The use of Nationally Appropriate Mitigation Actions (NAMAs) in the building sector UNEP-SBCI 2011 Symposium on Sustainable Buildings Stefan Wehner, Perspectives GmbH 24.05.2011, Leverkusen 2011 Perspectives GmbH
Agenda What is Climate Financing? What are Nationally Appropriate Mitigation Actions NAMAs? NAMAs for the building sector Case studies on NAMA concept for the Mexican building sector 2
What is Climate Financing? 3
From carbon finance to climate finance Carbon markets (established) Market and carbon revenue driven - ETS - Offets Gov. AAU sales Gov. procurement programs Governments CDM/JI Private sector JPN/CAN/NZ EU ETS Non-carbon market (up-scaling) Governmental driven Uncertain flow and channel of financing - Bilateral - Multilateral - UNFCCC Different sources - Taxes, auctioning, public and private funds, ODA = Supply Forwarding compliance = Demand Climate Finance 4
Carbon market so far failed to provide pre-financing The Clean Development Mechanism (carbon market) creates revenues though trading offset However, it has not provided a structured financing from developed to developing countries (due to associated CDM regulatory risks) Biggest demand for CDM certificates will remain coming from the EU after 2012 - CERs only eligible if projects registered before 2012 (time is running out) - More restricted import conditions - Demand for CER uncertain especially for supply from non least developed countries (LDCs) Cancun: Surprisingly positive outcome regarding market mechanisms - Existing mechanisms to be continued under Kyoto New market mechanisms to be considered by COP 17 - Also non-market mechanisms But still limited demand for emission reduction credits 5
Demand side energy efficiency measures under represented in current carbon market Number (%) of CDM projects in each category Certified emission reductions (CERs) issued in each sector Demandside EE 4% Fuel switch 2% Supplyside EE 9% Fugitive emission 19% Forestry 1% Transport 1% Industrial gases 2% Renewables 62% Supplyside EE 5% Fugitive emission 6% Renewables 16% Fuel switch 2% Demandside EE 0% 0% Transport 0% Forestry 0% Industrial gases 71% Result: Significant lack of carbon finance for sustainable buildings Source: UNEP Risø Centre, CDM Pipeline as of May 1st 2011 Note: Considering CDM projects in the pipeline (6147 as of May 1st 2011) 6
What are Nationally Appropriate Mitigation Actions - NAMAs? 7
Scaling up mitigation and incentives for financing From single measures to sectorwide efforts Single CDM projects CDM Programme of Activites Nationally Appropriate Mitigation Action - NAMA Sectoral Mechanism Mitigation action in Sub- Sector A Voluntary programme Sectorwide targets Capacity building Scale of mitigation financing 8
Nationally Appropriate Mitigations Actions (NAMAs) Concept created in the Bali Action Plan (2007) at COP13 to denote [voluntary] mitigation actions by developing countries after 2012 Nationally appropriate mitigation actions by developing country Parties in the context of sustainable development, supported and enabled by technology, financing and capacity building, in a measurable, reportable and verifiable manner. Futher specified in Copenhagen Accord (2009) at COP15 - Supported by technology, financing and capacity building - 30 billion $US total by 2012; 100 billion $US yearly by 2020 - Should be measurable, reportable and verifiable - MRV 9
NAMA: Wide options for mitigation actions Mitigation actions Activities for emissions mitigation in developing countries that are not subject to mitigation commitments Appendix II to the Copenhagen Accord - National emission (intensity) target - Sector strategy / sector crediting baseline / sectoral emission target - Government policy programme - Single project 10
Different tiers of NAMAs (theoretical concept) Supported and credited NAMAs Mitigation cost Supported NAMAs Credit price Unilateral NAMAs Supported NAMAs Credited NAMAs Mitigation volume 12
NAMAs for the building sector: Differentiated benchmarks for support and credits Specific energy demand in kwh/m² (electricity and heat) Example: A NAMA financing framework developed to interface non-carbon creditbased NAMAs and carbon credit based-financing for the building sector Supported NAMA BAU Baselines 1 Improved future baselines Non-carbon credit based financing Mandatory Minimum Performance Standards Credited NAMA/CDM Carbon credit based financing State of the Art 1 Several baselines and benchmarks may be established for use in building sub-sectors. The baselines and benchmarks could be determined by building end-use types, climate zones and energy types, etc. 2 Minimum performance standards and crediting benchmarks are tightened over time. Source: According to UNDP 2009 13 time frame (year)²
Prioritising measure for NAMA formulation in the building sector (illustration) Measure Dimension GHG mitigation potential Abatement cost Monitoring, reporting & verification (MRV) Financing need Feasibility for financing support Additionality (crediting) Sustainable Development benefits etc. Building codes / Insulation enhancements High - medium to long term Neg. - low Direct - Baseline indicators Financing costs Very likely? SD criteria meet? Substitution of lighting equipment/acs Medium to high - medium to long term Neg. Direct - Baseline indicators Financing costs Very likely? SD criteria meet? Financial incentives ( green mortgage ) Medium to high - medium to long term Depends on measure Direct / indirect - Performance indicators Financing costs Likely? SD criteria meet? Capacity and institution building Medium - long term Positive? Indirect - Process indicators Financing costs Conditionally likely? SD criteria meet? Labelling for building / applications Medium - long term Positive? Indirect - Process indicator Financing costs Conditionally likely? SD criteria meet? Awareness raising and campaigns Low to medium - long term Positive? Indirect - Process indicator Financing costs Conditionally likely? SD criteria meet? (Pilot-)Projects etc. Low to medium - shot to medium term High Direct - Baseline indicators - Financing costs Conditionally likely? SD criteria meet?
Case studies on NAMA concept for the Mexican building sector 15
Millions NAMA More than 500.000 new houses per year demanded until 2030 in Mexico due to demographic change Housing stock in millions 40 35.6 Mil. 38.1 Mil. 35 30 25 20 24.4 Mil. 27.3 Mil. 30.2 Mil. 33.1 Mil. 5.8 Mil. new houses 2011-2020 NAMA focused on new houses 10.8 Mil. new houses 2011-2030 15 10 5 0 2005 2010 2015 2020 2025 2030 Existing houses Projection Source: CONAVI, 2010 16
Supported NAMA Design Concept for Energy-Efficiency Measures in the Mexican Residential Building Sector Item Sector Sub-sector NAMA boundary Measures and activities with direct impact on GHG emission reduction Measures and activities with indirect impact on GHG emission reduction NAMA timeframe -Preparation -Implementation NAMA implementation and operation costs NAMA type Type of support required under the NAMA Description Building sector New residential houses (maximum 4 storeys and 8 units) Entire country Substantial up-scale of Green mortgage and Ésta es tu casa schemes through increased subsidies and more ambitious efficiency standards. Supportive actions for transformation of the Green Mortgage and "Ésta es tu casa" programmes into a holistic urban planning process including building codes Building code pilot in 1 federal state Promotion and enforcement of building codes across federal states over time Capacity building Extension of urban planning criteria and inclusion in the holistic framework 2011-2012 2012-2020 NAMA Full costs of substantial up-scaling of actions until 2020 Supported NAMA (with the possibility of NAMA crediting for parts of the actions) Financial, technical and capacity building 17
Annual emissions in million tco 2 /a NAMA The NAMA could significantly reduce the BAU emissions 14 12 10 8 Emission paths under different scenarios Emissions 2013-20 Current practice = 57.6 MtCO 2-12% = 50.9 MtCO 2-18% = 47.2 MtCO 2-19% = 46.5 MtCO 2-28% = 41.4 MtCO 2-41% = 33.8 MtCO 2 6 4 2 0 2013 2014 2015 2016 2017 2018 2019 2020 BAU Current Green Mortgage (37% coverage 2020) Scenario 1 (100% coverage 2020) Scenario 2 (100% coverage 2015) Scenario 3 (technology scale up) Scenario 4 (scenarios 1 and 3 combined) Current practice cumulative 18
NAMA Climate financing for the Mexican NAMA? A revolving NAMA fund is a possibility - Directly reinvests monetary benefits (Mexican saved subsidies) Such a fund could be supported by soft loans from donors/climate funds until break-even is achieved - Which are the incremental costs given that - Air-conditioners and refrigerators have negative abatement costs? - Mexican government saves a huge amount of subsidies? Possible private sector involvement - Carbon market (NAMA crediting; e.g. of PV) => EU: Sectoral Mechanism pilot through a bilateral agreement - Provide loans to the NAMA fund on commercial terms (senior tranches) Industrialised countries could purchase credits as well 19
Summary 21
Summary CDM was believed to be a fiance leverage - But mainly generated carbon revenues, not carbon finance - Future of demand for CERs post-2012 is highly uncertain NAMAs are domestically driven GHG mitigation programmes with incentives for private sector - Unilateral: domestic market entry - Supported: shaping opportunity of the programmes Housing is political relevant for developing countries and NAMAs First movers on developing country and donor side are currently exploring new mechanisms, e.g. - How PoAs could be upscaled, and how NAMAs designed However, demand for such certificates (and large-scale financing) is not existing & modalities and procedures are not clear Pilot initiatives on NAMAs with a donor country partner provide opportunity in the long-term 22
Many Thanks for Your Attention! UNEP-SBCI 2011 Symposium on Sustainable Buildings Stefan Wehner, Perspectives GmbH wehner@perspectives.cc Mexican NAMA concept download: www.perspectives.cc 2011 Perspectives GmbH
Back up / unused slides 24
Climate finance incentives for low carbon development Year high Maturity of mechanism low 1997 2001 2005 2009 > 2010 Conventional CDM Kyoto Track (1997/COP3) CDM (2001/COP7) CDM Programme of Activities (PoA) - (2007) Registry: UN MRV: UN (established) ER to date 2 : 0 MtCO 2 e ER until 2012 2 : 2 MtCO 2 e Registry: UN MRV: UN (established) ER to date 1 : 401 MtCO 2 e ER until 2012 1 : >1,775 MtCO 2 e Registry: UN MRV: UN (not ready) ER to date: 0 ER until 2012:? REDD + (2009/COP15) Autonomous NAMAs (2009/COP15) LCA (Bali Action Plan 2007/COP13) Supported NAMAs (2009/COP15) Registry: Not envisaged MRV: Domestic ER to date: 0 Crediting: No Financial/CB support: possible Registry: UN MRV: UN (not ready) ER to date: 0 Crediting: maybe ( NAMA crediting ) Financial/CB support: possible Sectoral Mechanism Cap or no-lose target MRV: Domestic or UN ER to date: 0 Crediting or trading Sectoral Mechanisms (Bali Action Plan) 1. Registered projects only (2,148); 2. Registered PoAs only (2); As 19 th April 2010 Source: Perspectives Analysis; Point Carbon s Carbon Project Manager (April 2010) 25
Main steps for NAMA potential identification and selection 1. Identification actions 2. Mitigation potential assessment 3. Investigate of NAMA requirements 4. Identification of actions and selection 5. Formulation of a concrete NAMA 6. Outreach and capacity building Analysis of national context in terms of existing policies and programs and identification of appropriate and possible actions and opportunities in the building sector Analysis of current GHG mitigation potential of possible actions Review of current GHG mitigation opportunities within the building sector with regards to co-benefits Stakeholder consultations to discuss and refine options Investigation of NAMA requirements for each identified action Desk-review of studies/ regulatory text to draw out in detail the potential opportunities (as well as challenges) for NAMA supporting, e.g. MRV, financing requirements, barriers Identification of most promising options and selection for NAMA formulation following specific NAMA selection criteria Establishment of a priority list of mitigation measures / actions Selection of action or set of action for NAMA formulation Formulation of a concrete NAMA concept for the building sector in terms of general scope, detailed measures, MRV approach and type of NAMA To be included in Annex II of the Copenhagen Accords and its development in practice Outreach to international donor agencies to seek support for NAMA Capacity building on low carbon business plans/namas 26
Key elements of a successful NAMA formulation Mitigation potential (e.g. tco 2 e/a) and GHG impact (e.g. direct/indirect; short term/long term) Scope, boundaries and links to other national strategies and national plan (e.g. residential/non-residential; new buildings/existing buildings etc.) MRV and GHG calculation method (quantitative vs. qualitative e.g. emission/baseline based, performance/process indicators) Financing requirements for supported NAMAs (e.g. on MRV, measurability) Interaction between different measures Relation to carbon market (e.g. overlapping and double counting with CDM and other new market mechanisms) Crediting or not? 27