AMCEN Special Session on Climate Change Nairobi 25 – 29 May, 2009 CDM and Africa John Christensen Director, UNEP RISOE Centre.

AMCEN Special Session on Climate Change

Nairobi 25 – 29 May, 2009

CDM and Africa

John Christensen

Director, UNEP RISOE Centre

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Outline of presentation

• Carbon markets

• CDM projects status and perspectivesGlobal overviewAfrican projects and regional share

• Barriers and how to overcome them

• UNEP activities in support of African engagement in the emerging carbon market – part of Nairobi Framework

• Engaging the finance and business community

• Analytical and information support activities

• COP 15 and future directions for the CDMExamples of UNEP contributions

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Global Carbon Market

Fragmented market

• Project-based (baseline and credit system)• Emission reductions are created and traded through a given project or

activity (JI and CDM)• Allowance market (cap and trade system)

• Emission allowances are defined by regulations at the international, national, regional or firm level - Kyoto-ET, EU-ETS, Domestic: UK, Japan, Canada, Korea. Firms: BP, Shell

• Linkage between EU ETS and project-based mechanisms• Voluntary market

• Individuals and companies account and trade their greenhouse gas emissions on a voluntary basis (carbon compensation and travel compensation schemes)

• Several companies expressed interest in buying project-based credits (CERs and ERUs)

Market structures are likely to change with a new agreement

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Status on CDM Projects May 2009

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Share of credits from different projects

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277 million CERs have been issued (at 10€/tCO2 that is 2,7 Billion €)

CDM projects in the pipeline Type Projects Issued kCERs Issuance successAfforestationAgriculture 39 3782 45%Biogas 7 1139 64%Biomass energy 106 11796 86%Cement 7 1103 66%CO2 capture 1 43 191%Coal bed/mine methane 3 733 45%Energy distributionEE householdsEE industry 22 938 85%EE own generation 30 10701 90%EE service 1 4 61%EE supply side 5 345 76%Fossil fuel switch 18 2329 85%Fugitive 3 5153 112%Geothermal 2 318 29%HFCs 17 151782 106%Hydro 94 9984 91%Landfill gas 36 5902 34%N2O 12 58952 122%PFCsReforestationSolar 1 1 18%TidalTransport 2 132 47%Wind 89 11647 84%Total 495 276784 97,6%

CDM project with CERs issued

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Regional Distribution a political concernMarket dominated by +5 countries

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Now more than 100African CDM Projects

With a potential carbon value around 1 billion USD by 2012-but almost half will go to only two countries! (RSA & Nigeria)

Cumulative number of projects

Country 2004 2005 2006 2007 2008 2009Egypt 0 0 5 7 12 12Morocco 1 4 5 5 10 10Tunisia 0 0 2 2 2 2North Africa 1 4 12 14 24 24Cameroon 0 0 0 0 0 1Cape Verde 0 0 0 0 0 1Congo DR 0 0 0 0 2 2Ethiopia 0 0 0 0 1 1Ivory Coast 0 1 1 1 2 2Kenya 0 0 1 4 7 9Liberia 0 0 0 0 0 1Madagascar 0 0 0 0 1 1Mali 0 0 0 1 2 2Mauritius 0 0 0 1 1 1Mozambique 0 0 0 1 1 1Nigeria 0 2 2 2 4 6Rwanda 0 0 0 0 1 1Senegal 0 0 0 1 2 2South Africa 1 7 16 23 27 29Swaziland 0 0 0 0 1 1Tanzania 0 0 1 2 5 6Uganda 0 1 1 2 8 10

Zambia 0 0 0 0 1 1

Sub-Sahara Africa 1 11 22 38 66 78

Total Africa 2 15 34 52 90 102

Total global 60 533 1370 2779 4340 4733

Project types in Africa

Renewables41%

Landfill etc26%

Fuel switch7%

HFC & N2O reduction5%

Supply-side EE6%

Afforestation & Reforestation

10%

Demand-side EE5%

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•Even if African countries have made significant progress

•The regional share of the global market has remained constant

•Africa’s share of CDM market is low on all comparisons

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CDM Challenges

• Non Africa-specific:• Complex CDM Modalities & Procedures:

• Transaction cost to hire service providers.• Heavy institutional requirements for project cycle.• Knowledge gap between ER buyers & sellers.

• Africa-specific:• Limited access to finance by potential developers.• Financial intermediaries lack of knowledge about CDM.• Lack of trained national CDM consultants.• Investment climate.• Limited budgets for operations of DNAs.• Majority of potential in small projects, difficult to attract

financing:• Lack of entities capable of bundling projects for the buyers.

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The Nairobi Framework - catalysing the CDM in Africa

• The Nairobi Framework was initiated at COP 12 in Nairobi by UNDP, UNEP, World Bank, African Development Bank, and the UNFCCC Secretariat with the specific target of helping developing countries, especially those in sub-Sahara Africa, to improve their level of participation in the CDM.

• The NF partners work to:

• Build and enhance capacity of DNAs to become fully operational

• Build capacity in developing CDM project activities

• Promote investment opportunities for projects

• Improve information sharing/outreach / exchange of views on activities / education and training

• Inter-agency coordination.

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• Not a buyer. Not a seller:• Unbiased advisory services & research products

• Trusted by both buyers & sellers.

• In-country CDM CD activities in more than 35 developing countries:• Cross-fertilization of experiences from different regions and sectors.

• Intimate knowledge of host countries’ situation

• Access to valuable field information

• Ability to invest time & effort in activities unattractive to private sector:• Research products (CDM Pipeline database).

• Operate & pave way in high sovereignty risk countries (e.g. Sub-Saharan Africa).

• Diversified experiences (geographic & sectoral) among carbon finance team in UNEP.

UNEP is in a unique position

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UNEP’s CDM support program

• Key CDM activities o Structured, country-level capacity

building programs• Regulatory advisory, DNA/

institutional capacity building

o Targeted, hands-on workshops & training sessions

o Analytical work (guidebooks; market surveillance and analysis & targeted research)

o Promotion Activities – organization/participation in regional/global carbon events

• CDM Bazaar

o Facilitation of information management – web-based tools.

• Part of UNEP CC strategy o Supporting low carbon policy

development• Capacity building

• Analytical support

o Facilitating Finance• Innovative approaches

• Engaging with FI’s

o Technology transfer and deployment

• Supporting “New TNAs”

• Regional TT networks

• Piloting EE implementation

o Strong basis for possible future support to countries wanting NAMAs and sector planning

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•National awareness raising workshops

•Regional workshops

• Sector specific workshops (e.g RE; landfill; EE, etc) for sector experts; practitioners; project developers

•Executive briefings for key officials

UNEP – in country activitiesUNEP – in country activities

Core business & Core business & regulatory frameworks regulatory frameworks

for CDM investmentfor CDM investment

Modalities & Modalities & Procedures for CDM Procedures for CDM projects approval projects approval

Organize national Organize national CDM workshops and CDM workshops and

training sessions training sessions Identify, assess and Identify, assess and implement CDM implement CDM

projectsprojects

Promote Promote commitment of commitment of policy makerspolicy makers

project originationproject approval

Creates a national CDM projects portfolio and the institutional capability to attract CDM investmentsCreates a national CDM projects portfolio and the institutional capability to attract CDM investments

Identify, formulate Identify, formulate and secure financing and secure financing

for CDM projectsfor CDM projects

National CDM National CDM investor guidebookinvestor guidebook

Institutional Capacity Institutional Capacity DevelopmentDevelopment

Individual Capacity Individual Capacity DevelopmentDevelopment

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UNEPcapacity development activities in Africa

• CD4CDM

• Green Facility

• UNDP-UNEP

• CASCADE

• Upcoming CB for MEAs (CDM) interest statements

21 Countries + 7 to be selected

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Regional Activities

• Africa Carbon Forum, Senegal, Sep. 2008 & 2nd Forum in Nairobi early 2010

Knowledge and information sharing platforms

Updates on Carbon markets; technical knowledge sharing on conferences; trade fair and capacity-development sessions,

Organizers: IETA, UNEP, WB, UNDP, and UNFCCC Sec.

• Latin America Carbon Forums, Quito 2006, Lima 2007, Santiago 2008, Panama 2009

Investment mobilization and engaging the finance sector

Regional Carbon Forums

• African Bankers’ Carbon Finance Investment Forum. May 2007, Johannesburg

• Dakar, Senegal: Carbon finance perspectives for the banking sector. Feb 12-14, 2008

• Finance guidebook

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Virtual platform for information exchange

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• Operationalizing of DNAs: business & regulatory frameworks for CDM investment

• Pipeline of PINs/PDDs by national CDM experts.

• Local financial institutions have good understanding of CDM, possibly able to provide underlying project financing.

• Organized capacity building workshops• Skills and Knowledge provided to local experts

• Local experts able to deal with the complete cycle of CDM projects

• Local relevant institutions have good understanding of CDM and Climate Change

• Inter-institutional networks and coordination have been generated and enhanced through country team activities and the DNAs.

Measures of Results and Impacts

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Implementing in Partnership

• All national activities are undertaken with government focal points and engage local experts and institutions

• Technical support is provided using regional Centres of excellence and trained experts from other countries in the region

• Partnership with UNFCCC Secretariat on CDM Bazaar and Pipeline

• Partnership with UNDP on CDM and adaptation activities in Africa, currently supporting 7 countries on CDM

• Partnership with World Bank on national projects and e.g. regional finance events

• One UN Training Service Platform for CC (TSP4CC) led by UNITAR

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Some of the CDM issues on the table for COP 15

“Political” enhancing regional distribution

Higher threshold for small scale projects

Simpler additionality criteria for small scale projects

Elements of financing for validation and verification

Broader inclusion of forests Inclusion of NAMA and

sectoral crediting

“Normative and CB” support enhancement

Streamlining programmatic CDM and targeting CB support to this area

Developing projects and approaches to forestry and bio energy CDM projects

Establishing targeted finance to further CDM project development

UNEP supporting new directions for the CDM to become more effective, especially for African countries:

•Programmatic guide and project support•Forestry projects and methodologies•African Carbon Finance Facility

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Programmatic CDM making slow progress- 8 projects still only at validation

• Installation of solar home systems in Bangladesh

• Methane capture and combustion from Animal Waste Management System (AWMS) of the 3S Program farms of the Sadia Institute. Brazil

• Solar water heaters in South Africa

• Efficient light bulbs in Households in Mexico

• Composting of household waste in cities in Uganda

• Efficient light bulps in rural Senegal

• Masca Small Hydro Programme in Honduras

• Solar water heater programme in Tunisia - PROSOL developed based on UNEP supported program

Main features of the PROSOL programme

1. Loans financed through local banks repayments made through electricity bills interest rates initially softened

1. Loans financed through local banks repayments made through electricity bills interest rates initially softened

2. Subsidy equalized between SWH and LPG underwritten for a trial period by Italy

2. Subsidy equalized between SWH and LPG underwritten for a trial period by Italy

interest subsidy phased out after 18 months

after successful trial made permanent - change in Tunisian legislation

Carbon mitigation

PROSOL ResultPROSOL Result 113,400m113,400m22 SWH (58,000 installations) SWH (58,000 installations)

Equivalent to 280,000 tonnes of COEquivalent to 280,000 tonnes of CO22

Worth $4.5 million at market pricesWorth $4.5 million at market prices NB: programme cost $2.4 millionNB: programme cost $2.4 million

GOVERNMENT Target 2011GOVERNMENT Target 2011 540,000m540,000m22 (~180,000 installations) (~180,000 installations)

1.3 million tonnes of CO1.3 million tonnes of CO22

market value $19 millionmarket value $19 million

CDM documentation preparedCDM documentation prepared project being marketed to governmentsproject being marketed to governments

Programmatic Programmatic CDMCDM

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CASCADeCASCADe - - CCarbon Finance for arbon Finance for AAgriculture, griculture, SSylviculture, ylviculture, CConservation and onservation and AAction against ction against DeDeforestationforestation

• CASCADE – CASCADE – A UNEP Forestry-CDM InitiativeA UNEP Forestry-CDM Initiative

ObjectivesObjectives

• Fostering CDM capacity enhancementFostering CDM capacity enhancement

• Evaluate applicability of existing methodologies vis-à-vis the African Evaluate applicability of existing methodologies vis-à-vis the African contextcontext

• Putting "theory into practice" by developing and implementing pilot Putting "theory into practice" by developing and implementing pilot transactionstransactions

• Contributing to a more inclusive post-2012 climate regimeContributing to a more inclusive post-2012 climate regime

• Promoting the establishment of a Francophone network of expertise for Promoting the establishment of a Francophone network of expertise for CDM-LULUCF in AfricaCDM-LULUCF in Africa

Results-oriented capacity development… Results-oriented capacity development…

ONFi

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Forest Carbon in Africa Forest Carbon in Africa Key Benefits of Forest ProjectsKey Benefits of Forest Projects Climate benefits: Tropical deforestation and subsequent land use

accounts for an estimated 20% of global carbon emissions.

Economic benefits: Least cost intervention, agriculture and forest sector are main pillars of African economy.

Social benefits: More that 250 million people in Africa depend on forests for their livelihoods.

Environmental benefits: Rehabilitation of degraded lands, biodiversity conservation.

Adaptation benefits: Enhancing economic and environmental resilience of rural communities to climate change.

Forest projects as champions of sustainable development

and key instruments for adaptation.

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CASCADe CASCADe Target Countries and Partners Target Countries and Partners

• Simultaneous implementation in 7 countries• Benin• Cameroon• Democratic Republic of the Congo• Gabon• Madagascar• Mali• Senegal

• Implementing Partners• UNEP- DTIE / UNEP-Risoe• Office National des Forêts (ONF International)• CIRAD• ERM• Winrock• Local Partners

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Examples of Selected ProjectsExamples of Selected Projects

• Rehabilitation of degraded lands to agroforestry using Jatropha curcas, Benin

• Improved woodstoves project, Mali

• Rural electrification / fuel switch based on rice husks, Madagascar

• Reforestation of degraded lands with various species generating non-wood by-products for local population (fruit,Arabic gum, nuts), Senegal

• Reforestation with biodiversity / endangered species component, D R Congo

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• Sisal Biogas CDM Projects in Tanzania at two sites CDM projects convert sisal waste into biogas which is used in generation of electricity.

The project claims credits from the avoided methane emissions from the disposal site and the replaced fossil fuel in the national grid.

• Regional Forestry and Biocarbon Workshop, Addis Ababa (21st-24th April 2009) Workshop was jointly organised by UNEP RISOE, FAO, and UNDP and other organizations:

- to raise awareness of the bio-carbon opportunities offered by the carbon market;

- to enhance technical understanding of carbon finance;

- to create a ‘carbon community of interest’ in the region; and

- to catalyse a bio-carbon project pipeline.

African Carbon Finance Facility

Working with local project developers, financial institutions, national legislators and regulatory agencies, the ACFF will:

Facilitate the completion of costly project proposal development stages, such as the validation of project design documents

Provide training on critical issues such as proving project additionality, developing of financing plans or export guarantee applications, and negotiating carbon credit sales

Shepherd carbon projects through financial closure by facilitating financial sector intermediation and raising awareness of carbon finance among local and regional financial institutions

Pilot phase starting 2nd half of 2009

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Visit us…www.uneprisoe.orgwww.cd4cdm.org

www.cdmbazaar.netwww.cdmpipeline.org

Thank you!!

Upcoming – May 2009