Mechanism for voluntary mitigation of ghg emissions in colombia
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Mechanism for Voluntary Mitigation of GHG Emissions in Colombia. GEF and Carbon Finance Meeting Washington, DC - November 15 th , 2010. Content. Project Context and Rationale Justification of GEF Involvement Objective of the project and components Risks and challenges.

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Mechanism for Voluntary Mitigation of GHG Emissions in Colombia

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Mechanism for Voluntary Mitigation of GHG Emissions in Colombia

GEF and Carbon Finance Meeting

Washington, DC - November 15th, 2010


Content

  • Project Context and Rationale

  • Justification of GEF Involvement

  • Objective of the project and components

  • Risks and challenges


1. PROJECT CONTEXT AND RATIONALE

Supply of low-cost mitigation is limited

  • The international response to climate change and the increasing concentrations of GHG in the atmosphere has given a framework for pricing carbon into the economy

  • UNFCCC Kyoto Protocol  market mechanisms: Allowances (EU-ETS), CDM and JI

  • A regulated market with multiple barriers and unclear long-term signals

  • In this framework, access to carbon finance for developing countries is limited to mostly the CDM

  • Other emerging regulated markets: RGGI, NSW, WCI


1. PROJECT CONTEXT AND RATIONALE

  • While the voluntary markets still remain as a small fraction of the overall carbon market (1%), they have shown consistent growth in the last years

  • In 2009, the voluntary markets had transactions for a total value of $387.4M, 49% less than 2008.

  • The OTC represented 84% of this


1. PROJECT CONTEXT AND RATIONALE

  • Although pre-dating compliance markets, voluntary transactions of carbon offsets are gaining momentum due to:

    • CSR/Branding

    • Industry front-runners in Sustainability

    • Pre-compliance (very small)

    • Other climate-related policy, mainly through trade measures and information disclosure requirements (emerging)

  • During 2009, voluntary purchases of VERs remained primarily driven by private sector and NGOs for immediate retirement (48%)

  • Transactions occur primarily Over the Counter (OTC) or through an exchange (e.g.CCX)


  • Advantages

  • Reduced costs and time

  • Forestry and REDD projects are accepted

  • After the wild west, a “regularization” process has occurred:

  • - Verification and certification requirements

  • - Registration

  • - Uniformity of proprietary units transacted (standards)

  • Transparency, credibility and robustness

1. PROJECT CONTEXT AND RATIONALE

  • Disadvantages

  • Their non-regulated nature makes them volatile and with limited capacity

  • Highly affected by international and national policy frameworks

  • Higher risks of non-delivery and permanence

  • Limited capacity to have a large scale impact


2. JUSTIFICATION FOR GEF INVOLVEMENT

  • Although Colombia’s contribution to global GHG emissions is approx. 0.37% of the world’s total, the country’s emissions volume continue an upward trend

  • Many corporations have started including Climate Change within their Corporate Sustainability or Social Responsibility policy; yet only a few have started taking action or know what to do

  • Airline companies and others are preparing for stricter market regulations in the EU regarding their carbon footprint

  • Some companies have started their own GHG accounting efforts and offsetting programs, but with little credibility

  • Minimal capacity in the country for generation and commercialization of VERs, specially from the Forestry/REDD+ sectors

  • Lesser capacity for creating national transparent, credible and reliable market transactions


2. JUSTIFICATION FOR GEF INVOLVEMENT

  • Increasing interest from large scale companies to participate in a GHG carbon footprint mitigation and offsetting program

  • Increased interest from national consumers to offset their own carbon footprint

  • Supply awaiting market opportunities

  • Increased interest from international buyers in the country

  • Key national stakeholders, including the Stock Exchange and Mercantile Exchange have a mandate to open new business opportunities in the carbon markets


3. PROJECT OBJECTIVE AND COMPONENTS

  • Formulate and establish the technological and institutional platform basis for a Verified Emission Reduction Unit (VER) market mechanism to facilitate the voluntary mitigation of GHG emissions in Colombia, through:

    • creating a market platform for nationally produced VERs accessible to national or international buyers;

    • supporting the issuing of VERs from agriculture, forestry and/or REDD projects developed in Colombia; and

    • fostering local demand of VERs through corporate carbon mitigation and offsetting strategies


Certification and Issuance

(VCS, CCB, VER+)

Registry

VERs supply

Offsets/VERs Demand

  • Recognition and training program for Companies that supports GHG accounting, mitigation and offsetting

  • Promotion campaign to sensitize consumers and possible international buyers

  • Incentives to support corporate engagement

  • Capacity building for MVR

  • Support in the verification, validation, certification, registry and commercialization

  • Financing instruments to support implementation

  • Marketing and promotion

3. PROJECT OBJECTIVE AND COMPONENTS

INTERNATIONAL

NATIONAL

VER

market platform


3. Risks and challenges

  • Low market take from national buyers --> low prices may make mitigation efforts unworthy

  • Narrow and sporadic supply of VERs going to national markets

  • Companies are more interested in selling their own VERs than in offsetting

  • Slow market growth makes it unviable in the mid-term

  • Regulated markets take off again, driving prices up


4. Summary

  • Current efforts in the international arena appear to be insufficient for providing the right incentives in pricing carbon into the economy

  • Developing countries have a large range of low-cost mitigation options which are being untapped due to access to carbon finance, particularly VERs markets

  • This project aims at catalyzing the conditions for a market of colombian-based VERs through comprehensive and sound processes and technologies, within the principles credibility, transparency and competitiveness


THANK YOU !

Carolina Jaramillo

IDB-GEF Technical Focal Point

carolinaj@iadb.org


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