AMCEN Special Session on Climate Change Nairobi 25 – 29 May, 2009 CDM and Africa John Christensen

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

2. Outline of presentation • Carbon markets • CDM projects status and perspectives • Global overview • African 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 CDM • Examples of UNEP contributions

3. 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

4. Status on CDM Projects May 2009

5. Share of credits from different projects

6. 277 million CERs have been issued (at 10€/tCO2 that is 2,7 Billion €)

7. Regional Distribution a political concern Market dominated by +5 countries

8. Now more than 100 • African CDM Projects • With a potential carbon value around 1 billion USD by 2012 • but almost half will go to only two countries! • (RSA & Nigeria)

10. 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

11. 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.

12. 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.

13. UNEP is in a unique position • 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.

14. UNEP’s CDM support program • Key CDM activities • Structured, country-level capacity building programs • Regulatory advisory, DNA/ institutional capacity building • Targeted, hands-on workshops & training sessions • Analytical work (guidebooks; market surveillance and analysis & targeted research) • Promotion Activities – organization/participation in regional/global carbon events • CDM Bazaar • Facilitation of information management – web-based tools. • Part of UNEP CC strategy • Supportinglowcarbon policy development • Capacity building • Analytical support • Facilitating Finance • Innovative approaches • Engaging with FI’s • Technology transfer and deployment • Supporting “New TNAs” • Regional TT networks • Piloting EE implementation • Strong basis for possible future support to countries wanting NAMAs and sector planning

15. UNEP – in country activities Institutional Capacity Development Individual Capacity Development • 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 Core business & regulatory frameworks for CDM investment Organize national CDM workshops and training sessions Identify, assess and implement CDM projects Modalities & Procedures for CDM projects approval Identify, formulate and secure financing for CDM projects National CDM investor guidebook Promote commitment of policy makers project origination project approval Creates a national CDM projects portfolio and the institutional capability to attract CDM investments

16. UNEPcapacity development activities in Africa • CD4CDM • Green Facility • UNDP-UNEP • CASCADE • Upcoming CB for MEAs (CDM) interest statements • 21 Countries + 7 to be selected

17. Regional Activities Regional Carbon Forums Investment mobilization and engaging the finance sector • 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 • African Bankers’ Carbon Finance Investment Forum. May 2007, Johannesburg • Dakar, Senegal: Carbon finance perspectives for the banking sector. Feb 12-14, 2008 • Finance guidebook

18. Virtual platform for information exchange

20. Measures of Results and Impacts • 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.

21. 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 Implementing in Partnership

22. 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

23. 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

24. 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

25. Main features of the PROSOL programme 1. Loans financed through local banks • repayments made through electricity bills • interest rates initially softened • interest subsidy phased out after 18 months 2. Subsidy equalized between SWH and LPG • underwritten for a trial period by Italy • after successful trial made permanent - change in Tunisian legislation

26. Carbon mitigation Programmatic CDM PROSOL Result • 113,400m2 SWH (58,000 installations) • Equivalent to 280,000 tonnes of CO2 • Worth $4.5 million at market prices • NB: programme cost $2.4 million GOVERNMENT Target 2011 • 540,000m2 (~180,000 installations) • 1.3 million tonnes of CO2 • market value $19 million • CDM documentation prepared • project being marketed to governments

27. ONFi CASCADe - Carbon Finance for Agriculture, Sylviculture, Conservation and Action against Deforestation • CASCADE – A UNEP Forestry-CDM Initiative Objectives • Fostering CDM capacity enhancement • Evaluate applicability of existing methodologies vis-à-vis the African context • Putting "theory into practice" by developing and implementing pilot transactions • Contributing to a more inclusive post-2012 climate regime • Promoting the establishment of a Francophone network of expertise for CDM-LULUCF in Africa  Results-oriented capacity development…

28. Forest Carbon in Africa Key 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.

29. CASCADe 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

30. Examples 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

31. 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.

32. 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

33. Thank you!! Upcoming – May 2009 Visit us… www.uneprisoe.org www.cd4cdm.org www.cdmbazaar.net www.cdmpipeline.org