Relvant lessons for GIS learnt JI Track 1 and Track 2 in various Central & Eastern European countries Zsolt Lengyel SenterNovem Carboncredits.nl Moscow, 28 April 2008

28 April 2008, Moscow Russian Carbon Market Forum2 Outline of the presentation 1.Carboncredits.nl – SenterNovem introduction 2.JI Track 1 & 2, GIS – the context of eligibility 3.JI Track 1 versus Track 2 – Track 1 as a transitory route to GIS? 4.A pragmatic approach from the Dutch perspective 5.Key lessons and challenges from Track 1 for GIS 6.Crowding out effects spotted... 7.Competition and co-operation between GIS/JI 8.Some tentative recommendations...

28 April 2008, Moscow Russian Carbon Market Forum3 1.Carboncredits.nl – SenterNovem introduction 1.An Agency of The Netherlands’ Ministry of Economic Affaires 2.Focus on Energy, Sustainability and Innovation with 1300 employees at four offices; an annual budget of 3-5 billion EUR 3.Carboncredits.nl was established within Senter Internationaal in 2000 to carry out the Joint Implementation purchasing through public procurement ( the ERUPT programme) 4.The Worldbank Prototype Carbon Fund and Carboncredits.nl were the first operational entities in the carbon market 5.Has signed and manages over 20 contracts with emission reductions around 17 million tonnes of CO2e

28 April 2008, Moscow Russian Carbon Market Forum4 2. JI Track 1 & 2, GIS – the context of eligibility RequirementJI track 1 and GIS (IET)JI T 2. Party to Kyoto Protocolxx Assigned amount issuedxx National system (Art. 5.1)x National registry in placexx Most recent inventory submitted x AA information submittedx A Party involved in an Article 6 project shall inform the secretariat of: (a) Its designated focal point for approving projects pursuant to Article 6, paragraph 1(a); (b) Its national guidelines and procedures for approving Article 6 projects, including the consideration of stakeholders' comments, as well as monitoring and verification.

28 April 2008, Moscow Russian Carbon Market Forum5 3. JI Track 1 versus Track 2 – Track 1 as a transitory route to GIS? SupplierHost countryPurchasing entity Transaction costs possibly lowerpossibly higherpossibly lower Controlnot relevantmuch morenot relevant Complexitypossibly less Project scopenot relevantpossibly more project types not relevant Risks & uncertainties reduced

28 April 2008, Moscow Russian Carbon Market Forum6 4. A pragmatic approach from the Dutch perspective We had a sstrategic focus for investigating and facilitating the Track 1 route in countries where: the ERU, AAU ( associated with pre-2008 early action) volumes were high, where the projects that were at high JISC Track 2 risk where there was preparedness and move towards eligibility for Track 1 JI

28 April 2008, Moscow Russian Carbon Market Forum7 5. A pragmatic approach from the Dutch perspective (cont.) Track 2 has been the default option for Carboncredits.nl, however some ERPAs and LoAs explicitly included the optional Track 1 route (the early crediting also required the AAU transfer options) Technical assistance cooperation with Romania ( ), the first CEE country in the world, to realise the benefits and face the challenges of Track 1 on its route towards GIS

28 April 2008, Moscow Russian Carbon Market Forum8 6. Key lessons and challenges from Track 1 for GIS Reducing transaction costs and risks whilst maintaining credibility and ensuring project quality to meet the environmental/greening criteria of the buyers Streamlining the approval procedures whilst establishing a preference for GIS over Track 1/Track 2 Enabling projects to go through GIS/Track 1 that otherwise will have difficulties (administrative, financial) getting approval via Track 2 ( JISC versus domestic criteria)

28 April 2008, Moscow Russian Carbon Market Forum9 7. Key lessons and challenges from Track 1 for GIS (cont.) Specific eligibility considerations: sectoral preferences (district heating, industrial technology housing; small scale projects; early mover projects; programmatic approach; project bundling) Accreditation of domestic and international entities for determination (e.g. AIEs have automatic accreditation for Track 1 whilst domestic entity requirements needs to be established; GIS fully domestic) Standardised baselines (e.g. exemplary projects and their baselines/cefs are selected, official grid factors established)

28 April 2008, Moscow Russian Carbon Market Forum10 8. Crowding out effects spotted... Buyers’side: funds set-aside for Kyoto Protocol mechanisms target GIS  less for JI/CDM Host’s side  regulatory attention towards GIS, whilst JI systems are not fully operational Project level  alternative routes creating even more confusion Co-existence of GIS/JI is a fact the question is how to improve the situation in both areas?

28 April 2008, Moscow Russian Carbon Market Forum11 9. Competition and co-operation between GIS/JI Project differentation for GIS/JI  have a clear picture what project type (technical) is suitable for which scheme (sectors, baseline and monitoring methodologies) Regulatory preferences and clarity  attention to both systems at the same time (may allow project suppliers to chose) Governance  do not distort; make it easy (or difficult) Do not spread your resources too thinly!

28 April 2008, Moscow Russian Carbon Market Forum Some tentative recommendations... One step at a time?  get your Joint Implementation system ready before establishing a GIS Identify the key GIS implementation challenges  a credible fund for disbursing and managing the GIS revenues is essential Learning by doing  the biggest lesson of JI is that one should start acting....and constantly adjust/correct its system Watch out for lessons/mistakes of Hungary/Latvia//Romania/Ukraine and those most active in the JI/GIS field

28 April 2008, Moscow Russian Carbon Market Forum13 Contact details for SenterNovem (Carboncredits.nl): Visiting address: Postal address: Catharijnesingel 59Postbus GG Utrecht 3503 RE UtrechtNetherlands Tel: Fax: Homepage: /