© 2006 UNDP. All Rights Reserved Worldwide. Proprietary and Confidential. Not For Distribution Without Prior Written Permission. Host Country Institutional Frameworks for CDM/JI Presented by Marina Olshanskaya, UNDP Regional Support Center for Europe and CIS September 28, 2006, Bratislava, Slovakia

1 RBEC Energy and Environment Practice meeting: Carbon finance 1 Host Country Requirements : Overview  Eligibility criteria for CDM/JI host countries  Designated National Authority (DNA)  National project review and approval procedures  Sustainable Development Criteria  Letter of Approval  How-to Guide

2 RBEC Energy and Environment Practice meeting: Carbon finance 2 CDM Eligibility for non-Annex I Countries Host Country Eligibility for CDM:  Ratification of Kyoto Protocol  Establishment of DNA for host country approval of CDM project Host country approval should affirm:  Compliance of CDM project with national sustainable development (SD) goals  Voluntarily nature of CDM activity [Marrakech Accords]

3 RBEC Energy and Environment Practice meeting: Carbon finance 3 CDM vs JI eligibility criteria JI Track IJI Track IICDM Participation requirements to be met by host country Party to the Kyoto Protocol Designated National Authority (CDM)/Designated Focal Point (JI) Compliance with sustainable development goals Calculation of Assigned Amount National system for estimation of anthropogenic emissions and removals by sinks National emissions registry Submission of national GHG inventory Validation/Verifi cation Validation/verification according to host country procedures Validation/verification by Independent Entity/Supervisory Committee Transfer of ERUs/CERs Issues of ERU according to host country procedures Issue of ERU (JI)/CER (CDM) upon validation/verification by Independent Entity/Supervisory Committee

4 RBEC Energy and Environment Practice meeting: Carbon finance 4 Designated National Authority  A legal entity/individual authorized to sign in a Letter of Approval (LoA) (Info in UNFCCC data base  Ministry (Environment, Economy, Energy, Hydromet), Inter-agency Committee, NGO  DNA structure –DNA Secretariat (day-to-day operations) –Technical review group (sustainability assessment) –Advisory body (policy advice on CDM matters)

5 RBEC Energy and Environment Practice meeting: Carbon finance 5 Designated National Authority in Macedonia Ministry of Environment and Physical Planning DNA Secretariat Department of Sustainable Development CDM Executive Board TechnicalReview Ministry of Economy TechnicalReview Ministry of Agriculture, Forestry & Water Supply Technical Review Ministry of Transport and Communication Written Opinion on Approval Letter Sectoral Ministry (Agric, Econ, or Trans) Ministry of Finance Ministry of Foreign Affairs Technical Review Ministry of Finance Technical Advisory/Working Group Provides written opinion on CDM projects

6 RBEC Energy and Environment Practice meeting: Carbon finance 6 National CDM Approval Process Step-by-step procedures for CDM project review and approval  Submission of PIN (non—mandatory)  Issuance of Letter of Endorsement (preliminary approval)  Submission of PDD (mandatory)  Internal check by DNA Secretariat  External and/or inter-ministerial technical review  Issuance of Letter of Approval (Rejection)

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8 8 National CDM Approval Process, cont  Time-frame: from 20 days to 1-2 year  National PIN format and list of supporting documentation to be submitted along with proposal (legal and financial statements, etc)  DNA fee or CDM tax: very uncertain and highly debated

9 RBEC Energy and Environment Practice meeting: Carbon finance 9 Sustainable Development assessment of CDM project Step 1: Select sustainable development issues that are to be addressed in the CDM project evaluation. Normally include: Social criteria: The project improves the quality of life, alleviates poverty, and improves equity. Economic criteria: The project provides financial returns to local entities, results in positive impact on balance of payments, and transfers new technology. Environmental criteria: The project reduces greenhouse gas emissions and the use of fossil fuels, conserves local resources, reduces pressure on the local environment, provides health and other environmental benefits, and is in accordance with energy and environmental policies. Step 2: Design of a procedure for evaluating sustainable development impacts of CDM projects relative to the sustainable development criteria selected in Step 1.

10 RBEC Energy and Environment Practice meeting: Carbon finance 10 Approaches to Sustainable Development assessment in CDM ApproachBrief descriptionExamples Guidelines Define descriptively the aspects of sustainable development that should be considered in a project. Indian CDM guidelines Checklists Checklists consist of clearly defined questions to be answered for a CDM project with a closed set of pre-defined answers CERUPT Negotiated targets Concrete targets are negotiated among stakeholders and the project owner. Indicators are defined to monitor the sustainability component of the projects. Jepirachi Wind power project, PCF Multi-Criteria Methodologi es Multi-Criteria Methodologies define criteria for several aspects of sustainability and assess the project with regard to each criterion. Some methodologies suggest aggregating the indicators by weighting the respective criteria according to their importance. SouthSouthNorth, Multi-Attribute Utility Theory

11 RBEC Energy and Environment Practice meeting: Carbon finance 11 SouthSouthNorth Sustainable Development Appraisal Tool ComponentScore [-2 to +2] Local / regional / global environment -Water quality and quantity -Air quality [EG: MIN threshold: NO increase in toxic emission] -Other pollutants (toxicity, radioactivity, POPs,) -Soil condition (quality and quantity) -Biodiversity (species and habitat conservation) Social sustainability and development -Employment (including job quality, fulfilment of labour standards) -Livelihood of the poor (poverty alleviation, distributional equity) -Access to energy services -Human and institutional capacity (empowerment, education) Economic and technological development - Employment (numbers) - Balance of payments (sustainability) -Technological self-reliance (institutional capacity, technology transfer) TOTAL

12 RBEC Energy and Environment Practice meeting: Carbon finance 12 Letter of Approval  Must confirm: –The fact of Kyoto Protocol ratification –Voluntary participation in CDM project activity –Contribution to sustainable development of the host Party  Additionally, the Letter may contain: –Authorization of project participants –No objection or assistance to current and/or future allocation of CERs

13 RBEC Energy and Environment Practice meeting: Carbon finance 13 Letter of Approval  Authorisation of project participants: –CDM rules require that at least one of the Parties involved in the project must authorize all private and public entity participants in the projects –In principal, any legal entity registered in host country can be a project participant, BUT –Possible restrictions may be applied, e.g. a company with dominant share of foreign capital

14 RBEC Energy and Environment Practice meeting: Carbon finance 14 Letter of Approval: Example [State Forest Agency „MOLDSILVA”] No.018– 03/9.04 from 2 nd of September, 2004 ref No /401 from 20 th of July 2004 On examination of the project proposals “Soil conservation in the Republic of Moldova” Through the present, we acknowledge that the National Commission for the implementation and realization of the commitments under the United Nations Framework Convention on Climate Change and of the mechanisms and commitments of the Kyoto Protocol, as the Supreme Designated National Authority, responsible for the implementation of the Clean Development Mechanism of the Kyoto Protocol, has examined on its meeting from 9 th of August 2004 the project “Soil Conservation in the Republic of Moldova”, elaborated and presented by the State Forest Agency “MOLDSILVA”. As result of examination, the National Commission concluded the following: 1The State Forest Agency “MOLDSILVA” is the only responsible for elaboration and implementation of the CDM Project “Soil Conservation in the Republic of Moldova”. In the name of the Government of the Republic of Moldova, the Agency has negotiated and contracted with the World Bank Prototype Fund all the conditions of the CDM Project (Government Resolution No from 26 th of September 2003). In case of implementation of the CDM Project in its actual version, the planned activities would essentially contribute to the sustainable development of the Republic of Moldova and would positive influence the quality of the environment. Through this CDM Project, the Republic of Moldova is participating on voluntary basis on realization of the Clean Development Mechanism of the Kyoto Protocol. Constantin MIHAILESCU Minister, Ministry of Ecology and Natural Resources, Chair of the National Commission

15 RBEC Energy and Environment Practice meeting: Carbon finance 15 How-to Guide on National Institutional Frameworks for Kyoto Protocol  Primer on DNA: JI/CDM project cycle, eligibility, functions of DNA  Designing and establishing the DNA:  Selecting institutional framework  Project review process  Sustainable Development Criteria  Legalization  Making the DNA work  Human/technical requirements  Processing project  Outreach and communication  Annexes:  Templates (PINs, legal documents, Letters of Approval)  FREQUENTLY ASKED QUESTIONS & ANSWERS

16 RBEC Energy and Environment Practice meeting: Carbon finance 16 THANK YOU FOR YOUR KIND ATTENTION