Green Investment Scheme: combination of trade and project- based mechanism: a countries’ asset Ms. Maria Khovanskaya Climate Change Department REC Bucharest, Romania 30 April 2009

Outline Brief history of GIS Main principles of the initial models: GIS as a modality of International Emission Trade (IET): Tradable Kyoto quota (Art. 17 of the Protocol) Hot air issues GIS at home: “Hard greening” Soft greening” Main dilemmas of the AAU management: Allocation between national needs and tradable amount; Allocation between two commitment periods; Outline for the workshop and discussion

Brief history of the GIS Idea introduced at COP 6 in the Hague, in 2000 In 2002 Russian Federation has presented first version of GIS functioning at COP 8, in New Delhi Idea of GIS abandoned for a JI, EU ETS, etc After the shortcomings of the JI mechanism became apparent, GIS was picked up again in ; December 2007: Hungary adopts the legal basis for GIS Fall 2008 – fist transaction In April 2009 – 7 countries participate in GIS as either buyers or sellers (Austria, Belgium, Hungary, Japan, Latvia, Spain, Ukraine)

Kyoto Quota (Assigned Amount) The amount of tonnes of GHG emissions which all the enterprises, mobile sources (transport), residential houses, agricultural units, landfills can emit into the atmosphere Has been identified once and forever in the submitted Initial Report Calculated according to the international formula: AA= Total GHG emissions in the baseyear (for Romania 1989) X Kyoto target (92%) X 5 (years in the first commitment period) = tCO2 eq. (Initial report) For everything!!! A quota can be increased by purchasing carbon credits and can be reduced by selling them

“Hot air” issues In the countries-sellers usually in the baseyear (1989 for Romania) GHG emissions were still high because of the high production augmented by energy inefficient technologies In many countries sellers surplus occurs because of the downfall of the economic system GHG emission has fallen also considerable in the beginning of 90-es but only because economic collapse not because of emission reduction measures Doubts about environmental integrity of purchasing from this kind of sellers GIS came picture as a solution to this problem

Source: Initial Report of Romania submitted on 17 May 2008

Main principle of GIS “Greening” of AAU transfers by earmarking the proceeds from AAU sales for implementing environmental projects in the seller country Hard greening GHG emissions reduction projects (e.g. renewable energy projects, energy efficiency projects) Soft greening Management (administrative cost) of GIS Creating enabling environment for the “hard” greening to occur Capacity building

AAU management dillemas AAU quantity is limited Dilemma faced by the countries-sellers in the 1 st Commitment Period; Sell AAUs earlier through GIS and invest into GHG decreasing technologies and projects; Save AAUs for the needs of developing national economies Dilemmas faced by the countries-sellers about the allocation of AAUs between the two periods: AAUs can be carried over between two periods without limitation For EU members the ambitious EU targets for post-2012 should be taken into consideration Dilemma faced by the potential country-buyers: to which extent to buy AAUs and to which encourage the national economy to undertake carbon-saving measures; Decisions to be taken under political uncertainty about future commitment periods, costs of non-compliance, etc.

Legislation Significant amount of legislative job to be done; Primary legislation ; Identification of legal nature of AAU; Adjusting the concept of GIS for the national and EU legislation (some contradictions do exist); Secondary legislation; Complicated process of taking the drafts of the legal documents through the public hearings.

Institutional set-up Training the experts; Regulatory work: Synchronizing the work of GIS unit with the work of other institutions (for instance, Registry operator, inventory preparation and submission in terms of eligibity, etc); Eligibility of projects and project owners; Methods of financing of the projects (grants, low interest loans, etc)

GIS as Good Image Scheme Monitoring Transparency Enforcement

And also… Creating and implementing a sales strategy; Creating strategy to work with buyers („one for all buyers approach” or „tailoring every deal to the requests of a particular buyer”), MOUs, state vs. private buyers; Solving conflicts of stakeholders; Interference of marginal interests

Extension of flexibility concept Best of every mechanism; Way to „green” IET; Way to capture the projects not captured under JI;

… environmentally friendly technologies. Way to finance the priority areas (for instance: renewables, biofule, small-scale projects);

Thank you for your attention!