Barriers to the Successful Implementation of Kyoto Mechanisms (JI/CDM) in CEE and CIS Countries Marina Shvangiradze Ministry of Environment Protection and Natural Recourses of Georgia National Agency on Climate Change 9 October, 2004 Almaty,

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Barriers to the Successful Implementation of
Kyoto Mechanisms (JI/CDM) in CEE and CIS
CountriesMarina ShvangiradzeMinistry of
Environment Protection and Natural Recourses of
Georgia National Agency on Climate Change9
October, 2004 Almaty, Kazakhstan
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Content of presentation

• Overview of CEE/CIS countries status in
  Convention process
• CDM international process and barriers in CEE/CIS
  countries
• CDM/JI national process and existing barriers
• Role of DNA and capacity needs
• Ongoing activities of international donors
• Role of UNDP in CDM capacity building process
  (suggestions)

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Overview of CEE/CIS Countries Status in
Convention Process

• In total 32 countries are under consideration
• 27 countries with different status to the UNFCCC
  and Kyoto Protocol are from CEE
• 5 countries in transition (CIS) are from Asia
• CEE is the only region from five regions
  identified by Convention comprising the countries
  with different obligations and eligible for the
  different mechanisms

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• 
  (Cont.)
• 14 countries in transition from CEE are Annex-I
  Parties to the Convention and 13 of them (except
  Belarus) are Annex B Parties to the Protocol with
  the quantitative obligations on reduction of GHGs
  emissions in the commitment periods
• These countries are eligible for all flexible
  mechanisms ET, JI, CDM
• They could be only investors in CDM projects
• They are potential investor or host countries in
  JI

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• 
  (Cont.)
• In the international process of JI they are still
  considered as host countries to be in need for
  outside assistance in building of national
  capacity
• In 2003 attractiveness of CEE JI host countries
  were assessed according to the following
  indicators potential project pipelines,
  political and institutional environment, general
  investment climate, past experience with AIJ/JI
  projects. (Norwegian Point Carbon)
• Countries have been ranged as follows

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• Romania, Poland, Slovakia, Hungary, Czech
  Republic (Top half)
• Russian Federation and Ukraine (Bottom half)
  Huge potential and political interest Weak
  institutional structure
• Baltic States-JI market it rather small
• Croatia and Slovenia had low score on all
  indicators
• 10 Countries in transition (Annex I and non-Annex
  I) from the region joined EU on 1 May, 2004. Now
  they are eligible and have to obey the EU Linking
  Directive.

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• Beginning of 2003
• Romania
• Slovakia
• Czech Republic
• Poland
• Hungary
• Bulgaria
• Russian Federation
• Estonia
• Ukraine
• Latvia
• Lithuania
• Slovenia
• Croatia

• Beginning of 2004
• Romania
• Bulgaria
• Slovakia
• Czech Republic
• Hungary
• Poland
• Estonia
• Russian Federation
• Ukraine
• Latvia
• Lithuania
• Slovenia
• Croatia

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The EU Linking Directive

• 10 countries are already EU members (three
  pending)
• Final agreement April 2004
• Accounting of CERs and ERUs in EU ETS
• EU ET System doesnt depend on ratification of
  Kyoto Protocol
• Restricted use of CERs/ERUs by operators (
  defined in NAP
• No nuclear, no sinks projects are eligible
• Use of CERs from 2005
• Use of ERUs from 2008.

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Distribution of JI projects by host countries

• EE projects are most attractive. 11 CEE countries
  have reported AIJ projects on EE
• Fuel switch and Renewables are next after EE. 6
  countries reported projects for these sectors
• 2 countries (Russ., Czech.) have AIJ projects in
  A/R and forest preservation sectors. No
  agriculture
• In total reported to the UNFCCC Secretariat AIJ
  projects 60 (30)? Are from CEE region.
• For 17 JI projects emissions transfer has been
  already agreed. Romania-5, Estonia-5, Hungary-2,
  Bulgaria-1, Czech Republic-1, Latvia-1, Poland-1,
  Slovakia-1

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• 13 countries in transition from CEE are non-Annex
  I Parties without any quantitative obligations on
  GHGs emissions reduction
• 5 CIS countries in transition from Asia are also
  non-Annex I Parties (Kazakhstan is special case)
• These countries are eligible only as host
  countries for CDM
• 19 countries of 32 mentioned (27-CEE/CIS and
  5-Asia/CIS) have ratified Kyoto Three countries
  have signed but not ratified yet.

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• 
  (Cont.)
• Only 5 of 18 potential CDM host countries in the
  region have already Designated National Authority
  (DNA), which is one of the criteria for countrys
  eligibility in CDM
• No projects have been implemented in these 18
  countries under the AIJ pilot phase launched in
  1995
• No projects are yet submitted for registration as
  CDM project from the region

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Key players in CDM process

• (Decision 17/CP.7, Modalities and Procedures)
• The COP/MOP shall further
• Review annual report of the executive board
• Review the regional and subregional distribution
  of designated operational entities and take
  appropriate decisions to promote accreditation of
  such entities from developing country Parties
• Review the regional and subregional distribution
  of CDM project activities with a view to
  identifying systematic or systemic barriers to
  their equitable distribution and take appropriate
  decisions, based, inter alia, on a report by the
  executive board

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• International process
• CDM Executive Board A member and an alternate
  from CEE region.
• Methodological Panel- 2 seats for CEE. Region can
  not provide experts.
• Roster of experts for assessment teams on
  baseline and monitoring issues. Only one expert
  from region (Meth. Panel member).
• Accreditation Panel-2 seats for CEE. No
  aplication has been received from region.

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• Roster of experts for accreditation assessment
  teams. No application has been received from
  CEE/CIS
• Accreditation of Operational Entities (OE/DOE)
  for Validation, Verification Certification. No
  application has been received from CEE/CIS No
  application from CEE/CIS.
• Baseline and monitoring methodology submission. 3
  of 64 Methodologies submitted are from CEE/CIS (2
  Moldova and 1 Uzbekistan). Not approved yet.

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• 
  (Cont.)
• Working group on afforestation and reforestation.
  Only one application (Poland)
• Working group on small-scale projects. Only one
  application (in first round).

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Barriers to CDM at international level in CEE/CIS

• Lack of technical experts in baseline and
  monitoring methodology
• Low awareness and not enough experience among the
  private companies, potential OE
• Lack of experts with significant experience in
  accreditation procedures
• Access to internet and other communication
  facilities
• Language.

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• National Process
• Eligibility Criteria for countrys participation
  in CDM
• (a) Party to Kyoto Protocol
• (b) Designated National Authority
• (c ) Voluntary Participation
• Eligibility Criteria for project as CDM
  project
• (a) Contribution in sustainable development
• (b) Additionality
• (c) Report on stakeholder comments
• (d) Assessment of Environmental Integrity

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Barriers to JI host countries

• GHGs national inventory is required for track 1
  JI
• For track 2 JI are eligible CEE countries until
  they have not established strong national systems
  for GHGs inventory
• Track 2 JI requires Supervisory Committee and
  similar procedures as CDM. CDM barriers existing
  at international level will be the same for JI
• Absence of national procedures for project
  national approval
• Not attractive investment environment
• Capacities of JI national focal points.
• Lack of bankable JI projects.

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Role of DNA and capacity needs

• Provide project participants (PP) with host
• country approval letters that
• Project contributes in host countriys
  sustainable development
• Countrys participation in project is voluntary
• In case if country participate in project through
  public/private entity the entity shall be
  authorized by country.

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• DNA should enable the environment for flexible,
  effective and successful implimenation of CDM
  projects
• Selection of CDM priority sectors
• Establishment of SD criteria
• Monitoring of EIA for each CDM project
• Providing the national guidelines to present PIN
  and PDD
• Issuance of approval letters
• Facilitation of the process of signing the MoU
  with different bilateral and multilateral CDM
  programmes.

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Barriers to the private sector when developing
the project

• Lack of in-country information and experience on
  the state-ofthe-art renewable energy and energy
  efficient technologies
• Lack of in-country capacity to develop bankable
  investment proposals, feasibility studies and
  business plans
• Data gaps and access to the necessary information
• Lack of an adequate legal and regulatory
  framework to support energy efficiency and
  renewable energy investments
• Lack of approved and functioning strategies and
  programs at the Government level for the long
  term, sustainable development of the economy
  sectors

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Financing problems faced by project developers

• Relatively small size of the projects, which
  make them less attractive to big, international
  financing organizations (high transaction costs)
• High perceived risks of developing and financing
  projects in Georgia, leading to high interest
  rates, short pay-back periods and difficulties in
  getting access to the financing in general
• Weak financial status of the local companies and
  problems in meeting the strict guarantee and
  collateral requirements of the possible
  financiers

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

• TACIS (Armenia, Azerbaiuan, Georgia, Moldova)
• Canada-CIDA(Azerbaijan, Kazhakhstan, Uzbekistan)
• Eastern Climate Change Network (ECCN) Project (11
  countries JI countries -7, CDM countries-4)
• WB NSS- Study on CDM Capacity Building
  (Uzbekistan)
• Regional project on inventory(12 countries
  CEE/CIS)

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Suggestion for UNDP future response

• Strengthening the capacity of DNA
• Improving the coordination while implementing the
  strategic programmes (such as EDPRS, MDG, long
  and short term programmes for renewable energy
  sector, EE measures, etc.)
• Strengthening the links between CDM and poverty
  reduction, public private participation
  programmes,
• Establishing the CEE/CIS regional training center
  (cources) for the experts
• -technical experts on methodological and
  accreditation issues
• -negotiators for international political and
  project level processes
• -priority should be given to experts already
  applied for different CDM bodies and been
  rejected because of lack of experience.

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• Investigation of barriers and potential of CDM in
  CEE/CIS region
• Increasing the assistance for improvement of data
  gathering systems, statistics and monitoring
• Implementation of plans developed in the
  framework of capacity needs self-assessment
  programmes is also very important
• Promote the participation of private sector in
  CDM public awareness
• Facilitate the stakeholder participation in
  decision making process.