· NAMA Design Concept for Energy-Efficiency Measures in the Mexican Residential Building Sector Presentation at UNEP-WB-UNFCCC Workshop 14 March 2011 Sonja Butzengeiger Perspectives GmbH *a project of Thomson Reuters Point Carbon Global Advisory

· Our clients The Ministry of Environment and Natural Resources (Secretaría de Medio Ambiente y Recursos Naturales, SEMARNAT) The National Housing Commission (Comisión Nacional De Vivienda, CONAVI) Project team: Stefan Wehner, Matthias Krey, Axel Michaelowa, Fernanda Gusmao (PCA), Nelson Sam (PCA)

· Objectives Aim of the assignment -Develop a supported NAMA concept for EE in residential housing in Mexico that can enhance the impact of Mexican CC Programme (PECC) -that takes into account Mexican development priorities -that is attractive for donors to support further -Present at the UNFCCC level as a pilot NAMA Scope NAMA -Up-scale existing support programmes in housing sector -Supportive actions Mexican ambition: Implementation and operation of NAMA from 1 st half 2012 onwards

· Approximately 50 million Mexicans live in poverty…

· …of which 80% have no access to sufficient funds to build appropriate homes and houses

· Mexico has a considerable challenge to address Mexicos population growth and demography creates pressure to expand housing construction rapidly -Population will increase from million in 2005 to million in 2030 and million in million new houses to be constructed annually until 2020/30 -70% expected to live in urban areas Mexico committed to reduce its greenhouse gas (GHG) emissions by MtCO 2 e until 2012 under the Mexican Programa Especial de Cambio Climático (PECC) Additional emission reduction of 30% reduction with respect to BAU until 2020 are committed conditional to support 5.53 Mt reduction by 2012 are attributed to the residential, commercial and municipal sectors

· Status and trends current programmes Ésta es tu casa Programme -Subsidiy programme by CONAVI -Minimum EE requirements => subsidy for house owner (<4 mw) -Goal: 95,000 households annually until 2030 Green Mortgage (Hipoteca Verde) -Use of CONAVI requirements -Goals: 6% of existing housing stock by million new houses by 2020 (= 10% increase per year) -Extension plan: -Extension to higher income classes -Minimum energy cost saving goal depending on wage class -Model for technology choices depending on cost saving goal in preparation Impact: 0.96 t CO 2 /house/year (based on INFONAVIT* survey) *Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit)

· NAMA could enhance GHG impact The NAMA aims to enhance GHG emissions reductions through the Green Mortgage and "Ésta es tu casa". Following steps define the incremental enhancement through NAMA: -increased penetration (more houses covered during the same time) and/or -technology up-scaling (more ambitious efficiency standards and/or inclusion of technologies that are currently not covered).

· Scope of NAMA concept ItemDescription SectorBuilding sector Sub-sectorNew residential houses (maximum 4 storeys and 8 units) NAMA boundaryEntire country Measures and activities with direct impact on GHG emission reduction Substantial up-scale of Green mortgage and Ésta es tu casa schemes through increased subsidies and more ambitious efficiency standards. Measures and activities with indirect impact on GHG emission reduction Supportive actions for transformation of the Green Mortgage and "Ésta es tu casa" programmes into a holistic urban planning process including building codes Building code pilot in 1 federal state Promotion and enforcement of building codes across federal states over time Capacity building Extension of urban planning criteria and inclusion in the holistic framework NAMA timeframe - Preparation - Implementation NAMA implementation and operation costs Full costs of substantial up-scaling of actions until 2020 NAMA typeSupported NAMA (with the possibility of NAMA crediting for parts of the actions) Type of support required under the NAMA Financial, technical and capacity building

· Scaling-up options from under NAMA Scenario 1 – increased penetration Broader participation with 100% saturation in 2020 with Green Mortgage Scenario 2 – increased penetration Rapid broader participation with 100% saturation in 2013 with Green Mortgage Scenario 3 - Technology up-scaling -Potential contribution of technology options (individual and in total) –Refrigeration, AC/insulation and PV Scenario 4 -Combination of Scenarios 1 and 3: 100% saturation by 2020 and technology up-scaling

· Technology options for scaling up I Solar water heating (SWH) -Already required in CONAVIs minimum requirements -Limited potential for up-scaling EE water use appliances -Already required in CONAVIs minimum requirements -Limited potential for up-scaling (covered by SWH) Lighting -Compact fluorescent light (CFL) already required in CONAVIs minimum requirements -Limited potential for up-scaling (LED not market ready world wide)

· Technology options for scaling up II Refrigeration -Currently NOT covered under CONAVIs minimum requirements -ER potential on (i) electricity use (ii) HFC-134a refrigerant replacement -ER potential can be determined based on INFONAVIT survey and own calculation -Electricity use: 0.2 tCO 2 /house/year -HFC-134a replacement: 0.04 tCO 2 /house/year Air-Conditioning -Currently NOT covered under CONAVIs minimum requirements -ER potential on energy use/interdependent with thermal insulation for reduction of cooling demand -ER potential can be determined based on recent INFONAVIT survey and own calculation -Electricity use: 0.26 tCO 2 /house/year -HCFC-22 to HC refrigerant change: 0.05 tCO 2 /house/year

· Technology options for scaling up III Photovoltaic (PV) -Currently NOT covered under CONAVIs minimum requirements -ER potential through own power generation (deemed as savings through net metering) -ER potential can be determined based on own model tCO 2 /house/year assuming 200 W installed capacity per house -= +25% ER compared to current 0.96 tCO 2 /house/year

· Abatement costs for technology scale-up options PVRefrigerator with refrigerant changewithout refrigerant change AC /tCO 2 99 /tCO 2 Abatement costs estimation based on current costs -13/-15 /tCO 2 -22/-26 /tCO 2 Incremental investment costs, O&M, 8% interest rate

· Marginal cost curve and NAMA elements NAMA crediting alone may not be sufficient for financing PV

· All scenarios show substantial emission reduction benefits over time MtCO 2 Emission reduction potential until MtCO 2 27 MtCO MtCO 2 16 MtCO 2 Graph shows ER that are additional to baseline roll-out (11.7 Mt CO 2 until 2020)

· Comparison of ER to the baseline under each scenario

· Uncertainties of ER potential In how far the estimated emission reductions associated with the different possible scenarios for actions will materialise under a supported NAMA will depend on -(i) the future detailed international rules for baseline setting under such frameworks -(ii) the quality of argumentation that Mexico can provide on why certain technology standards should or should not be part of the baseline, and -(iii) the willingness of donors to finance the more expensive components of technology-scale up such as PV The determination of the precise benchmark level for the supported NAMA and crediting will require further research on the status of the energy efficiency level of Mexican new houses

· Supportive and administrative actions Supportive actions -Buildings codes: Promotion of adoption and enforcement; pilot with a state -Capacity Building -Marketing campaign -Linking the urban planning programme DUIS and subsidy progr. Ésta es tu casa and Green mortgage requirements in order to achieve a more holistic approach -Institutional design

· Financial requirements I Scenario 1 would require a cumulative incremental subsidy volume for the Green Mortgage of USD$ 3.1 billion until Scenario 2 would require US$ 7.4 billion until 2020

· Financial requirements II For Scenario 3, the total incremental financial requirement is in total US$ 2 billion until 2020 Scenario 4 would require cumulative investment needs until 2020 of US$ 6.7 billion -40% would be necessary for PV and about 47% for the broader participation

· Associated monetary benefits and investments estimations under scenarios 3 & 4 Long term savings possible Monetary benefits on two levels: (i)the house owner (electricity costs, assumed net-metering), and (ii)the Mexican government (saved subsidies on electricity tariffs) Current price/cost ratio for household electricity tariffs in Mexico approximately 0.41, i.e. government subsidises roughly 60% of electricity costs Monetary benefits under the NAMA concept could be shared differently and used to finance the investments

· Financing opportunities Multilateral financing of the NAMA concept rather unlikely in the short term due to the time-requirements for finalizing NAMA rules on UN-level Finance through bilateral cooperation for the next steps of NAMA implementation should be sought -Due to the ambitious timeline for NAMA implementation and operation (start 1st half 2012) -As long as uncertainty prevails on the multilateral level Several financing mechanisms and actors involved with different interests Creation of a NAMA fund which will centralize all the financial resources from donors, the private sector and the Mexican government

· Overview of the proposed NAMA fund i.a. Donors, CONAVI, institutions

· Monitoring, reporting and verifying (MRV) MRV framework for the NAMA should be based on direct GHG emissions monitoring -introduction of energy performance benchmarks and/or minimum appliance standards based on whole-building energy performance -boundary should be the houses through the whole building approach -whole building approach would also allow inclusion of renewable energy technologies (e.g. SWH and PV) -benchmarking is the most appropriate approach to the whole- building

· Key data requirements for the Mexican NAMA Data to monitorType of monitoring Electricity consumptionDirect and continuous metering of electricity consumption (including generation from PV). If available, utility billing records can be used. Emission factor of the grid electricityAs per CDM Tool to calculate emission factor for an electricity system [1], or use published data. [1] Transmission & distribution lossData from utility or an official government body. Fuel consumptionDirect and continuous metering of fuel consumption. If available, utility billing records or fuel purchase invoices can be used. Net calorific value of the fuelValues provided by the fuel supplier in invoices, own measurement, or regional or national default value. CO 2 emission factor of the fuelValues provided by the fuel supplier in invoices, own measurement, or regional or national default value. Refrigerant leakage from refrigerators and air-conditioners IPCC default value or manufacturer specifications. Gross floor area of a building unitBuilding plan, or onsite measurement. [1]

· Possible MRV indicators for supportive actions Supportive ActionMRV Indicator 1: Institutional set-up and NAMA administration - Development of data collection system for MRV (database) - Establishment of inspection and supervision system of new houses built under the NAMA - Survey of house of realised GHG emission reductions (annually) 2: Enforcement of mandatory building codes - Number of federal states adapting and enforcing mandatory building codes - Performance of the Verification Units (VUs) 3: Transformation of Green Mortgage programme into a country-wide holistic urban planning and building code framework - Number of developments and updates of norms and standards for enhanced building codes by CONAVI (including urban planning process integration in building codes/programme requirements) - Number of supportive dialogues towards a policy for sustainable housing for Mexico 4: Capacity building- Number of certified architects, engineers, constructors and installers for sustainable housing design and technology - University Curriculum: Number of professors, Number of studies and reports, Number of graduated students (Master and PhD) - Development of technology database for the housing sector and updates 5: Marketing & Advertisement - Implementation and operation of webpage - Number of TV spots, radio spots and newspaper advertisements

· Next steps Phase 2: NAMA concept and the underlying GHG reduction programme will need be further detailed, refined and developed into a full and implementable programme -encompassing final legislative, institutional, financial and GHG accounting frameworks -Programme Office for implementation needs to be dedicated -NAMA implementation and operation, possibly before the end of Mexico will require further support from donors to enter into Phase 2 of the NAMA development.

· Thank you! Sonja Butzengeiger Perspectives GmbH