Impact Measurement: Lessons from the carbon markets

April 2015

nexus-c4d.org

Content

•Brief presentation of Nexus

•Overview of the carbon project cycle

•Lessons from the carbon markets

•Certifying the co-benefits of carbon projects

•Measuring co-benefits: case study

•Valuing the co-benefits

•Valuing co-benefits: case study

Brief presentation of Nexus

• Nexus is a cooperative of development organizations which supports most vulnerable communities to have an improved access and control over energy and sanitation services

• Membership of 23 organizations based in Asia and Africa• Services :

– Capacity building and knowledge sharing on climate and development finance;

– Carbon asset development and management;– Financing for carbon asset development, through two funds;– Fundraising services (grants, crowdfunding) to support the design

and implementation of sustainable market-based models.

Overview of the carbon project cycle

• Project are monitored to account for carbon savings and sometimes for their sustainable development benefits

• Carbon finance is a results-based mechanism but it helps assess the feasibility of the project itself

Design Validation Registration Monitoring

VerificationIssuance

Lessons from the carbon marketsA common MRV methodology for CO2 emissions…

•Clean Development Mechanism (CDM): first and largest carbon offset instrument in the world

• Commonly agreed reporting procedures have been decided and implemented.

• These Monitoring, Reporting and Verification (MRV) processes enabled the provision of reliable and comparable information.

• Carbon finance is a rigorous RBF mechanism

Lessons from the carbon markets … but no common SD criteria

• One of the key goal of the CDM is to assist non-Annex I parties (mostly developing countries) in achieving sustainable development (Kyoto Protocol 1997)

• But most financial flows have benefited industrial projects in emerging countries and CDM does not have a well-defined sustainability analysis framework

•However, carbon projects can have multiple co-benefits: how to account for job creation, health improvement, biodiversity and ecosystem preservation…?

Certifying the co-benefits of carbon projects

•Project developers that want to take a more rigorous approach to the certification sustainable development co-benefits can use standards

Measuring co-benefits: case study

• Cambodian SE producing and distributing Ceramic Water Purifiers• Environmental benefits: annual savings:

– 1,5 tCo2 per CWP– 700 kg of firewood /y

• Social benefits: reduced exposure to diarrheal diseases and air pollution, time saving (collecting fuel and boiling water)

• Economic benefits:– Household energy budgets reduced from $56 to $110 during

the first two years (decrease medical expenses, savings on charcoal or wood)

– 67 rural jobs are created, business opportunities arise for rural merchants in CWP distribution and sales.

Valuing the co-benefits of climate friendly projects• Social Return on Investment (SROI) is a framework for

effectively assessing and accounting for the value of co-benefits• It provides a quantitative approach to understanding

the impacts of a project by placing financial ‘proxy values’ on co-benefits. • It can be used to illustrate the value of non-market

benefits which are attributable to a project intervention• SROI accounts for a range of social, environmental,

health and livelihood benefits and expresses this as a ratio of benefits per dollar of investment.

Valuing co-benefits: case study (1/3)Breakdown of the value and impacts of the 3 co-benefit types for Hydrologic

Valuing co-benefits: case study (2/3)Breakdown of total Hydrologic co-benefits by percentage and benefit type

Valuing co-benefits: case study (3/3)Calculating SROI

*SROI has been calculated by dividing the total net co-benefits

associated with the projects by the total value of the Gold Standard

Voluntary Emission Reductions (GS VER) issued from the Hydrologic project

Next steps

• Improve the assessment of the sustainable development outcomes of low carbon projects by incorporating different poverty measurement tools into existing monitoring and evaluation frameworks.

• Assuming that projects would increase income, reduce poverty, and have other social benefits is not enough

– Impact investors need to specify the metrics and benchmarks that would demonstrate when that is or isn’t he case.

• By strengthening these frameworks we hope to:– Improve the effectiveness and efficiency of current and future

sustainable development interventions by providing information on how to adjust and redesign them as necessary

– Increase donor, funder and investor return and impact by harnessing synergies between climate change and poverty

Singapore office: 352 Tanglin Road #0202Singapore 247671 | UEN: 200915559E

Cambodia office: #33 E3, Sothearos BoulevardPhnom Penh | P.O. Box: 956

Thank you!Claire Dufour

Executive Director

c.dufour@nexus-c4d.org

nexus-c4d.org