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Cost assessment of capacity building requirements for market mechanisms
10 March 2010
Dr. Niklas Höhne, Ecofys, [email protected]
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
EcofysGtriple C (Murray Ward)
www.sectoral.org
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
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
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
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
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
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
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
Linking developing countries to carbon markets
Linking scenarios
1. Assumptions
2. Methodology
3. Results
Country groups CDM classic+ Sectoral CDM Sectoral crediting National targets(no ETS)
National targets (ETS)
Scenario 1: Low ambition
Nearly industustrialised X
China X
Upper middle income X
Lower middle income X
Low income X
Scenario 2: Medium ambition
Nearly industustrialised X
China X
Upper middle income X
Lower middle income X
Low income X
Scenario 3: High ambition
Nearly industustrialised X
China X
Upper middle income X
Lower middle income X
Low income X
Country groups CDM classic+ Sectoral CDM Sectoral crediting National targets(no ETS)
National targets (ETS)
Scenario 1: Low ambition
Nearly industustrialised X
China X
Upper middle income X
Lower middle income X
Low income X
Scenario 2: Medium ambition
Nearly industustrialised X
China X
Upper middle income X
Lower middle income X
Low income X
Scenario 3: High ambition
Nearly industustrialised X
China X
Upper middle income X
Lower middle income X
Low income X
Linking developing countries to carbon markets
Cost by country group
Linking developing countries to carbon markets
ConclusionsCosts
• 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/emissions/emissions.aspx
Linking developing countries to carbon markets
Backup slides
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
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$1. Assumptions
2. Methodology
3. Results
Linking developing countries to carbon markets
Cost by country group
1. Assumptions
2. Methodology
3. Results
0
20
40
60
80
100
120
140
160
180
Nearlyindustrialisedcountries (3)
China Upper middleincome (71)
Lower middleincome (52)
Low income (49)
Av
era
ge
co
st
in M
io U
S$ Low ambition
Medium ambition
High ambition
(number of countries within the group in brackets)
Linking developing countries to carbon markets
Cost by cost category
1. Assumptions
2. Methodology
3. Results
0
100
200
300
400
500
600
700
800
900
1000
Measure andmonitor
Reporting Verification Policy /Legislation
Enforcing
To
tal
cost
in
Mio
US
$
Low ambition
Medium ambition
High ambition
Linking developing countries to carbon markets
Total cost per scenario
1. Assumptions
2. Methodology
3. Results
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
5,500
Low ambition Medium ambition High ambition
To
tal c
os
t in
Mio
US
$
Low income (49)
Lower middle income (52)
Upper middle income (71)
China
Nearly industrialised countries (3)
Linking developing countries to carbon markets
Costs for example countries
Linking developing countries to carbon markets
Costs for example countries
Linking developing countries to carbon markets
Costs for example countries
Linking developing countries to carbon markets
Costs for example countries
Linking developing countries to carbon markets
Costs for example countries
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 assessmentGroup of countries
Possible data load
Current capacity on MRV
Funding efforts needed it
from public institutions
from private sector
Nearly-industrialised
(ranges)
advanced developing
low income developing
Section 2
Section 5
Section 6
Section 7
Country
Scaling up
Cost assessment methodology
1. Assumptions
2. Methodology
3. Results
Section 4 Section 3
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
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
Develo
pin
g c
ou
ntrie
s
Linking developing countries to carbon markets
Reference countries
Nearly industialised
(3) Turkey
China
(1) China
Upper middle income
(71) ChileLower middle income
(52)Sri LankaLower income
(49) Ghana1. Assumptions
2. Methodology
3. Results
Develo
pin
g c
ou
ntrie
s
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
Linking developing countries to carbon markets
Cost assessment for reference countries
Estimate of cost factors
Packages per cost category
Cost categories
Cost factors
General definitions Cost assessment per reference country
Existing capacityRelevant capacity Indicator of success (formulated as question) Answer
a Assign focal point UNFCCC Is there a registered UNFCCC focal point in the host country? (check www.unfccc.int)
Yes No no
b Set-up legal entity (DNA) including technical committee screening the proposals and steering committee safeguarding consistency between ministeries
Is there a registered DNA at UNFCCC for the host country? (check www.unfccc.int)
Yes Informal/partly
No no
c Define sustainable development criteria to which all CDM projects have to adhere, based on national legislation and policy
Are host-country specific Sustainable Development criteria publicly available? (check site of Ministry of Environment, assigned DNA organisation, google if there is a separate DNA website)
Yes No no
d Are the CDM project approval procedures of the DNA publicly available? (Check DNA website)
Yes No no
How many projects are approved already by the DNA?(check DNA website and make telephone call to DNA)
>5 1 to 5 0 0
Set approval process supervised by the DNA, define fees, response times, create templates
Score
Cost per package
Packages needed per scenario per cost category
Total cost per scenario per cost category
Estimate of cost factors
Packages per cost category
Cost categories
Cost factors
General definitions Cost assessment per reference country
Existing capacityRelevant capacity Indicator of success (formulated as question) Answer
a Assign focal point UNFCCC Is there a registered UNFCCC focal point in the host country? (check www.unfccc.int)
Yes No no
b Set-up legal entity (DNA) including technical committee screening the proposals and steering committee safeguarding consistency between ministeries
Is there a registered DNA at UNFCCC for the host country? (check www.unfccc.int)
Yes Informal/partly
No no
c Define sustainable development criteria to which all CDM projects have to adhere, based on national legislation and policy
Are host-country specific Sustainable Development criteria publicly available? (check site of Ministry of Environment, assigned DNA organisation, google if there is a separate DNA website)
Yes No no
d Are the CDM project approval procedures of the DNA publicly available? (Check DNA website)
Yes No no
How many projects are approved already by the DNA?(check DNA website and make telephone call to DNA)
>5 1 to 5 0 0
Set approval process supervised by the DNA, define fees, response times, create templates
Score
Cost per package
Packages needed per scenario per cost category
Total cost per scenario per cost category
1. Assumptions
2. Methodology
3. Results
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
Linking developing countries to carbon markets
Structure of packages
Package One package capacity building would include
Number of units
Unit costs in reference country (in €)
Total costs
PeopleTravel (int) Travel (nat)
Communi-cation
Office/venue cost
Campaign support
Senior specialised technical advisor 1 800 800 800
Senior technical advisor 3 400 1,200 1,200
Days of technical advise 5 200 1,000 1,000
Days of junior technical advise 20 75 1,500 1,500
Communication cost 1 150 150 150
Travel cost 1 2,250 2,250 563 1,688
Office/venue costs 1 1,000 1,000
Campaign support 1 1,000 1,000 1,000
Total 8,900 51% 6% 19% 2% 0% 11%
Measure and monitor
Package structure is the same for all countries adjustment for China
Cost factors are country
specific1. Assumptions
2. Methodology
3. Results
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 GDPTravel national Country AreaTravel international Fixed per countryCommunication Average SalaryOffice/Venue use Average SalaryCampaign GDP
1. Assumptions
2. Methodology
3. Results