Assessing Investment & Financial flows for Mitigation in the ENERGY Sector UNDP I&FF Methodology Guidebook: Mitigation Namibia 30 June - 2 July 2009

Relevance of energy sector  Primary source of global greenhouse gas (GHG) emissions  Emissions from this sector have grown faster than those in any other sector since 1970, and will continue to be the largest source of global GHG emissions.  Energy sector key to development: energy-related GHG emissions are growing fast in most highly dynamic (high growth) developing countries  Some mitigation options bring important local co-benefits: energy security, low cost energy options, improved local environmental and health conditions, etc.

Characteristics of energy sector in Namibia  In Namibia, the energy sector accounts for 2200 Year 2000 Carbon Dioxide Equivalent (CO2-e) Emissions  In 1994, the greenhouse gas emissions from Namibia were Gg CO2 equivalent, excluding the sink effect by bush encroachment  The transport sector is the greatest emitter of CO2 (about 50%) because of the great distances travelled to distribute goods and services  Energy needs in rural areas are largely met by biomass fuel. Supply of wood for fuel is increasing due to bush encroachment in some parts of the country, but often remote from areas of fuelwood scarcity.

I&FF ASSESSMENT SUMMARY OF KEY STEPS  Establish key parameters of assessment (scoping)  Collect data (historic- present - projections)  Define baseline scenario and associated I&FF  Define CC (mitigation) scenario and associated I&FF  Estimate incremental I&FF to implement mitigation  Evaluate policy measures

 Define scope & boundaries for the assessment  What are the key subsectors to be included?  Define the institutional framework  Specify the time horizon for the analysis: recommended, base year 2005 recommended  Build on existing model for the sector where possible 1. Establish key parameters of the assessment

Define boundaries for the assessment 1. Establish key parameters of assessment SubsectorsData availability Investment (baseline & prior 10 years) Priority in mitigation scenario HighMediumLowRank Fossil-fired generation Total electricity Oil supply Gas supply Coal supply Petroleum refining Electricity, gas distribution and water supply Gas distribution Nuclear generation Transmission and distribution Renewables including Large and small hydro Example list of subsectors for screening and prioritization

 Focus: Local data at adequate aggregation level to identify investment types (e.g. wind energy facilities, biomass fired power plant, etc.), public programmes (e.g. energy efficiency program to replace incandescent bulbs), their costs and financing sources  Recommended options: Sector investment & public programmes data, projections and development plans GHG Inventories, National Communications to UNFCCC 2. Compile historical I&FF data and other input data for scenarios

 Data collection, rely on national accounts data  The System of National Accounts (SNA) constitutes the primary source of information about the economy  Systems of integrated environmental and economic accounts (SEEA) were developed to address statistical gaps

2. Compile historical I&FF data and other input data for scenarios Data collection, rely on national accounts data Examples of I&FF data disaggregation in each sub-sector

 Define the physical basis for the Baseline Scenario  A baseline scenario: description of what is likely to occur in the absence of ADDITIONAL policies to address climate change; expected socioeconomic trends (e.g., population growth and migration, economic growth), technological change (if relevant), and expected business-as-usual investments in the sector. 3. Define Baseline Scenario

3. Define baseline scenario  Characterizing baseline for each relevant energy supply and energy end-use subsector over the assessment period.  Assuming no new climate change policies are implemented  Baseline scenario reflects  Current sectoral and national plans  Expected socioeconomic trends  Expected investments in the subsectors  Use of available model/s (e.g. used for National Communication) may facilitate scenario definition Define baseline scenario

3. Define baseline scenario Define physical basis for the Baseline Scenario  Information should be disaggregated by:  year (starting 10 years before the assessment’s Base Year)  source (by corporations and government)  type (national funds, foreign direct investment, official development assistance)

3. Define baseline scenario Define physical basis for the Baseline Scenario Energy scenarios used so far in Namibia:  Climate change scenarios for Namibian Country Study (1998) were based on IS92a emission scenario, as translated by global climate models in the early 1990s. It offers a mid-range estimate of future emissions & assumes only a modest degree of policy intervention to limit emissions of GHG  Planning programme Vision 2030 is in progress. Vision 2030 describes in general terms the overall level of development the country wants to achieve over the course of the coming three decades

 Compile annual estimates, disaggregated by investment entity, source, investment flow type, and financial flow type & d isaggregate costs of conventional and unconventional sources of energy  Calculate the total investment cost in real, unannualized terms over the planning period  Estimate annual investment costs associated with the new plan  Develop a breakdown of total investments into major categories (e.g., ODA, FDI, domestic funds) 4. Derive I&FF for baseline scenario

Estimate annual I&FF Adding costs to baseline scenario

 Mitigation scenario: incorporates measures to reduce GHG emissions  The mitigation scenario should describe expected socioeconomic trends, technological change (if relevant), relevant measures to mitigate GHG emissions, and the expected investments in key areas of the energy sector (e.g. end-use and supply subsectors) to implement those mitigation measures.  Costing tools and international information sources may help to identify I&FF needs for different mitigation options 5. Define Mitigation scenario

5. Define mitigation scenario Category of Mitigation Measure Energy Supply MeasuresEnergy End-Use Measures Reduce Combustion Emissions Reduce Fugitive Emissions Reduce Combustion Emissions Reduce Energy Demand Improve efficiency of energy use Efficiency improvements in energy supply processes Efficiency improvements in energy end-use technologies Energy conservation measures Reduce emissions per unit of energy production or use Switch to lower carbon fuels Switch to alternative energy sources Reduce fugitive losses (including recovery and use) Energy Sector Mitigation Measures

5. Define mitigation scenario Energy Sector Mitigation Measures Options identified in the Initial National Communication of Namibia  In Namibia, due to hot climatic conditions, a large amount of halocarbons are used for refrigeration & air conditioning  Improvement of refrigeration & air conditioning will have large effects on the amount of GHG emissions

5. Define mitigation scenario Two approaches to define Mitigation Scenario  Approach #1: assume an end point for energy supply emissions  E.g. setting a target in 2030 for emissions from the energy supply sector  Approach #2: assume a set of technologies for energy supply:  E.g. Review national potential for energy policy that articulate a set of technological options, such as renewable energy, and other carbon-reducing options to meet future energy demand.

 Compile annual estimates, disaggregated by investment entity, source, investment flow type, and financial flow type  Estimate annual investment costs associated with the alternative management plan  Calculate the total investment cost in real, unannualized terms over the planning period.  Develop a breakdown of total investments into major categories (e.g., ODA, FDI, domestic funds) 6. Derive I&FF for Mitigation Scenario

Projecting Investments 6. Derive I&FF for mitigation scenario Adding costs to mitigation scenario

 Subtract the baseline annual I&FF, by entity and source, from the mitigation annual I&FF, by entity and source.  Subtraction of the Baseline Scenario from the Mitigation Scenario.  Sum incremental amounts over all years, by entity and source. 7. Estimate changes in annual I&FF needed to implement adaptation

[ Subtract the baseline annual I&FF from the mitigation annual I&FF 7. Estimate changes in annual I&FF needed to implement mitigation  For each chosen energy mitigation option, the analysis should identify the incremental investment (total dollars) by source (domestic funds, ODA, FDI etc.) up through 2030 necessary for its implementation

[ Summarizing incremental investments 7. Estimate changes in annual I&FF needed to implement mitigation

 Objective: Analyze additional efforts, funding and policy needs to implement measures identified in the mitigation scenario  Determine policy instruments and measures to encourage changes in I&FF  Identify the entities that are responsible for the significant incremental changes in I&FF  Determine the predominant sources of their funds, particularly important to distinguish between public and private sources of finance 8. Evaluate policy implications

Assess contribution and suitability of different policy options given country conditions 8. Evaluate policy implications Examples of mitigation & policy option Policy options Mitigation measure Economic Instrument RegulationsInformation provision Other instruments Energy efficiency Improvement Energy tax Tradable permits Fiscal incentives for efficient appliances Performance standards for electric applicances Information campaigns Labelling of energy efficient equipment Voluntary Agreements R&D programme (to develop more efficient technologies) Energy source switching (e.g. substitute biomass for fossil fuels) GHG tax Tradable permits Power plant fuel portfolio standards Information provision/ campaigns R&D programme (e.g. to develop Hydrogen) Increased Renewable Energy Capacity Capital grants Feed-in tariffs Tradable permits Renewable targets Green electricity validation Voluntary Agreeements

 For more information on synthesizing results, documentation & the completion of the report, please refer to the Reporting Guidelines 9. Synthesize results and complete report

Q&A CLARIFICATIONS ? ? ? ? ? ? ? ? ?

Additional Information Possible models and methods NameDeveloperPlatformMetho- dology Cost (US$)/ Licensing Web Site/ Contact Description CO2DBIIASA,WindowsDatabaseFreeWWW.IIASA.A C.ATWWW.IIASA.A sa.ac.at Database of CO2 emitting energy technologies ENERGY COSTING TOOL UNDPExcelAccountingFreeWWW.UNDP.O RGMINORU.TA ORG Estimates the amounts and types of energy investments required to meet the Millennium Development Goals ENPEPArgonne National WindowsVariousDepends on modules used and type of institution. L.GOV Suite of Models for Integrated Energy/Environment Analysis HOMERNational Renewable Energy WindowsOptimizati on Freewww.nrel.gov/h omer Design of off- and on-grid electrification options LEAPStockholm Environment Institute WindowsPhysical Accounting, Simulation Free to qualified users from developing countries. YCOMMUNITY. -US.OR Integrated Energy/Environment Analysis …………………