Barriers to the Successful Barriers to the Successful Implementation of Kyoto Mechanisms Implementation of Kyoto Mechanisms (JI/CDM) in CEE and CIS Countries(JI/CDM) in CEE and CIS Countries

Marina ShvangiradzeMarina Shvangiradze

Ministry of Environment Protection and Ministry of Environment Protection and Natural Recourses of GeorgiaNatural Recourses of Georgia

National Agency on Climate Change National Agency on Climate Change9 October, 2004 9 October, 2004

Almaty, KazakhstanAlmaty, Kazakhstan

Content of presentationContent of presentation

Overview of CEE/CIS countries status in Overview of CEE/CIS countries status in Convention process;Convention process;

CDM international process and barriers in CDM international process and barriers in CEE/CIS countries;CEE/CIS countries;

CDM/JI national process and existing barriers;CDM/JI national process and existing barriers; Role of DNA and capacity needs;Role of DNA and capacity needs; Ongoing activities of international donors;Ongoing activities of international donors; Role of UNDP in CDM capacity building Role of UNDP in CDM capacity building

process (suggestions); process (suggestions);

Overview of CEE/CIS Countries Status in Overview of CEE/CIS Countries Status in Convention ProcessConvention Process

In total 32 countries are under consideration;In total 32 countries are under consideration; 27 countries with different status to the 27 countries with different status to the

UNFCCC and Kyoto Protocol are from CEE;UNFCCC and Kyoto Protocol are from CEE; 5 countries in transition (CIS) are from Asia;5 countries in transition (CIS) are from Asia; CEE is the only region from five regions CEE is the only region from five regions

identified by Convention comprising the identified by Convention comprising the countries with different obligations and countries with different obligations and eligible for the different mechanisms;eligible for the different mechanisms;

(Cont.)(Cont.)

14 countries in 14 countries in transitiontransition from CEE are from CEE are Annex-I Parties to the Convention and 13 of Annex-I Parties to the Convention and 13 of them (except Belarus) are Annex B Parties to them (except Belarus) are Annex B Parties to the Protocol with the quantitative obligations the Protocol with the quantitative obligations on reduction of GHGs emissions in the on reduction of GHGs emissions in the commitment periods;commitment periods;

These countries are eligible for all flexible These countries are eligible for all flexible mechanisms: ET, JI, CDM;mechanisms: ET, JI, CDM;

They could be only investors in CDM projects;They could be only investors in CDM projects; They are potential investor or host countries in They are potential investor or host countries in

JI; JI;

(Cont.)(Cont.)

In the international process of JI they are still In the international process of JI they are still considered as host countries to be in need for considered as host countries to be in need for outside assistance in building of national outside assistance in building of national capacity;capacity;

In 2003 attractiveness of CEE JI host countries In 2003 attractiveness of CEE JI host countries were assessed according to the following were assessed according to the following indicators: potential project pipelines, political indicators: potential project pipelines, political and institutional environment, general and institutional environment, general investment climate, past experience with investment climate, past experience with AIJ/JI projects. AIJ/JI projects. (Norwegian Point Carbon)(Norwegian Point Carbon)

Countries have been ranged as follows: Countries have been ranged as follows:

Romania, Poland, Slovakia, Hungary, Czech Romania, Poland, Slovakia, Hungary, Czech Republic (Top half);Republic (Top half);

Russian Federation and Ukraine (Bottom half): Russian Federation and Ukraine (Bottom half): Huge potential and political interest; Weak Huge potential and political interest; Weak institutional structure;institutional structure;

Baltic States-JI market it rather small;Baltic States-JI market it rather small; Croatia and Slovenia had low score on all Croatia and Slovenia had low score on all

indicators;indicators; 10 Countries in transition (Annex I and non-10 Countries in transition (Annex I and non-

Annex I) from the region joined EU on 1 May, Annex I) from the region joined EU on 1 May, 2004. Now they are eligible and have to obey the 2004. Now they are eligible and have to obey the EU Linking Directive. EU Linking Directive.

Beginning of 2003Beginning of 2003

1.1. RomaniaRomania

2.2. SlovakiaSlovakia

3.3. Czech RepublicCzech Republic

4.4. PolandPoland

5.5. HungaryHungary

6.6. BulgariaBulgaria

7.7. Russian FederationRussian Federation

8.8. EstoniaEstonia

9.9. UkraineUkraine

10.10. LatviaLatvia

11.11. LithuaniaLithuania

12.12. SloveniaSlovenia

13.13. CroatiaCroatia

Beginning of 2004Beginning of 2004

1.1. Romania Romania

2.2. BulgariaBulgaria

3.3. SlovakiaSlovakia

4.4. Czech RepublicCzech Republic

5.5. HungaryHungary

6.6. PolandPoland

7.7. EstoniaEstonia

8.8. Russian FederationRussian Federation

9.9. UkraineUkraine

10.10. LatviaLatvia

11.11. LithuaniaLithuania

12.12. SloveniaSlovenia

13.13. CroatiaCroatia

The EU Linking DirectiveThe EU Linking Directive 10 countries are already EU members (three 10 countries are already EU members (three

pending);pending); Final agreement: April 2004;Final agreement: April 2004; Accounting of CERs and ERUs in EU ETS;Accounting of CERs and ERUs in EU ETS; EU ET System doesn’t depend on ratification of EU ET System doesn’t depend on ratification of

Kyoto Protocol;Kyoto Protocol; Restricted use of CERs/ERUs by operators (% Restricted use of CERs/ERUs by operators (%

defined in NAP;defined in NAP; No nuclear, no sinks projects are eligible;No nuclear, no sinks projects are eligible; Use of CERs from 2005;Use of CERs from 2005; Use of ERUs from 2008.Use of ERUs from 2008.

Distribution of JI projects by host countriesDistribution of JI projects by host countries EE projects are most attractive. 11 CEE countries EE projects are most attractive. 11 CEE countries

have reported AIJ projects on EE;have reported AIJ projects on EE; Fuel switch and Renewables are next after EE. 6 Fuel switch and Renewables are next after EE. 6

countries reported projects for these sectors;countries reported projects for these sectors; 2 countries (Russ., Czech.) have AIJ projects in A/R 2 countries (Russ., Czech.) have AIJ projects in A/R

and forest preservation sectors. No agriculture;and forest preservation sectors. No agriculture; In total reported to the UNFCCC Secretariat AIJ In total reported to the UNFCCC Secretariat AIJ

projects 60 (30%)? Are from CEE region.projects 60 (30%)? Are from CEE region. For 17 JI projects emissions transfer has been already For 17 JI projects emissions transfer has been already

agreed. Romania-5, Estonia-5, Hungary-2, Bulgaria-agreed. Romania-5, Estonia-5, Hungary-2, Bulgaria-1, Czech Republic-1, Latvia-1, Poland-1, Slovakia-1; 1, Czech Republic-1, Latvia-1, Poland-1, Slovakia-1;

13 countries in transition from CEE are non-13 countries in transition from CEE are non-Annex I Parties without any quantitative Annex I Parties without any quantitative obligations on GHGs emissions reduction; obligations on GHGs emissions reduction;

5 CIS countries in transition from Asia are also 5 CIS countries in transition from Asia are also non-Annex I Parties non-Annex I Parties (Kazakhstan is special case);(Kazakhstan is special case);

These countries are eligible only as host These countries are eligible only as host countries for CDM;countries for CDM;

19 countries of 32 mentioned (27-CEE/CIS 19 countries of 32 mentioned (27-CEE/CIS and 5-Asia/CIS) have ratified Kyoto; Three and 5-Asia/CIS) have ratified Kyoto; Three countries have signed but not ratified yet.countries have signed but not ratified yet.

(Cont.)(Cont.)

Only 5 of 18 potential CDM host countries in Only 5 of 18 potential CDM host countries in the region have already Designated National the region have already Designated National Authority (DNA), which is one of the criteria Authority (DNA), which is one of the criteria for country’s eligibility in CDM;for country’s eligibility in CDM;

No projects have been implemented in these No projects have been implemented in these 18 countries under the AIJ pilot phase 18 countries under the AIJ pilot phase launched in 1995;launched in 1995;

No projects are yet submitted for registration No projects are yet submitted for registration as CDM project from the region;as CDM project from the region;

Key players in CDM processKey players in CDM process

(Decision 17/CP.7, Modalities and Procedures)(Decision 17/CP.7, Modalities and Procedures)The COP/MOP shall further:The COP/MOP shall further:(a)(a) Review annual report of the executive board;Review annual report of the executive board;(b)(b) Review the regional and subregional distribution of Review the regional and subregional distribution of

designated operational entities and take appropriate designated operational entities and take appropriate decisions to promote accreditation of such entities decisions to promote accreditation of such entities from developing country Parties;from developing country Parties;

(c)(c) Review the regional and subregional distribution of Review the regional and subregional distribution of CDM project activities with a view to identifying CDM project activities with a view to identifying systematic or systemic barriers to their equitable systematic or systemic barriers to their equitable distribution and take appropriate decisions, based, distribution and take appropriate decisions, based, inter alia, on a report by the executive board;inter alia, on a report by the executive board;

International process:International process: CDM Executive Board – A member and an CDM Executive Board – A member and an

alternate from CEE region.alternate from CEE region. Methodological Panel- 2 seats for CEE. Methodological Panel- 2 seats for CEE.

Region can not provide experts. Region can not provide experts. Roster of experts for assessment teams on Roster of experts for assessment teams on

baseline and monitoring issues. baseline and monitoring issues. Only one Only one expert from regionexpert from region (Meth. Panel member). (Meth. Panel member).

Accreditation Panel-2 seats for CEE. Accreditation Panel-2 seats for CEE. No No aplication has been received from region.aplication has been received from region.

Roster of experts for accreditation Roster of experts for accreditation assessment teams. assessment teams. No application has been No application has been received from CEE/CIS;received from CEE/CIS;

Accreditation of Operational Entities Accreditation of Operational Entities (OE/DOE) for Validation, Verification & (OE/DOE) for Validation, Verification & Certification. No application has been Certification. No application has been received from CEE/CIS; received from CEE/CIS; No application No application from CEE/CIS.from CEE/CIS.

Baseline and monitoring methodology Baseline and monitoring methodology submission. 3 of 64 Methodologies submission. 3 of 64 Methodologies submitted are from CEE/CIS (2 Moldova submitted are from CEE/CIS (2 Moldova and 1 Uzbekistan). Not approved yet.and 1 Uzbekistan). Not approved yet.

(Cont.)(Cont.)

Working group on afforestation and Working group on afforestation and reforestation. reforestation. Only one applicationOnly one application (Poland); (Poland);

Working group on small-scale projects. Working group on small-scale projects. Only Only one applicationone application (in first round). (in first round).

Barriers to CDM at international level in Barriers to CDM at international level in CEE/CISCEE/CIS

Lack of technical experts in baseline and Lack of technical experts in baseline and monitoring methodology;monitoring methodology;

Low awareness and not enough experience Low awareness and not enough experience among the private companies, potential OE;among the private companies, potential OE;

Lack of experts with significant experience in Lack of experts with significant experience in accreditation procedures;accreditation procedures;

Access to internet and other communication Access to internet and other communication facilities;facilities;

Language. Language.

National Process:National Process: Eligibility Criteria for country’s participation in Eligibility Criteria for country’s participation in

CDM:CDM:

(a) Party to Kyoto Protocol(a) Party to Kyoto Protocol

(b) Designated National Authority(b) Designated National Authority

(c ) Voluntary Participation(c ) Voluntary Participation Eligibility Criteria for project as CDM project:Eligibility Criteria for project as CDM project:

(a) Contribution in sustainable development(a) Contribution in sustainable development

(b) Additionality(b) Additionality

(c) Report on stakeholder comments(c) Report on stakeholder comments

(d) Assessment of Environmental Integrity(d) Assessment of Environmental Integrity

Barriers to JI host countriesBarriers to JI host countries

GHGs national inventory is required for track 1 JI;GHGs national inventory is required for track 1 JI; For track 2 JI are eligible CEE countries until they have not For track 2 JI are eligible CEE countries until they have not

established strong national systems for GHGs inventory;established strong national systems for GHGs inventory; Track 2 JI requires Supervisory Committee and similar Track 2 JI requires Supervisory Committee and similar

procedures as CDM. CDM barriers existing at international procedures as CDM. CDM barriers existing at international level will be the same for JI;level will be the same for JI;

Absence of national procedures for project national approval;Absence of national procedures for project national approval; Not attractive investment environment;Not attractive investment environment; Capacities of JI national focal points.Capacities of JI national focal points. Lack of bankable JI projects.Lack of bankable JI projects.

Role of DNA and capacity needsRole of DNA and capacity needs

Provide project participants (PP) with hostProvide project participants (PP) with host

country approval letters that:country approval letters that: Project contributes in host countriy’s Project contributes in host countriy’s

sustainable development;sustainable development; Country’s participation in project is voluntary;Country’s participation in project is voluntary; In case if country participate in project through In case if country participate in project through

public/private entity the entity shall be public/private entity the entity shall be authorized by country. authorized by country.

DNA should enable the environment for flexible, DNA should enable the environment for flexible, effective and successful implimenation of CDM effective and successful implimenation of CDM projects:projects:

Selection of CDM priority sectorsSelection of CDM priority sectors Establishment of SD criteriaEstablishment of SD criteria Monitoring of EIA for each CDM projectMonitoring of EIA for each CDM project Providing the national guidelines to present PIN and Providing the national guidelines to present PIN and

PDDPDD Issuance of approval lettersIssuance of approval letters Facilitation of the process of signing the MoU with Facilitation of the process of signing the MoU with

different bilateral and multilateral CDM programmes. different bilateral and multilateral CDM programmes.

Initial approval of PIN

PDD

Submission of PIN/PDD Issuance of Letter of Approval

State Commission on Sustainable DevelopmentChair: Minister of Environment

National Agency on Climate Change (NACC) Functions: 1. Insurance of effective participation of Georgia in CDM2. Development and approval by SC on SD of SD criteria and documentation need3. Initial approval of PIN and guidance for development of PDD4. Issue CDM Project Letter of Approval according to decision of SCoSD and Registration. 5. Governance and technical management of the sale and transfer of CERs?6. Development and maintenance of CDM database7. Organise working groups for evaluation of CDM projects. 8. Executes promotional functions

Advice on PDD

Deci-sionon

PDD

Interdepartemental CDM CommitteeChair: MoE; Members: Experts from Ministries, NGOs for each priority areas (Energy, forestry, agriculture, transport)Functions: 1. Evaluation of CDM project proposals (PDD) according to criteria of DNA, recommendation to SC on SD2. supports promotional functions like unilateral CDM development?

Experts on demandAdditional experts to assist Working Group in evaluating projects

Training

DNA

Ministry of Environment and Natural Resources

PDD Evaluation Working GroupAdditional interdepartmental experts to assist NACC in evaluating projectsRecommendations to respective ministries for discussion at CDM Comittee

Project developers

Barriers to the private sector when Barriers to the private sector when developing the projectdeveloping the project

Lack of in-country information and experience on the state-of–Lack of in-country information and experience on the state-of–the-art renewable energy and energy efficient technologiesthe-art renewable energy and energy efficient technologies

Lack of in-country capacity to develop “bankable” investment Lack of in-country capacity to develop “bankable” investment proposals, feasibility studies and business plansproposals, feasibility studies and business plans

Data gaps and access to the necessary informationData gaps and access to the necessary information Lack of an adequate legal and regulatory framework to Lack of an adequate legal and regulatory framework to

support energy efficiency and renewable energy investmentssupport energy efficiency and renewable energy investments Lack of approved and functioning strategies and programs at Lack of approved and functioning strategies and programs at

the Government level for the long term, sustainable the Government level for the long term, sustainable development of the economy sectorsdevelopment of the economy sectors

Financing problems faced by project Financing problems faced by project

developersdevelopers Relatively small size of the projects, which make Relatively small size of the projects, which make

them less attractive to big, international financing them less attractive to big, international financing organizations (high transaction costs)organizations (high transaction costs)

High perceived risks of developing and financing High perceived risks of developing and financing projects in Georgia, leading to high interest rates, projects in Georgia, leading to high interest rates, short pay-back periods and difficulties in getting short pay-back periods and difficulties in getting access to the financing in generalaccess to the financing in general

Weak financial status of the local companies and Weak financial status of the local companies and problems in meeting the strict guarantee and problems in meeting the strict guarantee and

collateral requirements of the possible financierscollateral requirements of the possible financiers

On-going international projects on capacity building On-going international projects on capacity building for CDM/JI in CEE/CIS for CDM/JI in CEE/CIS

TACIS (Armenia, Azerbaiuan, Georgia, Moldova)TACIS (Armenia, Azerbaiuan, Georgia, Moldova) Canada-CIDA(Azerbaijan, Kazhakhstan, Uzbekistan)Canada-CIDA(Azerbaijan, Kazhakhstan, Uzbekistan) Eastern Climate Change Network (ECCN) Project (11 Eastern Climate Change Network (ECCN) Project (11

countries: JI countries -7, CDM countries-4)countries: JI countries -7, CDM countries-4) WB NSS- Study on CDM Capacity Building (Uzbekistan)WB NSS- Study on CDM Capacity Building (Uzbekistan)

Regional project on inventory(12 countries CEE/CIS)Regional project on inventory(12 countries CEE/CIS)

Suggestion for UNDP future responseSuggestion for UNDP future response Strengthening the capacity of DNAStrengthening the capacity of DNA Improving the coordination while implementing the strategic Improving the coordination while implementing the strategic

programmes (such as EDPRS, MDG, long and short term programmes (such as EDPRS, MDG, long and short term programmes for renewable energy sector, EE measures, etc.)programmes for renewable energy sector, EE measures, etc.)

Strengthening the links between CDM and poverty reduction, Strengthening the links between CDM and poverty reduction, public private participation programmes, public private participation programmes,

Establishing the CEE/CIS regional training center Establishing the CEE/CIS regional training center (cources) for the experts:(cources) for the experts:

-technical experts on methodological and accreditation -technical experts on methodological and accreditation issues;issues;

-negotiators for international political and project level -negotiators for international political and project level processes;processes;

-priority should be given to experts already applied for -priority should be given to experts already applied for different CDM bodies and been rejected because of lack of different CDM bodies and been rejected because of lack of experience.experience.

Investigation of barriers and potential of CDM in Investigation of barriers and potential of CDM in CEE/CIS regionCEE/CIS region

Increasing the assistance for improvement of data Increasing the assistance for improvement of data gathering systems, statistics and monitoring;gathering systems, statistics and monitoring;

Implementation of plans developed in the framework Implementation of plans developed in the framework of capacity needs self-assessment programmes is also of capacity needs self-assessment programmes is also very important;very important;

Promote the participation of private sector in CDM Promote the participation of private sector in CDM public awareness;public awareness;

Facilitate the stakeholder participation in decision Facilitate the stakeholder participation in decision making process.making process.