Ecology, Economy and Social Responsibility Carbon Finance Capacity Building Programme Carole Küng, ecos, Project Leader CFCB Sao Paulo Workshop São Paulo City Hall, 4 May 2010

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 2 ecos Is an internationally working consultancy based in Basel, Switzerland. Since 1987 ecos develops, realises, supports and evaluates processes, projects and products that harmonise the needs of the economy, the environment and society. Is a facilitator and manager of public and business innovation processes for sustainable development. ecos initiated the CFCB programme together with its partners.

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 3 Agenda Starting position 1.Why capacity building: CDM – a rewarding path for cities after Copenhagen? 2.What is capacity development? 3.How can Carbon Finance capacity be integrated in Cities? 4.The CDM survival kit for city officers

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 4 Why capacity building? CDM - a rewarding path for cities after Copenhagen? Carbon Finance (with focus on CDM) FactsFacts Bottom up market approach accessible through regulatory mechanisms such as CDM CDM can continue after 2012 even without a treaty (ETS based on EU reduction targets) Co-financing of infrastructure based on actual CO 2 reduction and its market price (risks) Other climate related financing: Climate Finance, Namas... Continuous top-down political process. Dependent on donor countries. (Up-front) financing or co-financing of infrastructure reducing CO 2 (closing of financing gaps, technology transfer) Not finalised near-term -> future opportunity

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 5 Why capacity building? Investment in CDM is considered risky. Depends on:  Reforms of the mechanism (no agenda yet)  Development of supply (e.g. REDD) and demand (EU, Japan, Australia, other new markets) Trend towards high quality CDM projects (e.g. gold standard), but overall decline of registration of new projects Probably neither Carbon nor Climate Finance (...) will dominate future climate mitigation efforts completely. A mix of both is most likely and promising, the complexity of financing through Carbon or Climate Finance will rise in the short term. CDM - a rewarding path for cities after Copenhagen?

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 6 Why capacity building? There will be financing options. A city task force/ cross-sectoral committee on climate which closely observes the developments to seize opportunities is recommended. => Put the city as major emitter into the position to assess opportunities and to drive the processes. Summary: CDM - a rewarding path for cities after Copenhagen?

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 7 Carbon Finance Challenge for a city administration Technical know-how: Project as such + CDM Organisational Development: Strategic, dynamic structures Changing environment/framing conditions Interdisciplinary, global challenges Financial-, Environmental-, and Social questions... Tasks The 3 building blocks of capacity development in a dynamic environment.

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 8 Why capacity building? What happens in cities without structured Carbon Finance capacity? An example Waste Manager Economy Law Environment FinanceMunicipal Services WelfareTransport Carbon Finance/ CDM

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 9 Why capacity building? What happens in cities without structured Carbon Finance capacity? An example Waste Manager CDM solid waste Revenue 15% (of estimated 200‘000t CER/year) Contract 15% of 20‘000t CER/year Ltd

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 10 Transport Manager ? ? Economy Law Environment Finance Municipal Services Welfare Transport leaves Waste Manager Ltd Know-how Why capacity building? Lessons learned Interconnection! => Knowledge management! City

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 11 Capacity development of city‘s CF management skills Capacity Development as: “The process of strengthening the capabilities of cities in order to achieve their own goals on a sustainable basis.“ Success factors: The city is put in a position to organise complex processes on its own. A receptive organisational setting and process is put in place that can receive knowledge and expertise and convert it to practice and action. Ownership of projects is guaranteed. Continuous and frequent handholding and daily business support is available.

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 12 Capacity development of city‘s CF management skills CFCB programme as a learning-by-doing approach:  Working on a concrete project and developing it as a CF project.  Establishing a nucleus institutional body of capacity within the city administration that can manage Carbon Finance together with a network of technical experts. Technical know-howOrganisational Development Tasks

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 13 CDM Pilot Project Idea for Sao Paulo Environmental GHG emmission reduction Reduction of waste going to landfills Social Local Job creation Improved health/ quality of life Awareness for resource management Economic Co-financing of Sustainable infrastructure through Carbon Finance Sustainable waste treatment systems for Favelas Task: Sustainable city development through high quality CF project

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 14 City CFCB Task team Possible implementation structure in each city/ city group CFCB-Programme City Government Mayor‘s/Governor‘s Office Political CFCB champion CFCB to local link LIP Local Implementation Partner City Officers Head of Divisions (General-) Managers Expert officials Technical/Legal/Finance Private sector Technical Partners Carbon Mgmt. Consultants City Management City Manager Head of Departements Executive CFCB champion MoU/ LoI CFCB – City Financial sector Traders, Asset management Investors, banks Mode of Cooperation Agreement Assignment Cooperation Strategic steering Implementation Later

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 15 Organisational set-up for cooperation with cities MoU/ LoI between CFCB programme and each city/ city group: High-level support Local implementation partner (LIP) City representation  Mayor‘s / Governor‘s office -> political CFCB champion  City task team (CTT) –City Management -> executive CFCB champion (CFCB contact) –City Officers Other City stakeholders  Private sector: Technical partner(s)/carbon management consultant(s)  Financial sector: Traders, Asset management, Investors, banks  Advice and consultancy: Periodic short meetings for a more comprehensive discussion of general operational and strategic matters. Technical partner/carbon management consultant  Identification of unbiased consultants and technical partners to be hired by the cities, is mentioned as one of the key requests by the cities.  Although technical-/carbon partners have a clear focus and range of responsibilities they might be included in the LPSG as a guest to ensure coherence of the CFCB intervention. KvR? tbd

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 16 City representation/City task team CFCB-Political Champion:  The CFCB activities can only be successful if they are under an explicit and committed patronage of the Mayor/Governor of the city. City Task team:  Carbon Finance requires a cross-sectional approach.  Thus the city has to be involved with the relevant departments forming a City task team that mutually coordinates the CFCB involvement. CFCB-Executive Champion  Chairs the City Task Team  Drives the CFCB activities within the City administration  Main contact person to Local Implementation Partner and CFCB Programme Management KvR? tbd

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 17 City task team City CFCB Task team City Officers Head of Divisions (General-) Managers Expert officials Technical/Legal/Finance Private sector Technical Partners Carbon Mgmt. Consultants City Management City Manager Head of Departements Executive CFCB champion 1-2 years Carbon and Climate Finance Knowledge Hub  Strategic decisions (PoA, Namas...)  Potential projects  Exchange of knowledge gained Technical Expertise Key Know-how Effective Interconnected Learning

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 18 Local implementation partner (LIP) Ensures ongoing support. Coordinates between the city and the technical partners and represents the CFCB programme in the city. Core element of the locally based support for each city includes:  Help-desk: Continuous consulting by and phone regarding issues arising from daily business that can be solved by immediate consultation. The LIP has to be jointly defined. KvR? tbd

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 19 CDM survival kit for city officiers: 1. Baseline The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox  Reveals how much GHG can be saved and therefore demonstrates Carbon Financing potential (ex-post and market-dependent!) Carbon credits = emissions Carbon credits = emissions Greenhouse gas emissions Historical Trend Project start Time Baselin e Actual emissions Recall:

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 20 CDM survival kit for city officiers: 2. Additionality The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox  Proves that the targeted emmissions wouldn‘t be saved without CDM (precondition for every CDM project) Project without carbon revenue is profitable – but not sufficiently profitable compared with alternatives Project without carbon element Project with carbon element Carbon revenue makes the project attractive relative to investment alternatives Investment threshold Revenue / NPV / IRR Recall:

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 21 The 3 key points: 1. Baseline; 2. Additionality; 3. CDM Toolbox  The Carbon Finance add-on challenge! CDM survival kit for city officiers: 3. CDM Toolbox Project Recall: CDM Project Cycle Depicts the step-by-step approach to CDM as well as the key institutions 6 to 12 months1.5 months Crediting period of the project Project Developer DNA DOE CDM EB PIN PDD Host country approval Project validation Project registrati on CER issuance Project verificati on Recall: CDM Methodologies Depict the approach for different project types CDM Cycle

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 22 Roles and timing for starting a CDM project in Cities Who Key points City officers/ Project teams Technical experts Timing 1. Baseline Collect basic dataFirst estimateBefore PIN 2. Additionality Announce project as under CDM Initial adoptionBefore official announcement/ project tender 3. Toolbox Refer to expert for choosing methodology Become project participant and work on a contract Plan project according to CDM project cycle Technical expertise, guiding through project cycle According to steps in CDM project cycle

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 23 Thank you very much for your attention! Contact: ecos team:  Daniel Wiener,  Daniel Lehmann Pollheimer,  Carole Kueng, t. +44.(0)

Ecology, Economy and Social Responsibility Sao Paulo Carbon Finance Workshop, April 26, Carole Küng 24 References (amongst others)  CFCB:  Carbon Finance Assist/Carbon Finance Unit, World Bank  (WB/ UNDP) t. +44.(0)