Green Investment Scheme: combination of trade and project- based mechanism: a countries’ asset Ms. Maria Khovanskaya Climate Change Department REC Bucharest,

Green Investment Scheme: combination of trade and

project-based mechanism: a countries’ asset

Ms. Maria KhovanskayaClimate Change Department

RECBucharest, Romania

30 April 2009

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Outline

• Brief history of GIS• Main principles of the initial models:

• GIS as a modality of International Emission Trade (IET):• Tradable Kyoto quota (Art. 17 of the Protocol)• Hot air issues

• GIS at home:• “Hard greening”• Soft greening”

• Main dilemmas of the AAU management:• Allocation between national needs and tradable amount;• Allocation between two commitment periods;

• Outline for the workshop and discussion

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Brief history of the GIS

• Idea introduced at COP 6 in the Hague, in 2000

• In 2002 Russian Federation has presented first version of GIS functioning at COP 8, in New Delhi

• Idea of GIS abandoned for a JI, EU ETS, etc

• After the shortcomings of the JI mechanism became apparent, GIS was picked up again in 2004-2005;

• December 2007: Hungary adopts the legal basis for GIS

• Fall 2008 – fist transaction

• In April 2009 – 7 countries participate in GIS as either buyers or sellers (Austria, Belgium, Hungary, Japan, Latvia, Spain, Ukraine)

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Kyoto Quota (Assigned Amount)

• The amount of tonnes of GHG emissions which all the enterprises, mobile sources (transport), residential houses, agricultural units, landfills can emit into the atmosphere

• Has been identified once and forever in the submitted Initial Report

• Calculated according to the international formula: AA= Total GHG emissions in the baseyear (for Romania 1989) X

Kyoto target (92%) X 5 (years in the first commitment period) = 1 299 349 047 tCO2 eq. (Initial report)

For everything!!!

• A quota can be increased by purchasing carbon credits and can be reduced by selling them

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“Hot air” issues

• In the countries-sellers usually in the baseyear (1989 for Romania) GHG emissions were still high because of the high production augmented by energy inefficient technologies

• In many countries sellers surplus occurs because of the downfall of the economic system

• GHG emission has fallen also considerable in the beginning of 90-es but only because economic collapse not because of emission reduction measures

• Doubts about environmental integrity of purchasing from this kind of sellers

• GIS came picture as a solution to this problem

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Source: Initial Report of Romania submitted on 17 May 2008

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Main principle of GIS“Greening” of AAU transfers by earmarking the

proceeds from AAU sales for implementing environmental projects in the seller country

Hard greening

• GHG emissions reduction projects (e.g. renewable energy projects, energy efficiency projects)

Soft greening• Management (administrative cost) of GIS• Creating enabling environment for the “hard”

greening to occur• Capacity building

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AAU management dillemas

• AAU quantity is limited• Dilemma faced by the countries-sellers in the 1st Commitment

Period;• Sell AAUs earlier through GIS and invest into GHG decreasing

technologies and projects;• Save AAUs for the needs of developing national economies

• Dilemmas faced by the countries-sellers about the allocation of AAUs between the two periods:

• AAUs can be carried over between two periods without limitation

• For EU members the ambitious EU targets for post-2012 should be taken into consideration

• Dilemma faced by the potential country-buyers: to which extent to buy AAUs and to which encourage the national economy to undertake carbon-saving measures;

• Decisions to be taken under political uncertainty about future commitment periods, costs of non-compliance, etc.

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Legislation

• Significant amount of legislative job to be done;

• Primary legislation;• Identification of legal nature of AAU;

• Adjusting the concept of GIS for the national and EU legislation (some contradictions do exist);

• Secondary legislation;

• Complicated process of taking the drafts of the legal documents through the public hearings.

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Institutional set-up

Training the experts;

•Regulatory work:

•Synchronizing the work of GIS unit with the work of other institutions (for instance, Registry operator, inventory preparation and submission in terms of eligibity, etc);

•Eligibility of projects and project owners;

•Methods of financing of the projects (grants, low interest loans, etc)

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GIS as Good Image Scheme

•Monitoring

•Transparency

•Enforcement

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And also…

•Creating and implementing a sales strategy;

•Creating strategy to work with buyers („one for all buyers approach” or „tailoring every deal to the requests of a particular buyer”), MOUs, state vs. private buyers;

•Solving conflicts of stakeholders;

• Interference of marginal interests

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Extension of flexibility concept

•Best of every mechanism;

•Way to „green” IET;

•Way to capture the projects not captured under JI;

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…environmentally friendly technologies.

•Way to finance the priority areas (for instance: renewables, biofule, small-scale projects);

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Thank you for your [email protected]