1. Cost assessment of capacity building requirements for market mechanisms 10 March 2010 Dr. Niklas Höhne, Ecofys, n.hoehne@ecofys.com

2. Linking developing countries to carbon markets Recent Ecofys activities Identification of NAMAs and using templates to make NAMA proposals Testing “sector proposal templates” Electricity, transport, cement, iron & steel Tested in China and Mexico Ecofys Gtriple C (Murray Ward) www.sectoral.org

3. Linking developing countries to carbon markets Aim of this study Analysis of the capacity building needs and the related cost for non-Annex I countries to reach a level of capacity that allows a successful implementation of mechanisms that link to the global carbon market Linking developing countries to carbon markets - Cost assessment of capacity building requirements Marion Vieweg, Claudia Doets, Marta Torres, Sina Wartmann, Padraig Oliver, Deniz Yener, Edgar Cruz, Edwin Dalenoord, Nuria Valero Esteban Ecofys for UK Office of Climate Change, April 2009 http://www.decc.gov.uk/en/content/cms/what_we_do/change_energy/tackling_clima/emissions/emissions.aspx

4. Linking developing countries to carbon markets Method 1.Design 3 scenarios of countries’ participation (from CDM to national ETS) 2.For 7 representative countries: capacity gap = capacity needs – existing capacity 3.Calculation of costs to overcome capacity gap 4.Scaling up country results to regions

5. Linking developing countries to carbon markets Capacity needs CDM Install a Designated National Authority (DNA) Define of sustainable development criteria Implement a one stop shop for project developers Prepare CDM investment guidance Develop enterprises in the CDM service sector

6. Linking developing countries to carbon markets Capacity needs National emission inventory Preparation of national emission inventory Design of legal frameworks to collect, store and verify data National emission trading system Assigning coherent targets to sectors and within sectors to specific installations/operations Development of guidelines for monitoring, reporting, verification, enforcement and compliance Development of registry of transactions Making the business community aware Legally embed trading rules

7. Linking developing countries to carbon markets Activities CDM Inventorise sustainable development criteria used in the country including localised MDG targets Scan of sustainable development criteria of neighbouring countries Workshop with local experts in economic and social development and environmental protection Proposal on sustainable development criteria setting by experts Government decision

8. Linking developing countries to carbon markets Institutional readiness trading system Explorative study on how to enlarge trade registration responsibilities of entity(ies) Government decision to assign trading registration to a national entity including necessary licenses Propose a structure for the registry, governance of the registry and accreditation for verifiers, anticipating connection to the international trading log Build and maintain registry Formally set accreditation standard for local verifiers organisations Organise training on accreditation for local service providers Organise training on restrictions and opportunities of cap and trade system for business community Evaluate system operations after a year and come up with suggestions for improvement Adjust the registry, governance and accreditation structures

9. Linking developing countries to carbon markets Example: Chile Existing capacity CDM National communication Sectoral responsibilities Analytical capacity Capacity needs Company level reporting, review and verification of GHG emissions National inventory National target setting across ministries

10. Linking developing countries to carbon markets Linking scenarios 1.Assumptions 2.Methodology 3.Results

11. Linking developing countries to carbon markets Cost by country group

12. Linking developing countries to carbon markets Conclusions Costs First rough estimate of capacity building needs: 1 to 5 bln US$ Most costs in the many higher middle income countries Capacity gap Already high capacity for CDM, especially in the more developed and larger countries National emission trading requires substantial further capacity, but very country specific Low income countries, capacity building for CDM relative low cost per country Important factors influencing the costs Scope of capacity building – fine line between CB and implementation Assumption on the effectiveness: here ideal situation, maximum effectiveness Scaling up from countries to regions Non-capacity related barriers: Political will, stability, access to finance Full report: http://www.decc.gov.uk/en/content/cms/what_we_do/change_energy/tackling_clima/e missions/emissions.aspx

13. Linking developing countries to carbon markets Backup slides

14. Linking developing countries to carbon markets Assumptions International agreement facilitates different linking options Sufficient political will for the implementation of linking options Funding for capacity building is available (in time and amount) Training capacities are available (in time and amount), Private investment and capacity building in support sectors (e.g. financial institutions, law firms) is mainly covered from the private sector Capacity on international level (governance structures, UNFCCC) are not considered Political stability in the countries has no negative impact on implementation REDD is NOT included No assumptions on methodological approach to capacity building

15. Linking developing countries to carbon markets Methodological assumptions Reference countries are representative for the whole group. The whole group adopts the linking option as defined in the scenarios. Implementation of options, especially sectoral and national targets, is carried out in a way that does not give perverse incentives. Institutions in a sectoral approach are designed in a way to enable easy transition to a national scheme. Different options for implementing sectoral / national targets are not calculated, but the general capacity to implement sound implementation policies is evaluated. No assumptions on methodological approach to capacity building All calculations are in current US$ 1.Assumptions 2.Methodology 3.Results

16. Linking developing countries to carbon markets Cost by country group 1.Assumptions 2.Methodology 3.Results

17. Linking developing countries to carbon markets Cost by cost category 1.Assumptions 2.Methodology 3.Results

18. Linking developing countries to carbon markets Total cost per scenario 1.Assumptions 2.Methodology 3.Results

19. Linking developing countries to carbon markets Costs for example countries

20. Linking developing countries to carbon markets Costs for example countries

21. Linking developing countries to carbon markets Costs for example countries

22. Linking developing countries to carbon markets Costs for example countries

23. Linking developing countries to carbon markets Costs for example countries

24. Linking developing countries to carbon markets General methodology Definition of reference countries Definition of linking scenarios Capacity needs assessment Existing capacity analysis Capacity gap Cost assessment Section 2 Section 5 Section 6 Section 7 Country Scaling up Cost assessment methodology 1.Assumptions 2.Methodology 3.Results Section 4 Section 3

25. Linking developing countries to carbon markets Timeline Scenarios are selected for 2020 Capacity need is assessed as overall cost to bring countries to a defined capacity level Time lines are only considered qualitatively (e.g. assessing if the capacity building can realistically be achieved by 2020) 1.Assumptions 2.Methodology 3.Results

26. Linking developing countries to carbon markets Categories of countries Nearly industialised (3) China (1) Upper middle income (71) Lower middle income (52) Lower income (49) 1.Assumptions 2.Methodology 3.Results Developing countries

27. Linking developing countries to carbon markets Reference countries Nearly industialised (3) Turkey China (1) China Upper middle income (71) Chile Lower middle income (52)Sri Lanka Lower income (49) Ghana 1.Assumptions 2.Methodology 3.Results Developing countries

28. Linking developing countries to carbon markets Assessing the capacity need From the starting point of a successfully used mechanism we derived: Indicators and linked activities into packages to build the required level of capacity A questionnaire with the indicators was filled in by the country experts Based on the questionnaire the relevant packages profile of each reference country was defined 1.Assumptions 2.Methodology 3.Results

29. Linking developing countries to carbon markets Cost assessment for reference countries 1.Assumptions 2.Methodology 3.Results

30. Linking developing countries to carbon markets Costing the capacity need Packages were broken down to specific needed inputs (cost factors). These different inputs were given a cost price for each reference country This way a price per package was derived per reference country The price per package was multiplied with the package profile per reference country to derive the total cost per country 1.Assumptions 2.Methodology 3.Results

31. Linking developing countries to carbon markets Structure of packages Package structure is the same for all countries  adjustment for China Cost factors are country specific 1.Assumptions 2.Methodology 3.Results

32. Linking developing countries to carbon markets Scaling up to country groups Cost for each resource category are corrected per country within the group compared to the reference country through : Skilled labour  GDP Travel national  Country Area Travel international  Fixed per country Communication  Average Salary Office/Venue use  Average Salary Campaign  GDP 1.Assumptions 2.Methodology 3.Results