1. Green Investment Schemes: Maximizing their Benefits to Society and Climate Dr. Diana Ürge-Vorsatz Budapest 24th April. 2008

2. 3CSEP Outline  Background: additional challenges and opportunities  Criteria to optimise GIS and to choose target areas  The influence of GIS architectures on effectiveness in target areas  Further research needs

3. 3CSEP Further challenges and opportunities  GIS: unregulated, as compared to other flexible mechanisms  Risk of failure or misperformance  Opportunity: freedom in its design; could potentially overcome challenges by CDM/JI  Opportunity: testing ground for post 2012 flexmex? (programmatic CDM?)  Highly under-researched  Little window left to develop  Could GIS become the flex mex of choice for buyers?

4. 3CSEP Criteria for the optimisation of GIS  Significant revenue locked in the surplus AAUs in EIT countries  How to spend this best to maximise benefits for climate and society?  Potential criteria for target areas:  Cost-effectiveness  Interest of the buyer  National social/political interests  Areas with strategic potentials but not easily supportable by other mechanisms  Selection of such areas in CEE:  Retrofit of old buildings stock  Renewable heat (biomass heat?)  Awareness raising, institution and capacity building, training, etc.?  Learning experiences from JI/CDM: optimise GIS based on lessons to be learned from JI/CDM  E.g. why do they fail in selected strategic areas such as energy efficiency in buildings

5. 3CSEP Target Areas for GIS: national interests  Sellers side: Criteria reflecting national interests may include : 1.cost-efficiency of investments; 2.Maximising gains towards national social, political and regional development priorities, and 3.Focus on important but are difficult to foster by BAU policies  Buyers Side: prefer such combination of greening types that  Most of the revenues are used through hard greening  And only a minority is channelled through soft greening  Buyers are flexible in regards to GIS target areas but prefer  Retrofit of old buildings stock  Expanding biomass production and use  Promotion of new buildings with ultra-low specific energy consumption (ex. Passive house)

6. 3CSEP Potential target for GIS: retrofit of old buildings stock  Benefits of the retrofiting of old buildings  Cost-effective/low-cost potential for GHG savings in buildings is the largest as compared to that of other sectors  Mitigation of this potential offers co-benefits  A clearly demonstrable spending  Barriers for Retrofit of the old building stock  Market-based instruments do not work: payback times are long; disperse ownership of EE makes ESCOs hardly work; other mechanism, such as JI failed in this area;  Regulatory policies hardly work too: The EPB Directive for large buildings and especially hard in CEE countries; population groups with the least access to self-financing or to capital markets

7. 3CSEP Implications for GIS architecture options  Architecture of GIS have a major impact on its effectiveness in different target areas  Better if a limited amount of target areas to be supported; and fitting the GIS design carefully to the specific needs of the particular target area  Basic modalities of design:  Type of greening  Project or Program/policy-based GIS  Distribution of funds  Selection of target areas  Institutional arrangements

8. 3CSEP GIS architecture modalitiesNotes Type of greening Hard greening Requirement for verifiable emission reductions additional to what would happen in the absence of the project Soft greening No verification of emission reductions required Hard and Soft greening Project or policy- based Project-based Implementation of individual projects and project bundling Policy-based Implementation of policy based activities (e.g. development and introduction of EE standards and labelling) Project/ program selection Top-down Pre-defined programs for directing investments into prioritized sectors and measures Bottom-up Project-proposals from organ-ns, individuals & local authorities Combination Funds allocated to several prioritized sectors and project selection within each sector Funds distribu- tion Grants Amount corresponding to the quantity of reduced emissions Soft loans Loans with below-market interest rates & longer repayment periods Soft loans and grants Credit guarantees Guarantees for credits granted by other institutions Equity for projects GIS finances projects, taking an equity share and a corresponding share of the revenues Benefici- aries Firms & Non-profit organizations Central and local authorities Applying for funding also for capacity building programs Physical persons Time- frame Short During the first Kyoto commitment period (2008-2012) Long May extend beyond the first Kyoto commitment period

9. 3CSEP Options in the GIS architecture Target areas for support Thermal retrofit of existing buildings Support of renew- able heat Other residential or public sector measures (inc. Standby consumption reduction) Information dissemination, awareness raising, educational Type of greening Hard greening - +Variable: -- to +- Soft greening ++++ Hard and Soft greening + 0 - Project or policy/progra m-based Project-based + Variable: - to +- Policy/program- based + + combination + ++0 Project/ program selection Top-down --++ Bottom-up ++++ Combination + Funds distribution [1] [1] Grants + Soft loans ++0- Soft loans & grants + 0- Credit guarantees 0+-- Revolving funds ++-- Equity for projects -+-

10. 3CSEP Options in the GIS architecture Target areas for support Thermal retrofit of existing buildings Support of renew- able heat Other residential or public sector measures (inc. Standby consumption reduction) Information dissemination, awareness raising, educational Beneficiaries Firms & Non-profit organizations + + Central and local authorities - / + Institutions operating on public budgets ++ + Physical persons + Dwelling owners Owner associations ESCOs ++0 Timeframe Short-term (until 2012) 0+++ Long term (beyond 2012 + + [2] [2] 0 [3] [3] 00 Notes: [1] The authors of this paper are not financial experts, therefore the evaluations in this row should especially be viewed as indicative rather than assertive, and can change subject to a more profound analysis of financial criteria and options. [2] Depends on the size of GIS revenues. In case the revenues are substantial, it is advisable that it is disbursed over a loger period, because retrofitting a very large number of buildings in a short period may prove challenging due to capacity constraints. In addition, a gradual retrofit schedule better leverages the natural retrofit cycle of buildings. [3] Depends on the GIS revenue size. If the income can be effectively utilised until 2012 without meeting capacity constraints, it is better to focus the support for a shorter period.

11. 3CSEP Conclusion from previous research  For the CEE countries, the priority areas for support are:  Retrofitting the old building stock  Promoting ultra-low energy new construction  Supporting biomass-based heating  Standby, low-power mode & idle electricity consum. reduction  Education, training and awareness raising  Architecture of GIS is important for its effectiveness  Not to rely on very strict hard greening  Not an extension of JI.  A small role of soft greening is also advisable

12. 3CSEP Thank you for your attention! Diana Ürge-Vorsatz: vorsatzd@ceu.hu Environmental Sciences & Policy Dept Central European University Tel: +36-1-327-3095 Fax: +36-1-327-3031 http://www.ceu.hu/envsci