leaves
                                                            Ltd
                          ?
                                Municipal    Waste
     Finance                    Services
                                            Manager
                              Transport
               Welfare
                                                           Know-how
           Transport
           Manager
               ?




   Interconnection! => Knowledge management!
Sao Paulo Carbon Finance Workshop, April 26, Carole Küng              10
Ecology, Economy and
  Social Responsibility




  Capacity development of city‘s CF management skills

  Capacity Development as:
  “The process of strengthening the capabilities of cities in order to
  achieve their own goals on a sustainable basis.“


  Success factors:
  •The city is put in a position to organise complex processes on its
  own.
  •A receptive organisational setting and process is put in place
  that can receive knowledge and expertise and convert it to practice
  and action.
  •Ownership of projects is guaranteed.
  •Continuous and frequent handholding and daily business
  support is available.
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Ecology, Economy and
  Social Responsibility




   Capacity development of city‘s CF management skills

  CFCB programme as a learning-by-doing approach:
      Working on a concrete project and developing it as a CF project.
      Establishing a nucleus institutional body of capacity within the city
       administration that can manage Carbon Finance together with a network of
       technical experts.



                      Technical know-how                   Organisational Development



                                                  Tasks




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Ecology, Economy and
  Social Responsibility




  CDM Pilot Project Idea for Sao Paulo
                   Task: Sustainable city development through high quality CF project

                                           Economic
                                           •Co-financing of Sustainable
                                            infrastructure through Carbon Finance


                                                                                        Social
 Environmental
                                     Sustainable waste treatment                        •Local Job
 •GHG
                                        systems for Favelas                              creation
  emmission
                                                                                        •Improved
  reduction
                                                                                         health/
 •Reduction of
                                                                                         quality of life
  waste going to
                                                                                        •Awareness
  landfills
                                                                                         for resource
                                                                                         management

Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                         13
Ecology, Economy and
  Social Responsibility




  Possible implementation structure in each city/ city group

                                             MoU/ LoI                  City Government
                                              CFCB – City              Mayor‘s/Governor‘s Office
                                                                       Political CFCB champion


  CFCB-Programme
                                                                     City CFCB Task team
                                                                      City Management
                                       CFCB to local link                  City Manager
                                                                       Head of Departements
                                                                      Executive CFCB champion
 Strategic steering
 Implementation
                                                                         City Officers
                                                 LIP                      Head of Divisions
                                                                        (General-) Managers
   Mode of Cooperation                Local Implementation Partner
                                                                           Expert officials
                                                                       Technical/Legal/Finance
                Agreement
                              Later
                Assignment
                                        Financial sector                Private sector
                Cooperation        Traders, Asset management             Technical Partners
                                          Investors, banks            Carbon Mgmt. Consultants
Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                         14
Ecology, Economy and
  Social Responsibility                                                                 KvR? tbd

  Organisational set-up for cooperation with cities
  MoU/ LoI between CFCB programme and each city/ city group: High-level support
  Local implementation partner (LIP)
  City representation
          Mayor‘s / Governor‘s office -> political CFCB champion
          City task team (CTT)
                 – City Management -> executive CFCB champion (CFCB contact)
                 – City Officers
  Other City stakeholders
          Private sector: Technical partner(s)/carbon management consultant(s)
          Financial sector: Traders, Asset management, Investors, banks
          Advice and consultancy: Periodic short meetings for a more comprehensive discussion of
           general operational and strategic matters.
  Technical partner/carbon management consultant
          Identification of unbiased consultants and technical partners to be hired by the cities, is
           mentioned as one of the key requests by the cities.
          Although technical-/carbon partners have a clear focus and range of responsibilities they
           might be included in the LPSG as a guest to ensure coherence of the CFCB intervention.




Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                                 15
Ecology, Economy and
  Social Responsibility                                               KvR? tbd

  City representation/City task team

  CFCB-Political Champion:
          The CFCB activities can only be successful if they are under an explicit
           and committed patronage of the Mayor/Governor of the city.
  City Task team:
          Carbon Finance requires a cross-sectional approach.
          Thus the city has to be involved with the relevant departments forming
           a City task team that mutually coordinates the CFCB involvement.
  CFCB-Executive Champion
          Chairs the City Task Team
          Drives the CFCB activities within the City administration
          Main contact person to Local Implementation Partner and CFCB
           Programme Management




Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                              16
Ecology, Economy and
  Social Responsibility




  City task team

                              City CFCB Task team                              Interconnected

                                Key Know-how
 Strategic decisions
                                               City Management
                                                    City Manager
     (PoA, Namas...)                            Head of Departements
                                               Executive CFCB champion
                                                                                Carbon and
                                                                                Climate
 Potential projects                              City Officers                 Finance
                                                  Head of Divisions        1-2 Knowledge
 Exchange of                                                                                   Effective
                                                (General-) Managers
                                                   Expert officials
                                                                          years Hub
     knowledge gained
                                               Technical/Legal/Finance
                             Technical
                             Expertise




                                                 Private sector                  Learning
                                                  Technical Partners
                                               Carbon Mgmt. Consultants




Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                            17
Ecology, Economy and                                                 KvR? tbd
  Social Responsibility




  Local implementation partner (LIP)

  Ensures ongoing support. Coordinates between the city and the
   technical partners and represents the CFCB programme in the
   city.
  Core element of the locally based support for each city includes:
          Help-desk: Continuous consulting by email and phone regarding
           issues arising from daily business that can be solved by immediate
           consultation.
  The LIP has to be jointly defined.




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Ecology, Economy and
  Social Responsibility




  CDM survival kit for city officiers: 1. Baseline

                   The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox
                          Reveals how much GHG can be saved and therefore demonstrates
                               Carbon Financing potential (ex-post and market-dependent!)


  Recall:                                         Baselin
                                                                        Carbon credits
                                                    e                   =      emissions
              Greenhouse gas
                 emissions




                                                                 Actual
                                                                emissions
                                                   Project
                                                    start


                                Historical            Time
                                 Trend
Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                    19
Ecology, Economy and
  Social Responsibility




  CDM survival kit for city officiers: 2. Additionality

                     The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox
                              Proves that the targeted emmissions wouldn‘t be saved without
                               CDM (precondition for every CDM project)

  Recall:
                                                                             Carbon revenue
           Revenue / NPV /




                                                                           makes the project
                                                                          attractive relative to
                                                                               investment
                                                           Investment
                IRR




                                                                               alternatives
                                                            threshold
                                                                             Project without
                                                                            carbon revenue is
                                                                           profitable – but not
                                                                          sufficiently profitable
                                                                             compared with
                Project            Project with
                                                                               alternatives
                without         carbon element
                carbon
Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                            20
               element
Ecology, Economy and
  Social Responsibility




  CDM survival kit for city officiers: 3. CDM Toolbox
 Project
                       The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox
               CDM
               Cycle
                           The Carbon Finance add-on challenge!

 Recall: CDM Project Cycle                                                                           Recall: CDM Methodologies
 Depicts the step-by-step approach to                                                                Depict the approach for different
 CDM as well as the key institutions                                                                 project types
                       6 to 12 months                1.5 months    Crediting period of the project
   Developer
    Project




                PIN       PDD



                                          Host
      DNA




                                        country
                                        approval
      DOE




                                                                      Project
                                         Project
                                                                      verificati
                                        validation
                                                                         on
   CDM EB




                                                       Project
                                                                                       CER
                                                      registrati
                                                         on                          issuance
                                                                                                     http://cdm.unfccc.int/methodologies/index.html

Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                                                                          21
Ecology, Economy and
  Social Responsibility




  Roles and timing for starting a CDM project in Cities

             Who City officers/                            Technical          Timing
  Key points     Project teams                             experts

  1. Baseline               Collect basic data             First estimate     Before PIN

  2. Additionality          Announce project               Initial adoption   Before official
                            as under CDM                                      announcement/
                                                                              project tender

  3. Toolbox                •Refer to expert for Technical expertise,         According to steps
                            choosing             guiding through              in CDM project
                            methodology          project cycle                cycle
                            •Become project
                            participant and work
                            on a contract
                            •Plan project
                            according to CDM
                            project cycle
Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                                           22
Ecology, Economy and
  Social Responsibility




  Thank you very much for your attention!

  Contact:
  ecos team:
     Daniel Wiener, daniel.wiener@ecos.ch, +41 61 205 10 10
     Daniel Lehmann Pollheimer, daniel.lehmann@ecos.ch, +41 61 205 10 56
     Carole Kueng, carole.kueng@ecos.ch, +41 61 205 10 46


  t. +44.(0)207.983.4627




Sao Paulo Carbon Finance Workshop, April 26, Carole Küng                23
Ecology, Economy and
  Social Responsibility




  References (amongst others)

      CFCB: www.lowcarboncities.info
      Carbon Finance Assist/Carbon Finance Unit, World Bank
      www.climatefinanceoptions.org (WB/ UNDP)
  t. +44.(0)207.983.4627




Sao Paulo Carbon Finance Workshop, April 26, Carole Küng       24

				
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