1. GIS in Hungary Context and architecture József Feiler

2. Contents Background National Climate Change Policy Legal framework Hungary’s GIS potential Greening Framework Project selection Where to reduce? GIS Windows Target areas Procedural framework Monitoring and verification Price

3. Background National Climate Change Policy Legal framework Hungary’s GIS potential

4. National Climate Change Policy National Climate Strategy (2008-2025): –determines the objectives, priorities, tasks and instruments related to research and measures about domestic impacts, mitigation and adaptation NCS priority areas on GHG emission reductions: –Energy efficiency in the residential sector –Energy efficiency in the public sector –Renewable energy use in micro, small and medium scale –Emission reduction in the transport sector

5. Legal framework Act LX of 2007 on the implementation framework of the Kyoto Protocol –defines the crucial elements of the treasury asset management of Kyoto units by Minister of Environment; –the Kyoto units can be used: to offset GHG emissions occurring in Hungary; to generate ERUs for JI projects implemented in Hungary; to trade under International Emission Trading –revenues from sale of Kyoto units (GIS and EU ETS auction) can be used only for GHG emission reductions, including LULUCF Adaptation to climate change Act on Budget –defined treatment of GIS revenues and earmarking

6. Legal framework Government Decree 323/2007. (XII. 11.) Korm. on the implementation of Act LX of 2007 –Objectives of the GIS –Conditions for the sale of AAUs –Contract regarding the sale of AAUs –Support conditions and types in the GIS –Conditions for & decisions over applications –Monitoring and verification

7. Hungary’s AAU potential Total assigned amount units: 542 million Commitment period reserve: 395 million Emission trends (low): 432 million Emission trends (high): 443 million JI reserve: 10 million Available AAU: 80-90 million GIS pilot phase: 15 million GIS 2 nd phase: 30-40 million

8. Greening Framework Project selection Where to reduce? GIS Windows Target areas Procedural framework Monitoring and verification

9. Greening Framework Defintion of areas of support under GIS, their priorities, technical details and precondtions attached as well as the definition of support intensity (Greening Objectives) Principles and technical description of the greenhouse gas emission reduction verification by areas of support Monitoring framework for the activities supported in GIS, including reporting to Buyers (financial and evaluation of verification) General provisions for the call for applications under the GIS (Procedural framework)

10. Project selection Hard greening: all activities supported by the Scheme should result in emission reduction Focus on areas where support can create enabling environment Climate additionality and legal additionality Carbon effectiveness calculation considers post- Kyoto period in proven areas Focus on areas with the highest cost-benefit ratio concerning emission reduction Matching funds from other Hungarian state sources

11. Where to reduce? - CO2 emissions CO2 emissions by final energy end-users in Hungary, 2004 Source: Novikova, Dr. Ürge-Vorsatz, based on ODYSSEE (2007)

12. Where to reduce? - Mitigation potential Estimated potential for CO2 mitigation in „EITs” at a sectoral level in different cost categories in 2030 Source: Novikova, Dr. Ürge-Vorsatz, based on IPCC (2007) Cost categories (US$/tCO2eq)

13. Where to reduce? – Residential sector Source: Novikova, Dr. Ürge-Vorsatz, (2007) Distribution of the existing dwelling stock from the point of view of the thermal insulation level in Hungary

14. GIS windows Program window (start in mid 2008) emission reduction activities which are easy to execute in large numbers, using standard procedures emission reductions are easily verifiable (energy certificate methodology) –house insulation –public lighting modernization –passive house construction –Renewable energy, energy efficiency and energy saving projects primarily in the domestic and public sector Project window (will be phased in in late 2009) large size unique or/and complex GHG reduction projects operations similar to those of Joint Implementation, with a streamlined procedure ISO 14064 based emission reduction verification procedure

15. Target areas – National CC Policy Residential and public sectors –heat insulation of buildings and the change of heating/cooling systems –renewable energy use –measures to increase the effectiveness of district heating systems –planning and construction of low energy use buildings –lighting modernization Renewable energy use for smaller to larger heating systems Biogas production and utilization Other measures of energy conservation, energy efficiency and promotion of the use of renewable energy

16. Target areas – GIS: residential sector Retrofit of existing buildings –Exchange of windows and doors –Improvement of the thermal envelope –Condensing boilers –Solar protection –Balanced ventilation systems with heat recovery –Sunspaces – additional glazing of existing loggias and balconies Applications of renewable energy sources –Solar thermal collectors –Biomass burners –Heat pumps –Biogas Construction of new low energy buildings

17. Procedural framework for greening projects GIS contract signature: Buyer Govt. Hungarian Min. of Env. and Water (MoEW) GIS contract signature: Buyer Govt. Hungarian Min. of Env. and Water (MoEW) AAU => Buyer Purchase price => GIS fund AAU => Buyer Purchase price => GIS fund Calls for GIS applications approved and published In cooperation with MoEW Climate and Energy Unit Evaluation and contracting disbursement Implementation (post- completion disbursement) Implementation (advance payment) disbursement verification monitoring

18. Monitoring & Verification Verification 1. Small projects, easy to establish emission reductions: reporting by the beneficiary of the project with documentation and random verification by the GIS Management Office 2. Large, complex projects: third party verification according to ISO 14064 standard Monitoring Internationally renowned auditing firm to audit investments and use of the revenues Auditor to prepare annual reports and final report Buyers are presented all reports and will have full and unrestricted access to all relevant data, information and documentation

19. Monitoring & Verification

20. Price

21. Price Context is given by market prices and risk factors Price interlinkages: EUA – CER – green AAU – ERU (?) EUA (2008 dec): 25 euro CERs (2008 dec): 16.3 euro green AAUs (delivery before 2008 dec) hard greening (CER- 10-20 %), soft greening (CER- 25-35 %) Risk factors: Buyer faces and perceives the following main risks: Delivery risk, Greening risk, Political risk Seller faces and perceives the following main risks: Compliance risk, Greening risk, Counter-party risk, Political risk, Porfolio over-exposure Other risk considerations: Market risk, Advance payments and risk management

22. Conclusions Strong governmental commitments –Legal system in force, institutional system in place High standards of transparency and fiscal credibility –Verification framework –Monitoring framework Operational efficiency –Low administrative costs (up to 5%) Hard greening –Verification of emission reductions Buyer tailored approach –Priorities of buyers are considered and accommodated in the Greening Framework

23. Thank you! Contact: feiler@mail.kvvm.hu +36306788733 klima.kvvm.hu