1 Business Model Framework: Initial Result Areas and Performance Indicators GCF/B.05/02 20 September 2013 Meeting of the Board 8-10 October 2013 Paris, France Agenda item 4 (a)
2 Page b Recommended action by the Board It is recommended that the Board: a) Takes note of the information presented in document GCF/B.05/02 Business Model Framework: Initial Result Areas and Performance Indicators; b) Provides guidance on the policy matters regarding the initial result areas and performance indicators of the Fund; and c) Adopts the draft decision presented in Annex I to this document.
3 Page 1 Business Model Framework: Initial Result Areas and Performance Indicators I. Introduction 1. At its March 2013 meeting, the Board requested the Interim Secretariat to undertake work on a number of documents relating to the business model framework of the Fund. One of these documents was to address the objectives, results and performance indicators of the Fund. The Interim Secretariat, with the assistance of consultants, prepared the requested document (GCF/B.04/03) for consideration by the Board at its June 2013 meeting, where it was discussed by the Board. 2. At its June 2013 meeting, the Board, in its decision B.04/04: (a) (b) (c) (d) (e) Noted convergence that the Fund will have a strategic focus on climate mitigation and adaptation, and also seek to maximize sustainable development; Reaffirmed that country ownership will be a core principle of the business model framework of the Fund and that countries will identify their priority result areas in line with their national strategies and plans; Decided to consider further the initial result areas of the Fund, with an aim to achieve substantial progress at its September 2013 meeting; Further decided to consider the core performance indicators to be employed by the Fund to measure performance against the objectives of the Fund and the mitigation and adaptation results to be considered by the Board at its September 2013 meeting; Further decided to consider the expected impacts and role of the Fund in the initial result areas at its second meeting in The purpose of this document is to present to the Board an assessment of options for the initial result areas and performance indicators of the Fund which it could adopt to attain its objectives. This document should be read in conjunction with the document on objectives, results and performance indicators (GCF/B.04/03) and the document on the results management framework for the Fund (GCF/B.05/03). 4. The Governing Instrument for the Fund provides specific guidance on result areas of the Fund: Paragraph 2: The Fund will contribute to the achievement of the ultimate objective of the United Nations Framework Convention on Climate Change (UNFCCC). In the context of sustainable development, the Fund will promote the paradigm shift towards low-emission and climate-resilient development pathways by providing support to countries to limit or reduce their greenhouse gas emissions and to adapt to the impacts of climate change, taking into account the needs of those countries particularly vulnerable to the adverse effects of climate change. Paragraph 3: [ ] The Fund will play a key role in channelling new, additional, adequate and predictable financial resources to countries and will catalyse climate finance, both public and private, and at the international and national levels. The Fund will pursue a country-driven approach and promote and strengthen engagement at the country level through effective involvement of relevant institutions and stakeholders. The Fund will be scalable and flexible and will be a continuously learning institution guided by processes
4 Page 2 for monitoring and evaluation. The Fund will strive to maximize the impact of its funding for adaptation and mitigation, and seek a balance between the two, while promoting environmental, social, economic and development co-benefits and taking a gendersensitive approach. Paragraph 58: A results measurement framework with guidelines and appropriate performance indicators will be approved by the Board. Performance against these indicators will be reviewed periodically in order to support the continuous improvement of the Fund s impact, effectiveness and operational performance. 5. The provisions and principles from the Governing Instrument, as well as the decisions by the Board, have been fully reflected in the options for the Fund s initial result areas and performance indicators presented in this document. II. Initial result areas of the Fund 6. Document GCF/B.04/03 on the objectives, results and performance indicators of the Fund already provided a preliminary assessment of result areas of the Fund. This Chapter, however, complements this preliminary assessment by further elaborating on the reasoning behind the recommended set of initial result areas of the Fund. 7. Presented result areas are selected from a variety of possible options based on their feasibility and appropriateness. They present the best options with respect to both project and programme levels, and take into account the need for immediate results as well as long-term transformative impact, which could lead to low-emission and climate-resilient pathways. Annex V contains the descriptions of, and the reasoning behind, the individual initial result areas presented in Table 1. Annex VI further contains the rationale drivers for the recommended initial mitigation result areas. Table 1: Recommended initial result areas of the Fund IR 1 IR 2 IR 3 IR 4 IR 5 IR 6 IR 7 IR 8 IR 9 IR 10 IR 11 IR 12 Energy efficiency of buildings and appliances Energy efficiency of industrial processes Low-emission transport Low-emission energy access Large-scale low-emission power generation Agriculture and related land use management REDD+ implementation Sustainable forest management to support mitigation and adaptation Design and planning of cities to support mitigation and adaptation Support for result areas relating to all climate hazards Support for selected themes cutting across adaptation result areas ( flagships ) Facilitating capacity for programmatic and transformative adaptation activities
5 Page 3 IR 13 IR 14 Facilitating scaling up of effective community-based adaptation (CBA) actions Supporting coordination of public goods such as knowledge hubs and South-South exchange III. Performance indicators 8. As the Fund starts operating and as the results management framework is developed in greater detail, the list of performance indicators may be updated to ensure continuous learning. Performance indicators provide a metric for the Fund to measure its own effectiveness, as well as the effectiveness of its projects and programmes, and of the transformative country strategies supported by the Fund. Depending on the modalities of intervention and on the result areas of the Fund, initial performance indicators could be drawn from Table 2 and Annex III. Thus, not all performance indicators would be applied in all projects and programmes. The key criteria presented in document GCF/B.05/03 Results Management Framework are recommended to complement the performance indicators contained in Table 2. Table 2: Initial performance indicators of the Fund Indicator type Project and programme outputs performance indicators. Indicates the physical impact of Fund activities in terms of development and adaptation. Initial result areas indicators Mitigation (a) Reduced emissions from buildings and appliances (tco 2/m 2 ); (b) Increased access to transportation with low carbon fuels (tco 2/passenger km); (c) Reduced emissions from agriculture and related land use management (tco2/ha sequestered; tco2 sequestered; tn2o emitted per hectare from fertilizer); (d) tco 2 reduced through Fund interventions; (e) Deployment of low-carbon power generation technologies (tco2/kwh); (f) Households with access to low carbon modern technologies (Number of households served by off grid or clearly identifiable on grid renewable technologies); (g) Support development of negative emissions technologies (Number of CCS projects, tons of CO2 sequestered); (h) Support phased implementation of REDD+ (Decrease in rate of deforestation tco 2e reductions from reduced deforestation) and maintenance of afforestation, tco 2/ha. Adaptation (a) (b) (c) (d) (e) (f) Number of people supported by, and familiar with, early warning procedures; Indicators would need to be selected as appropriate to the results sector, the country and to the type of activity. There is a considerable body of experience on output indicators and gradually growing experience with outcome indicators; i Each flagship would have indicators relevant to its area of focus. For example, the ratio of women and children mortality/injury (possibly as DALYs) to that for men in climate-related events; variance in annual income of smallholder farmers postimplementation compared with estimated variance in the 10 years pre-implementation; total area under management for EbA values; Number of CBA scale-ups supported; Number of people supported by the scale-ups; Number of scale-ups achieving a 100 fold/1000 fold etc. more people within the activity than in the original pilot;
6 Page 4 Transformative impact of Fund activities performance indicators. Trends in the adoption of technology/best practice/business models for low-emission and climateresilient development pathways at the country and global levels. Captures the overall impact of the Fund on development pathways. (g) (h) (i) (j) (a) (b) (c) (a) (b) (c) (d) (e) (f) (g) (h) Each scale-up would have its specific performance indicators depending on the activity; e.g. the reduction in the number of participant farmers experiencing income losses of more than 33 per cent; Number of CBA pilots supported (if Fund resources are used for pilots by a country) and the portion supported as scale-ups; Number of countries with effective access to a regional Centre of Excellence / Regional Climate Centre ; Within a country, the existence of an active staff training and exchange programme with that centre and number of people trained. Mitigation Carbon intensity of economy (tco 2/GDP); Reduced energy intensity of industry (tco 2/GDP); Facilitate design of sustainable cities (tco 2/capita). Adaptation Decreasing number of people killed, injured and affected (e.g. from the Center for Research on the Epidemiology for Disasters database) by climate-related disasters; In the longer term, developed methodologies that better measure monetary and non-monetary losses as percentage of GDP from climate related events relevant to countries; ii In the longer term, developed pragmatic index (c.f. the Human Development Index), or indices, that capture the major elements of social vulnerability at national to community scales; Meanwhile, a longer list of indicators, possibly linked to the Sustainable Development Goals, might be tracked regularly by the Fund. These might include access to clean and reliable water and sanitation; access to adequate and diversified food, etc.; Overall, the existence of a process for identifying transformational opportunities and the number of applications of that process; the number of implementation ready transformational plans; the number plans implemented; Secondary indicators might include the number of vulnerability areas analysed and transformational opportunities identified; status of each of those transformational plans; Within each transformational plan specific indicators should be selected depending on the focus of the plan. For example; the proportion of people moving from a hazardous area, such as a coastal flood plain, and the number of people remaining there; Number of planning processes, public and private, that draw upon climate risk information from the centre or from staff trained by the centre. IV. Role and expected impact of the Fund 9. The initial result areas will guide the role of the Fund, which will be detailed further through an impact analysis. The climate finance focus of the Fund and its opportunity to help reduce current fragmentation in climate finance and support necessary scaling of climate change mitigation and adaptation, and possible collaboration with other climate finance actors should be assessed more closely through an impact analysis, including an analysis of the role and expected impact of the Fund in the initial result areas. The guidance to the Secretariat to detail the role and expected impact of the Fund in the initial result areas is presented in Annex IV.
7 Page 5 Annex I: Draft decision of the Board The Board, (a) (b) (c) (d) (e) (f) Recalls decision B.04/04, paragraph (a), in which it noted convergence that the Fund will have a strategic focus on climate mitigation and adaptation, and also seek to maximize sustainable development; Recalls decision B.04/04, paragraph (b), in which it reaffirmed that country ownership will be a core principle of the business model framework of the Fund and that countries will identify their priority result areas in line with their national strategies and plans; Notes convergence that the Fund will adopt a fully comprehensive approach to its vision, consistent with the objectives of the Fund, as set out in its Governing Instrument; Adopts the initial result areas of the Fund, as contained in Annex II to document GCF/B.05/02, in order to enable low-emission and climate-resilient development pathways; Adopts the initial performance indicators of the Fund, as contained in Annex III to document GCF/B.05/02; Decides to move forward the date of the consideration of the expected impacts and role of the Fund set in decision B.04/04, paragraph (e) and requests the Secretariat to initiate work to provide more detail on the role and expected impact of the Fund in the initial result areas, and to present a working document to the Board at its first meeting in 2014, based on the guidance contained in Annex IV to document GCF/B.05/02.
8 Page 6 Annex II: Initial result areas of the Fund (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (k) (l) (m) (n) Energy efficiency of buildings and appliances; Energy efficiency of industrial processes; Low-emission transport; Low-emission energy access; Large-scale low-emission power generation; Agriculture and related land use management; REDD+ implementation; Sustainable forest management to support mitigation and adaptation; Design and planning of cities to support mitigation and adaptation; Support for result areas relating to all climate hazards; Support for selected themes cutting across adaptation result areas ( flagships ); Facilitating capacity for programmatic and transformative adaptation activities; Facilitating scaling up of effective community-based adaptation (CBA) actions; Supporting coordination of public goods such as knowledge hubs.
9 Page 7 Annex III: Initial performance indicators of the Fund Indicator type Project and programme outputs performance indicators. Indicates the physical impact of Fund activities in terms of development and adaptation. Transformative impact of Fund activities performance indicators. Trends in the adoption of technology/best practice/business models for low-emission and climate-resilient development pathways at the country and global (a) (b) (c) (d) (e) (f) (g) (h) (a) (b) (c) (d) (e) (f) (g) (h) (i) (j) (a) (b) (c) (a) Initial result areas indicators Mitigation Reduced emissions from buildings and appliances (tco 2/m2) Increased access to transportation with low carbon fuels (tco 2/passenger km) Reduced emissions from agriculture and related land use management (tco 2/ha sequestered; tco 2 sequestered; tn 2O emitted per hectare from fertilizer) tco 2 reduced through Fund interventions Deployment of low-carbon power generation technologies (tco 2/Kwh) Households with access to low carbon modern technologies (Number of households served by off grid or clearly identifiable on grid renewable technologies) Support development of negative emissions technologies (Number of CCS projects, tons of CO 2 sequestered) Support phased implementation of REDD+ (Decrease in rate of deforestation tco 2e reductions from reduced deforestation) and maintenance of afforestation, tco 2/ha. Adaptation Number of people supported by, and familiar with, early warning procedures; Indicators would need to be selected as appropriate to the results sector, the country and to the type of activity. There is a considerable body of experience on output indicators and gradually growing experience with outcome indicators. iii Each flagship would have indicators relevant to its area of focus. For example, the ratio of women and children mortality/injury (possibly as DALYs) to that for men in climate-related events; variance in annual income of smallholder farmers post-implementation compared with estimated variance in the 10 years pre-implementation; total area under management for EbA values; Number of CBA scale-ups supported; Number of people supported by the scale-ups. Number of scale-ups achieving a 100 fold/1000 fold etc. more people within the activity than in the original pilot; Each scale-up would have its specific performance indicators depending on the activity; e.g. the reduction in the number of participant farmers experiencing income losses of more than 33 per cent; Number of CBA pilots supported (if Fund resources are used for pilots by a country) and the portion supported as scale-ups. Number of countries with effective access to a regional Centre of Excellence / Regional Climate Centre ; Within a country, the existence of an active staff training and exchange programme with that centre and number of people trained. Mitigation Carbon intensity of economy (tco 2/GDP); Reduced energy intensity of industry (tco 2/GDP); Facilitate design of sustainable cities (tco 2/capita). Adaptation Decreasing number of people killed, injured and affected (e.g. from the Center for Research on the Epidemiology for Disasters database) by climate-related disasters;
10 Page 8 levels. Captures the overall impact of the Fund on development pathways. (b) (c) (d) (e) (f) (g) (h) In the longer term, developed methodologies that better measure monetary and non-monetary losses as percentage of GDP from climate related events relevant to countries; iv In the longer term, developed pragmatic index (c.f. the Human Development Index), or indices, that capture the major elements of social vulnerability at national to community scales. Meanwhile, a longer list of indicators, possibly linked to the Sustainable Development Goals, might be tracked regularly by the Fund. These might include access to clean and reliable water and sanitation; access to adequate and diversified food, etc.; Overall, the existence of a process for identifying transformational opportunities and the number of applications of that process; the number of implementation ready transformational plans; the number plans implemented; Secondary indicators might include the number of vulnerability areas analysed and transformational opportunities identified; status of each of those transformational plans; Within each transformational plan specific indicators should be selected depending on the focus of the plan. For example; the proportion of people moving from a hazardous area, such as a coastal flood plain, and the number of people remaining there; Number of planning processes, public and private, that draw upon climate risk information from the centre or from staff trained by the centre.
11 Page 9 Annex IV: Guidance to detail the role and expected impact of the Fund in the initial result areas I. Background 1. At its October 2013 meeting, the Board discussed its initial result areas and adopted decision B.05/xx. In implementing and its initial result areas, it is important for the Fund to have clarity on the expected impact and the role on which it will focus. 2. Several entities are engaged in climate finance, including the Global Environment Facility (GEF), Adaptation Fund, Climate Investment Funds (CIFs), the multilateral development banks (MDBs) and various bilateral funds. The Board intends to enhance complementarity between the Fund s activities and those of other climate-related programmes or sources of finance to better mobilize the full range of financial and technical capacities. In the longer term, the Fund aims to become the main global mechanism for climate finance. 3. Existing climate finance is not adequate to successfully address the urgency and scale of the challenge, both in terms of volume of disbursed funds and the breadth of the areas of engagement. It is also crucial to ensure that countries enabling environments and policy frameworks facilitate low-emission and climate-resilient investment, from both domestic and international sources. Support to shift these policies and frameworks to mainstream climate change actions should also address non-financial barriers to climate-friendly investment. The opportunities for the Fund to enable transformation may lie in how result areas are scaled, combined, replicated and implemented, ideally as part of programmatic at the global and national levels. The aim of the impact analysis is to identify opportunities, considering the existing financing landscape, for the Fund to accelerate the support to low-emission and climateresilient development activities. A key element of the analysis will identify ways in which the Fund can reduce fragmentation within the existing international climate finance architecture by streamlining climate finance delivery for countries and to enhance the Fund s impact. II. Specific matters to be addressed 4. The document on the expected impact and role of the Fund in the initial result areas should address the following overarching questions, and will consider, among others, national adaptation programmes of action (NAPAs), national adaptation plans (NAPs), nationally appropriate mitigation actions (NAMAs) and technology needs assessments (TNAs): (a) (b) (c) (d) (e) (f) How can the Fund, in its initial result areas, best achieve paradigm shift towards low-emission and climate-resilient pathways? What kind of activities could fall under the individual result areas? How can the Fund help reduce fragmentation and attain the scale of financing to succeed in attaining its objective? What is the relevance of the initial result areas for countries? How can the Fund best manage to engage with countries on initial result areas based on their respective level of development and institutional capacity? What will be the Fund s role and expected impact in strengthening enabling environment (e.g. integrated climate and development planning, institutional capacity building, strengthening accountability systems, etc.), and what would appropriate policy indicators look like? What should be the balance between support for enabling environments and capital for direct investment support and how might this differ by country and sector?
12 Page 10 (g) (h) What will be the role of the Fund in engaging with other public and private financing channels to promote low-emission and climate-resilient development? What flagship programmes or sectors could be selected and what attributes should they entail?
13 Page 11 Annex V: Description of, and reasoning behind, initial result areas 1. IR 1. Energy efficiency of buildings and appliances (time frame: near-term). This includes energy used in lighting, heating and cooling buildings and by appliances, as well as upgrading building fabric. Measures could include support for: appliance standards and building design codes; institutional capacity building to enforce standards; commercialization of affordable high-efficiency appliances; and information campaigns and technical assistance. Reasoning: mitigation impact with the opportunity to avoid lock-in to inefficient infrastructure. Global mitigation is estimated at up to 6.7 Gt CO 2-eq/year. A fifth to a third of total end-use energy reduction in countries lies in buildings. Investment in buildings energy efficiency carries relatively high capital investment costs, but negative or low marginal abatement costs, making access to finance a key barrier to be addressed by the Fund. Many efficiency measures offer short paybacks and reduced energy bills to households and businesses. Up to 2030, significant technology innovations are expected in terms of the development of active metering and energy management systems, together with the integration of low-carbon generation technologies into building fabric. Interventions are both replicable and scalable, and can be supported through national-level frameworks, with a strong body of international best practice relating to efficiency standards and building codes. Reduced demand can lower energy import dependence and offset future investment in power generation at low cost. Reducing energy use also has significant economic co-benefits for households and industry. 2. IR 2. Energy efficiency of industrial processes (time frame: near-term and medium term). This includes two key types of measures: improving emission efficiency through fuel-switching and improving the productivity of energy use. Significant technology opportunities currently exist, including more efficient end-use electrical equipment; heat and power recovery; material recycling and substitution; control of non-co 2 gas emissions; and a wide array of process-specific technologies. Reasoning: mitigation, comprising around per cent of final energy use reduction alone. Although mitigation is concentrated in emerging economies, co-benefits are also important for other countries. In their TNAs, 80 per cent of least developed countries (LDCs) included industries, and 35 per cent and 42 per cent of countries included energy efficiency and fuel-switching, respectively, as priority technologies. v Relatively low capital investment and marginal abatement costs per tco 2-eq mean economic abatement is high and much can be addressed through improved information, standards and awareness. Payback periods are usually good, particularly for upgrading standard process equipment (e.g. motors, compressors). Sector-specific technology innovation pathways exist for energy intensive industries, with cross-cutting technologies including carbon capture and storage (CCS) and electrification. vi levels of ownership concentration in some industries can facilitate sector engagement; with more fragmented industries (e.g. ceramics, cement) scalable through the development of sector specific cleaner-production programmes and the adoption of Best Available Technology (BAT) guidelines. Medium co-benefits include improved energy security from reduced energy use and increased competitiveness of industry. 3. IR 3. Low-emission transport (time frame: medium to long-term). Measures could include: acceleration of the deployment of public transportation infrastructure in mega-cities in countries; support for the commercialization and deployment of high-efficiency, lowpolluting vehicles and related supporting infrastructure; support for the development of advanced low-carbon transport fuels; promoting modal shift to public transport, and encouraging a shift in freight transport from road to rail. vii Reasoning: Transport sector emissions are increasing rapidly in countries in line with urbanization and population growth. Transport sector-related energy reductions comprise a growing share of final energy reduction, up to per cent in viii
14 Page 12 Capital investment costs for new infrastructure are normally high, but overall marginal abatement costs are negative, creating a significant opportunity for the use of concessional finance. Electrification is a key decarbonisation strategy, with significant innovation expected in battery technology and motor efficiency. Advanced biofuels will also reduce fossil fuel reliance, particularly in aviation. Low-carbon transport options can be highly scalable and replicable, but need to be addressed through national and local planning frameworks. It is important to also consider life-cycle emissions of planned investments and interventions. development co-benefits, such as reduced air pollution, accidents, and congestion exist, with to integrate transport into wider urban planning (see IR 8). 4. IR 4. Low-emission energy access (time frame: near-term). This includes support for the deployment of decentralized renewable energy-based systems in regions that are beyond viable reach of central grid investments, such as in rural regions of sub-saharan Africa and South Asia. These might include household level solar systems, or community mini-grids, and the deployment of improved cook stoves with a net reduction in long-term and short-lived climate pollutants. The Fund would provide support for programmatic and national scale proposals. Reasoning: Significant mitigation for example, up to 1 Gt/CO 2 per year from cook stoves alone. ix Small-scale generation technologies exist and are cost-competitive against fossil fuel expenditure, although capital costs remain a challenge for the poorest households. ly relevant for LDCs, where estimated 2.6bn people are using biomass for cooking and 1.4 billion lack access to electricity x. Electrification and stove technologies are standard and low cost, and suitable for national programme design. Best practice exists at the national level of delivering successful programmes (e.g. IDCOL Bangladesh 1 ). Efficiencies and costs of solar photovoltaic are expected to improve steadily. development benefits from the reduction in premature deaths due to indoor air pollution (premature deaths today total 4 million per year) xi, reduced fuel collection time, increased time for children s education, among others. xii Improved energy access can also improve the reliability of electricity, increase climate resilience and provide new employment opportunities. 5. IR 5. Large-scale low-emission power generation (time frame: near to medium-term). Measures could include: support for the deployment of affordable advanced, lowcarbon power generation technologies; expansion of, and support for, improvements in grid technologies that may be necessary for the large-scale deployment of low-carbon energy sources. Support to cover the incremental cost difference to enable carbon capture and sequestration could also be considered. Reasoning: mitigation impact. The penetration of low-carbon technologies in electricity production is projected to increase from 33 per cent in 2010 to around 80 per cent by 2035 in scenarios of climate stabilization at 450 parts per million (ppm). xiii The sector represents a significant component of national low-carbon strategies in spite of relatively high capital and marginal abatement costs. Many emerging and LDC economies have established national targets and fiscal mechanisms to support scale-up, including several in sub-saharan Africa. Technologies and costs are relatively standard with well-developed global supply chains. Scalability is supported by high level of concentration within national or regional public utilities that can coordinate large scale investments. Independent power producers (IPP) can be engaged through fiscal mechanisms, and reform of tariff legislation, power purchase agreements and planning consents. Low to medium development co-benefits are achievable from reducing mercury and other pollution, decrease in mining fatalities as production is reduced; high development cobenefits from increase in access to energy. Fuel supply diversification improves energy security. 6. IR 6. Agriculture and related land use management (time frame: near to medium-term). Measures could include: reduction of soil and biota carbon losses from improved agricultural practices, such as switching from tillage to no-till cropping; reductions of direct (e.g. 1 Infrastructure Development Company Limited (IDCOL) was established by the Government of Bangladesh.
15 Page 13 tractors) or indirect (e.g. fertilizer production) emissions resulting from fossil energy use in agriculture; reductions in non-co 2 emissions from cropping and animal husbandry, and dedicated energy crops to replace fossil fuel use. Reasoning: Agriculture offers significant global abatement, and represents a high percentage of emissions in some LDCs. Both capital and marginal abatement costs for agriculture interventions are low, due to the focus on behavioural change and the resource savings from new technologies. Techniques are highly transferable between similar agro-ecological zones, and offer strong replication. In spite of the high level of fragmentation of the agricultural economy in many countries, sector-level are possible in relation to training and technology deployment programmes. development co-benefits exist for climate resilience, productivity, and freeing land for other uses. Among agriculture-related options, relatively high mitigation from lowering waste in distribution. xiv 7. IR 7. REDD+ implementation (time frame: near-term). There is an agreed phased approach to REDD+ within the UNFCCC. This is already supported by funding programmes of bilateral and multilateral agencies, and this result area would follow a similar approach. Activities would include development of national strategies or action plans, policies, and capacity building; results based action plans and demonstration projects, monitoring and verification, Payment for Ecosystem Services (PES), carbon offsets, and research and development (R&D). Reasoning: Medium to high mitigation impact. Tropical deforestation and forest related land-use change causes approximately 15 per cent of annual greenhouse gas (GHG) emissions globally. xv The relevance to countries is high, with the majority of REDD+ funding to date targeted at Brazil (Amazon Fund), the Democratic Republic of the Congo (Congo Basin Forest Fund) and Indonesia. Both capital and marginal abatement costs are relatively low ( less than EUR10/tcO 2-eq). The for replicability and scalability is high, given the investment in global and national level institutional infrastructure. The Fund is well positioned to build on readiness activities supported by multilateral and bilateral donor programmes and to provide finance at scale. There are significant co-benefits with tropical forests providing ecosystem services and biodiversity, and supporting the livelihoods of 1.6 billion people. PES approach can support poverty alleviation, improve the resilience of forest communities and sustaining vital ecosystem services. 8. IR 8. Sustainable forest management to support mitigation and adaptation. This is a non-market alternative that aims at promoting co-benefits to reduce deforestation and facilitate the transition to better land use through the development of a more sustainable production system (linking agriculture and forestry). xvi Reasoning: Agroforestry and forest-pastoral systems show evidence of being more resilient to climate events and provide diversified incomes while retaining high levels of forest cover and carbon storage in vegetation and soils. This is a form of ecosystem-based adaptation (EbA). 9. IR 9. Design and planning of cities to support mitigation and adaptation (time frame: medium to long-term). Measures could include: support of the integrated development of urban space, including buildings, transport and the zoning of commercial and industrial activity, incorporating infrastructure that promotes low-emission and climate-resilient development and addresses urban vulnerability. Reasoning: Cities currently account for per cent of energy use, and represent up to 75 per cent of total GHG emissions. xvii Organizing mitigation efforts around city development creates the opportunity to generate high mitigation impacts and high development co-benefits that are likely to be more than the sum of those from buildings, transport and energy options pursued individually. Overall, the International Energy Agency (IEA) estimates that energy efficiency measures contribute to 44 per cent of abatement in 2035 in the 450 parts per
16 Page 14 million scenario. xviii Rapid urbanization is underway in countries with 75 per cent of global population expected to live in cities by 2050 with95 per cent of expansion in countries. Over the next 20 years, the urban populations of sub-saharan Africa/South Asia is expected to double to 3.5 billion. The people living in informal settlements and exposed to climate risk are expected to double to 900 million by 2020 xix. In addition, combined mitigation/adaptation interventions in cities provide the opportunity to benefit large numbers of people due to the high population density. Both mitigation and adaptation interventions are also scalable due to the commonality of planning and development issues faced in urban design and sprawl. 10. IR 10. Support for result areas relating to all climate hazards. Countries would be able to seek support for concrete adaptation activities at the project or programme level xx in initial result areas across the full range of climate hazards. Reasoning. This initial result area is comprehensive and inclusive of all country priorities. Analysis of recent data on climate-related disasters shows that in most countries a particular disaster type (drought, flood, storm, wildfire) predominates, accounting for 80 to 90 per cent of the effects of climate events xxi. However, the particular dominant disaster type varies greatly from country to country with roughly a third being dominated by each of drought, flood or storm. Thus, if the Board seeks to support countries to address their most pressing climate-related risks, then support for action across the full range of climate extremes would be needed. 11. IR 11. Support for selected cross-cutting adaptation themes ( flagships ). The flagships may be time limited (5 to 10 years) as a priority area, although the commitment to resourcing could extend well beyond this. This initial result area could be combined with IR 10. Examples might include: reducing the high vulnerabilities of women and children in disasters; reducing climate-related hazards and increasing the resilience of people in highly populated floodplains; effective risk spreading mechanisms, including insurance mechanisms; and encouraging the use of ecosystem-based adaptation actions. The objective of the Fund would be to implement flagships at scale as opposed to a micro-project level, which, however, will depend on identification of suitable mechanisms for scaled implementation. Reasoning. This initial result area represents a focused approach that is likely to deliver clearly measurable results. A relatively small set of flagships would already encompass major priorities of most countries. Notably, this initial result area emphasizes outcomes and is likely to lead to transformative changes. For instance, women are disadvantaged in the recovery from disasters, especially those left as heads of households. This perpetuates their vulnerability. Thus, a flagship focusing on improving the ability of women to prepare for, cope with, and recover from, climate-related disasters would produce many other social and economic benefits and desirable transformative change. Similarly, even though insurance is not the answer to the steady increase in climate risks, there are opportunities to establish, or re-establish, effective risk spreading mechanisms that make livelihoods more resilient. These include community support schemes and fodder reserves, among others. Access to basic insurance of crops, homes and infrastructure, upon which developed country populations depend to buffer them from unfavourable climate events, is an order of magnitude lower in countries as compared to developed countries. xxii 12. IR 12. Facilitating capacity for programmatic and transformative adaptation activities. Under this initial result area, the Fund would seek to draw upon the experience of other relevant entities and technical literature to identify major barriers to moving to scale in adaptation activities and achieving transformational change. Currently, the main barriers include perceived uncertainty about climate risks, weak cost/benefit methodologies, and resistance to change within existing institutions. The Fund would financially support adaptation activities at a programmatic scale, including supporting countries in integrating climate risk into strategic
17 Page 15 planning, engaging multiple stakeholders, work across sectors, internalizing climate risk in operations and regulatory framework, and integrating it within budget planning. xxiii Reasoning. Most adaptation activities so far have been project-based and relatively small-scale. xxiv Many have called for a more programmatic approach to adaptation, which is taken to imply larger-scale, medium to long-term activities. Only facilitating capacity at scale can ultimately enable transformative adaptation activities. 13. IR 13. Facilitating scaling up of effective community-based adaptation (CBA) actions. This initial result area is to support the scaling up of the most successful actions from a few pilot communities to the thousands of communities that could benefit from them. This may require policies and measures at the national level, links with community-driven development (CDD) programmes, additional resources at local-government level and support to civil society and the private sector, to encourage self-replication of the best experience from CBA actions. As the Fund does not aim to itself act on a community-level, it will need to identify and collaborate with suitable mechanisms that will be able to implement such activities. Reasoning. Many adaptive actions will be achieved through CBA efforts. Although the CBA actions themselves may be incremental, the process of scaling up is transformational in itself. This initial result area would accelerate the spread of community-owned adaptation activities and would enhance the effectiveness of other initial result areas. 14. IR 14. Supporting coordination of public goods such as knowledge hubs and South- South exchange. Activities to achieve this result might be coordinated with the work of the Adaptation Committee on regional centres and networks xxv and the Global Framework for Climate Services, among others. The Fund would build on readily available experience and would aim to scale up and coordinate knowledge exchange. A target of this effort would be to support the preparation of integrated, climate resilient, national development plans, including integrated NAPs and Poverty Reduction Strategy Papers (PRSPs). Reasoning. Currently, there are many underfunded activities which are unlikely to be able to keep up with a rapidly expanding knowledge base. This initial result area would enhance adaptation result areas and would encourage greater country ownership and countries ability to direct resilience efforts.
18 Page 16 Annex VI: Rationale drivers for the recommended initial mitigation result areas Initial result Area Comment Reducing energy use from buildings and appliances Global GHG emission reduction Gt CO2-eq/year (1) 3.0 Gt CO2-- eq/year (2030) (2) Current technology options (IPCC 1 ) Efficient lighting; more efficient electrical appliances and heating and cooling devices; improved cook stoves, improved insulation; passive and active solar design for heating and cooling; alternative refrigeration fluids, recovery and recycle of fluorinated gases Programmatic Improvement of appliance and building standards, enforcement mechanisms, labelling, information and awareness campaigns, access to finance through financial intermediaries Relevance to countries The mitigation in residential buildings exceeds by far that in commercial buildings in regions. Capital intensity What level of upfront capital investment is required per tonne abated (where the Fund might address financing matters)? Initial CAPEX costs up to EUR30-40 per tco2-eq creating a role for concessional bridging finance to overcome investment barriers CAPEX costs for buildings estimated at 25 per cent of total GHG abatement investment globally Marginal abatement cost per tco2-eq What is the marginal abatement cost per tco2-eq based on resource savings and other benefits (where the Fund might create market momentum)? Negative savings on energy use. Some very low cost measures (LED lighting, Insulation, HVAC Retrofit, residential electronics and appliances with abatement cost of less than EUR 50 per tco2-eq) Replicability What is the likely for in- and intracountry replication? Building standards and design codes highly transferable. Mass production of high efficiency goods provides global access to technologies at low cost Scalability What is the for supporting activity at a sector level? Possible to engage on sector wide basis through introduction of minimum efficiency standards for appliances, and new building codes Technology innovation (by 2030) Integrated design of commercial buildings including technologies, such as intelligent meters that provide feedback and control; solar photovoltaic integrated in buildings Adaptation/ development co-benefits Low-medium Reduce level of household spending on energy consumption 1 Intergovernmental Panel on Climate Change.
19 Page 17 Initial result Area Global GHG emission reduction Current technology options (IPCC 1 ) Programmatic Relevance to countries Capital intensity Marginal abatement cost per tco2-eq Replicability Scalability Technology innovation Adaptation/ development co-benefits Enabling reduction in the emission intensity of industrial production Gt CO2-eq/year (1) 7.7 Gt CO2- eq/year (2030) (2) More efficient end-use electrical equipment; heat and power recovery; material recycling and substitution; control of non-co2 gas emissions; and a wide array of process-specific technologies Regulation on import and production of low efficiency equipment. Introduction of fiscal incentives Although mitigation is concentrated in emerging economies, co-benefits are widespread. In their TNAs, 80 per cent of LDCs included industries, and 35 per cent and 42 per cent of countries included energy efficiency and fuel-switching, respectively, as priority technologies Low-medium Initial costs low for cement (more than EUR 10 tco2-eq), higher for ferrous metals Low-medium Some negative cost measures (e.g. motor efficiency, clinker substitution with fly ash), but longer term electrification/c CS at much higher cost (more than 50 tco2-eq). Companies might be compensated for higher lifetime costs despite low capital investment demands Significant standardization in process technologies for key sectors. Industrial standards exist for specific sectors (e.g. EU BREF) Sector possible for energy intensive industries, including aluminium, ferrous metals, ceramics, and chemicals. Some sectors are highly concentrate and can be engaged in a centralized manner. Others (e.g. ceramics, cement) are more fragmented and require stakeholder processes Advanced energy efficiency; CCS for cement, ammonia, and iron manufacture; inert electrodes for aluminium manufacture Low-medium Medium co-benefits for energy security from reduced energy use and increased competitiveness of industry
20 Page 18 Initial result Area Global GHG emission reduction Current technology options (IPCC 1 ) Programmatic Relevance to countries Capital intensity Marginal abatement cost per tco2-eq Replicability Scalability Technology innovation Adaptation/ development co-benefits Increasing access to transportati on with low carbon fuels Gt CO2-eq/year (1) 2.6 Gt CO2- eq/year (2030) (2) More fuel efficient vehicles; hybrid vehicles; cleaner diesel vehicles; biofuels; modal shifts from road transport to rail and public transport systems; non-motorized transport (cycling, walking); land-use and transport planning. Information and awareness programmes. Subsidies to low carbon alternatives. Integrated transport planning and policy reform Growing over time as population growth and urbanization increase. Overall sector estimates ( more than EUR 75/tCO2-eq) reflect high technology/ infrastructure costs Some lower cost measures (e.g. first generation biofuels) Transport estimated at 35 per cent of total abatement CAPEX costs globally Negative Substantial savings in fossil fuel use from improved vehicle efficiency. Benefits are strong if capital and behavioural barriers can be overcome Medium Standard policy and technology options exist, but significant issues with existing urban planning and infrastructure lock-in Medium Transport policy can be fragmented (national/ regional/city level), with many countries still to integrated transport planning Second and third generation biofuels; higher efficiency aircraft; advanced electric and hybrid vehicles with more powerful and reliable batteries Medium Adaptation benefits when mitigation undertaken as part of integrated transport planning, creating redundancy against climate risks (e.g. evacuation plans). Development co-benefits, such as reduced local pollution, accidents, and congestion are strong
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