A city-wide approach to carbon finance Climate change mitigation in Cities: A city-wide approach to carbon finance Monali Ranade Carbon Finance Unit, The World Bank Carbon Expo, Cologne May 27, 2010

Why Cities and Carbon Finance? Fastest growing source of greenhouse gas (GHG) emissions High level of economic growth with very large population inflow Continuous challenge to balance development and environmental needs Inadequate level of engagement in CDM Potential for carbon finance to facilitate low-GHG development in cities Urban areas are the fastest growing source of global GHG emissions By 2030, it is estimated that 80% of global GHG emissions will occur in cities (as per C40). Due to competing socio-economic-political demands on its financial resources, cities require carbon finance to undertake specific GHG mitigation activities Carbon Finance transactions require detailed assessment of GHG emission reduction. CDM methodologies of the Kyoto Protocol of the UNFCCC provide such assessment tools. Current CDM methodologies cover a limited number of opportunities to reduce GHG emission within a city. Key areas such as buildings and non-motorized transport are not adequately covered. Moreover, CDM methodologies generally do not address policy and management interventions. Currently, the largest share of city- based GHG projects deal with solid waste management. The World Bank’s Carbon Finance unit is exploring options for developing a new “city-wide” Carbon Finance methodology. The methodology is in the early stages of development and this presentation should be considered work in progress.

GHG emissions in Cities Transportation of Waste Waste Transport Urban Forestry Water Grey water reuse Sludge treatment Pedestrian comfort Energy Traffic management systems Biogas-to- energy Efficient water pumping Heat island effect Sources of emissions: 1. Transport 2. Solid Waste 3. Water 4. Energy usage Emission sink: Urban Forestry City authorities are responsible for urban services like transport, waste, public buildings, water services and forestry (parks, recreation areas). Authorities also influence the behavior of city residents and visitors by enforcing regulations such as building codes, vehicular emission and specific awareness campaigns. The 4 sources of emissions add carbon dioxide to the atmosphere and the sink takes carbon dioxide from the atmosphere. Mathematically, it should be possible for a city to be carbon neutral by creating sufficient green areas

Types of CDM Projects Bundle of Projects Program Single Project (PoA) Single location Many locations Many locations, across countries Single project owner (e.g., 1 hydro plant) Many project owners (e.g., 10 hydro plant) 1 project only A number of activities submitted as 1 project (e.g., 10 hydro plants) A number of activities submitted over the duration of a program A single crediting period (e.g., 7/10years) Single crediting period for all activities (7/10 years) Each project has own crediting period Project owner is known All project owners are known At least one project is known, rest included as they join There are three types of projects under the CDM. A Program is expected to enable replication of the same type of activity. It is unique in the flexibility it provides on ‘when’ and ‘how many’ projects can be implemented under a program.

Options for cities to access carbon finance* Option 1: Stand-alone project in one large city (e.g., LFG project) Waste City A Transport water Options 2: PoA across many cities (e.g., Transport) Waste Transport City B water Option 3: Bundled project in two or more cities (e.g., EE in water pumping) Option 1 is the dominant activity in the CDM. Most solid waste projects fall under this category. Option 2 is the least common at present, but has a strong potential, if a strong central/national-level agency is willing to undertake the PoA. Option 3 is a rarely used, complex option that requires all the cities to be equally developed. City C Waste Transport * Under CDM

How does programmatic CDM work One Programme of Activities (PoA) & Many CDM Project Activities (CPAs) :One coordinating agency and type of intervention PoA Implements any policy/measure or stated goal CPA..n CPA1 CPA2 CPA4 CPA3 Achieve GHG reductions or removals by sinks C.Figueres & M.Philips, 2007

Enabling cities to improve urban services while reducing GHG emissions City-wide approach to carbon finance* Enabling cities to improve urban services while reducing GHG emissions Characteristics of an urban program City Authority responsible for Aggregation of GHG reductions Implementation Monitoring and verification Baseline includes the urban area, current and projected growth Technology and policy interventions identified in each sector Strengthens on-going programs Implementation through public-private partnerships, sub-contracts, ESCOs, etc Water CPA 7 CPA 8.. Energy CPA 5 CPA 6.. Waste CPA 3 CPA 4.. Transport CPA 1 CPA 2.. In this approach, a program for GHG emission reductions is created at the city-level, covering all sectors in a city. Urban Forestry CPA 9, CPA 10 * This approach will be submitted to the CDM EB in June 2010

Structuring a city’s carbon program Mayor / City Manager Water Water supply Energy Street-light efficiency Waste Composting Landfill Gas Transport Public transport Low-carbon vehicles Urban Forestry Parks Program Coordinator Municipal Departments Example of Projects Cities work through an administrative system that involve multiple departments, each providing a specific urban service. Departments work either directly or through a sub-contractor.

Creating city-wide programs 1 Establish a coordination office for the program 2 Establish the geographical and sector boundary for the program 3 Create an inventory of GHG emissions in the boundary 4 Identify responsible departments and agencies 5 Create appropriate incentives for relevant stakeholders 6 Identify interventions and establish program eligibility 7 Establish system for documentation and quality control 8 Implement and monitor the interventions 9 Quantify emission reductions: measure or estimate 10 Validate or verify ER benefit

Illustration of GHG mitigation impact Business As Usual GHG Emissions GHG Emission Reductions Unit Tons of CO2e (Cumulative) New Public transport Composting GHG Emissions with city’s carbon program Buildings EE Street-lights Baseline Energy + Waste + Transport sectors Year 1 10 Assumptions: 10% Annual growth of emissions in the Business As Usual (BAU) scenario Project and policy interventions included for each sector Implementation start date and length varies for project interventions in the 10 year period Emissions and emission reductions are cumulative

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