1. Regional Distribution Challenges 7 th UNFCCC CDM Joint Co- ordination Workshop (JCW) Bonn By Steve Thorne SSN Africa 12 th /13 th March 2010

2. Contents Reasons for unequal distributions Recent innovations by Regulators Increasing credit flows Reduction in transaction costs Some examples Some conclusions Reference: slides from UNDP (Matt Spanagle), KuyasaCDM team, GERES (William Battye) and Advocacy Body on Climate and Development

3. Reasons for unequal distributions… Climate Change and Development are not linked. Emissions in many LDCs and poorer areas are small and spread out – high transaction costs for low return. LDCs and many DCs do not have enabling environments for the development of a carbon market. Private finance has limited experience with derivatives, public finances chases development in industries they know (agriculture, mining, power, processing etc.). Limited capacity, lack of transparency, limited active promotion, little leadership. Conservative utilities and distributers, fossil tax income, limited interest in decentralised modern energy etc. Limited technical capacity (not skills) in the design of projects

4. Tools to encourage take up Reduce the transaction costs Increase the income from credits Increase the credits

5. Recent innovations by Regulators to reduce costs Programmes of Action (maturing and seeing application) Small-scale debundling for emissions sources <1% of cap Micro-scale facility Use of more than one methodology in a PoA Increasing interests in benchmarks, default emissions, and other simplifications in approach Gold Standard allows for micro-scale additionality waiver in LDCs, inclusion of suppressed demand in cookstove, biogas and water purification methodologies and lower validation and verification requirements Loans for LDCs, reduction/removal of registration fees, etc. More can be done to reduce validation and verification costs

6. Increasing carbon credit flows Simplification using benchmarks, deemed performance and/or accounting for suppressed demand These accounting simplifications should reduce requirements for measuring consumption Project scenarios include where poverty or lack of infrastructure exist – accounting for suppressed demand Baseline scenarios can be divided into technology/fuel and consumption –Technology/fuel is not difficult (precedents exist) –Consumption could include ex-post consumptions at level of service, minimum service levels, or predicted service levels

7. Suppressed demand Paragraph 46 of the Modalities and Procedures: The baseline may include a scenario where future anthropogenic emissions by sources are projected to rise above current levels, due to the specific circumstances of the host Party. Restated in the COP 15 outcomes: paragraph 35 of Further guidance related to the CDM. Encourages the EB to further explore again in COP 16… Energy demand is constrained as a result of poverty or lack of infrastructure Suppressed demand can be included if proof of livelihoods improving can be shown/if it not Minimum Service Levels apply Precedent AMS ID, GS cook stoves, biogas and clean water preparation and Kuyasa CDM project #0079 Treatment of increases in future anthropogenic emissions of host countries by SSC WG… The SSC WG 27 th meeting annex 7

8. Types and treatments of suppressed demand (SD)

9. Types – lets consider examples and possible treatments Immediate release of suppressed demand i.e. development starts with project start – few problems Livelihoods not improving - development doesn't start in project period Livelihoods already improving - development already underway

12. Ceramic water purifiers - Cambodia

13. Projects are mostly in areas of severe poverty (where people do not have access to safe water, lack of infrastructure etc) Suppressed demand for –Water consumption: difficult access, lack of infrastructure, poor quality/contaminated source –Fuel type and quantity: often biomass residues and plastics used and HH do not boil properly > 3mins –Water boiling practice: lack of knowledge, time, cost of fuel relative to the disposable income and a high risk of post treatment contamination Over time each of these variables will change alongside economic development: over what time frame? where and how is it measurable and verifiable?

14. Suppressed Demand Service Service Level Satisfied or projected Service (BaU) Minimum Service Level Increasing Wealth/ Resources/ Infrastructure Current (unsatisfactory) Service Level time Suppressed Demand Minimum Demand

15. Current Emission Level Suppressed Demand Emissions Service Level BaU Emissions, Satisfied Service Minimum Service Level Emissions (tCO2e) Current Service Level time Suppressed Demand Emissions Project Emissions, Satisfied Service Emission Reductions Avoided Emissions Conservativeness Creditable

16. 16 Ceiling installation - Public Works

17. Energy services and energy consumption – business-as- usual energy service Energy consumption ___ Energy Service ___ Baseline Energy time

18. SUPPRESSED DEMAND INTERVENTIONS energy serviceGHG emissions ___ Energy Service ___ Baseline Emissions ___ Energy Service Intervention ___ Project emissions time

19. Energy Services and Consumption that take Suppressed Demand for service into account energy service Energy Consumption ___ Energy Service ___ Baseline Carbon emissions ___ Energy Service intervention ___ Carbon emission after clean energy service intervention time A B A are Existing Emissions B are Existing Emissions + Future Avoided Emissions

20. National pledges and Low Carbon Development Strategies 2000201020302050 Emissions (tCO2e) Emissions (BaU) Avoided Emissions Emissions (LCDS)

23. Some conclusions… The majority of people on earth live in poverty without access to modern services We all agree (I hope) that suppressed demand exists, but But, how do we credit it without eroding the integrity of the CDM and flooding the market with credits? How do we not include it and live with the perversity of waiting for development to become dirty before being interesting to carbon markets? How do we ensure that it results in real and measurable emissions reductions – this is an opportunity for the regulation of carbon markets to account for suppressed demand 2012 is the UN year of Energy Access!

24. Way forward to decrease costs and increase credits Improve enabling environments for Clean Development Decrease transaction costs further Define typologies Agree on treatment of typologies with respect to baselines and consumption and prepare methodology module for SD Help regulators and market feel comfortable with real and measurable in the absence of monitoring consumption Invitation to contribute to Gold Standard led project on preparing methodologies for African access to carbon