Is the CDM delivering? Experiences in LAC Christiana Figueres for the Annex I Expert Group on the UNFCCC Paris March 21, 2005

Presentation 1.The good news - LAC has concrete CDM achievements 2.The tough question - What should the CDM catalyze? 3.The bad news - What cannot occur under current circumstances 4.Moving forward Post 2012 Figueres,

LAC Achievements: Institutional All countries have ratified UNFCC and KP Most countries have DNA or are forming Operational funding –Public and international cooperation Canada, Dutch, Finland, Germany, Japan, CAF, UNEP/Riso, UNDP, WB MOUs –Austria, Canada, Finland, France, Italy, Spain, Netherlands, others Figueres,

LAC Achievements: Capacity Building Major investment –$18 million over past 3 years (Canada, WB, CAF, UNDP, UNEP, etc) –Intra-regional capacity building Consulting Lesson sharing Exchange of views on UNFCCC negotiation Figueres,

184 projects in some stage of preparation and under review on the part of DNA’s 39 have received some degree of national approval –15 Letter of Endorsement –24 Letter of Approval LAC Achievements: Project Pipeline Source: IDB, 2004 Figueres,

LAC Achievements: Project Advance Projects under validation or registry Latin America % Asia % Africa 1 1.9% Other 1 1.9% Total % Source: updated Dec 1, 2004 Figueres,

LAC Achievements: Market Share Source: World Bank, State & Trends of Carbon Market, June 2004 Figueres,

17 Small-scale –Smallest (by CERs) Zacapa/Honduras, small-hydro; 1 kTonCO2/year; 10 years 16 Conventional –Largest (by CERs) Salvador de Bahia/Brazil; landfill gas; 800 kTonCO2eq/year; 7x3=21 years LAC Achievements: Diversity in Size Source: unfccc.int updated Dec 2004 Figueres,

LAC Achievements: Diversity of Sectors Source for project information: CDM EB web page, Nov.2004 (Validation & Registration stages ) Figueres,

Source: CDM EB web page,Nov.2004 (Validation & Registration stages) LAC Achievements: Diversity of Participants Figueres,

LAC Achievements: Methodological Expertise New methodologies proposed by Source for project information: CDM EB web page, Nov.2004 Figueres,

Source for project information: CDM EB web page, Nov.2004 PDD Development LAC Achievements: Technical Expertise Figueres,

PDDs validated, methodologies submitted: –Econergy –Ecoinvest –Ecosecurities Brazil –ICF Consulting do Brazil –MGM International –Poch Ambiental –Urquidi, Riesco, y Compania PDDs in pipeline: –CAEMA –CC&D –Servicios Ambientales –Others LAC Achievements: Private Sector Engagement Source for project information: CDM EB web page, November 2004; National CDM Offices Figueres,

DNAs –Evaluate and approve projects –CDM promotion –Market enabling Applicant Entities –ICONTEC in Colombia –TECPAR in Brazil –4 provisionally Designated Operational Entities have local offices/representations in LAC LAC Achievements: Reduction of Transaction Costs Figueres,

CAF (Andean Development Corporation) –17 member countries, regional presence –Both public and private lending –Infrastructure focus Energy, transportation and industry –Carbon finance program (PLAC) since 1999 –ER intermediary since 2002 –Mitigates risk –Has transacted 10MT, 18+ under evaluation LAC Achievements: Reduction of Transaction Costs Figueres,

Greening energy mix Increasing access to energy in rural areas Introduction of new technologies Improving air quality Conserving natural resources Others LAC Achievements: Projects have Positive Impacts Figueres,

The Tough Question Back to Basics Assist industrialized countries in achieving KP compliance Assist non A-1 in achieving sustainable development; Assist non A-1 in contributing to atmospheric stabilization Figueres,

“Achieving SD” and “Contributing to stabilization” require integrating climate considerations into domestic policy of non A-1 in order to decarbonize growth trajectories Figueres,

CDM not helping to integrate cc into national policies in LAC 1.Institutional weaknesses of DNAs a.Min Env – except Br, Gua, Jam b.Low level funding/ scarce staffing c.Mandate a.Regulatory: project is congruent with existing policies b.Promotional Figueres,

CDM not helping to integrate cc into national policies in LAC IMPACT INTEGRATION Integrate industry Sectoral policies Local project finance SYSTEM LEVEL Legal framework of DNA Evaluation criteria Approval procedures INSTITUTIONAL LEVEL Project preparation Baseline methodologies Additionality INDIVIDUAL LEVEL 2. Limited impact of capacity building Figueres,

CDM not helping to integrate cc into national policies in LAC 3.Design of the CDM A.Project-based instrument Single isolated projects Congruency with existing national policies B. Interpretation of additionality/national circumstances excludes climate friendly policies. Figueres,

5 Case Studies Brazil, Colombia, Costa Rica, Ecuador, Mexico History of mitigation activities Current institutional arrangements Experience to date with CDM Other sectoral initiatives with GHG emissions implications Assessment of integration of climate considerations into national policies Figueres,

5 Case Studies Brazil, Colombia, Costa Rica, Ecuador, Mexico Conclusions: –DNA does not necessarily lead to CDM projects –Country’s mitigation activities cannot be measured by its involvement in carbon market –Integration of climate considerations into national policies can disqualify projects from CDM Figueres,

Irony Some countries are integrating climate considerations and national policies But they are/will be disqualified by the CDM Figueres,

Perverse Incentive CDM most successful in those countries with climate damaging policies Non-A1 continue on an emission intense growth path, and implement a few isolated CDM projects Figueres,

LAC emissions are rising faster than global emissions Source: WRI, CAIT Figueres,

Global CO2 intensity is declining; LAC intensity is rising Source: WRI, CAIT Figueres,

Moving forward… Move capacity building to system level –Initiate more local banks in carbon finance Push for methodologies which help integrate cc into national policies Pilot one sector –Methane recovery from landfills in LAC Figueres,

Moving forward… post 2012 Deepening of A -1 commitments Market mechanism for non A-1 participation –Sector wide Large scale initiatives which transform sector –Policy based Intentional SD policies Market pull for clean technologies Figueres,

Moving forward… post 2012 Request WB to launch a “Carbon Adjustment” (DLP) initiative for larger non A-1 –Energy/transportation policy reforms to reduce carbon intensity –Policy pull for clean technologies –Appropriate financing instruments –Decarbonization of key sectors –Greening of the WB lending portfolio Figueres,

“ Institutional Capacity to Integrate Economic Development and Climate Change Considerations: An Assessment of DNAs in LAC ” Inter American Development Bank, October 2004 Christiana Figueres Tel