Colombia Final Market Readiness Proposal May 25, 2014 PMR - - PowerPoint PPT Presentation

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Colombia Final Market Readiness Proposal

May 25, 2014

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

MRP focus and objective

The MRP is aimed at developing carbon market instruments in Colombia’s transport sector. Final MRP contains same instruments as draft:

• (i) Credited NAMAs in the urban transport

sector;

• (ii) Domestic offset scheme
• (iii) Assessing the introduction of a

performance standard for vehicles combined with allowances

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 3

 MRP draft presentation (Mexico)  PMR Colombia team discussions and own summary of

issues

 Discussion with PMR consultants on issues where

clarification was sought

 Development of new version for internal review  PMR feedback received  PMR feedback responded and included into final MRP  Final MRP produced  Discussion with high-level government stakeholders in 4

ministries (MoT, MoE/MADS, DNP, MoF)

 Assessment of PMR fund operationalization

Process of Revising MRP

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 4

 DNP, MoE and MoT provide greater feedback as to

past and current projects, which help structure counterpart funding:

• Sustainable transport policy concept (MoT)
• Performance standard assessment (MoE/MADS)
• Carbon tax (DNP)

 Government cooperation agency created and

involved in assessment of PMR funds

• perationalization

Update on Context

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 5

Issue / question Response Clarification sought on the difference between domestic offset scheme and NAMA crediting Covered via seeking avoidance of double-counting A little bit puzzled on ‘performance standard & ‘feebates’, and its potential During implementation a study is previewed which shall look at different systems for performance standards and different experiences thereby suggesting a system apt for Colombia and learning from other experiences Offset scheme would be financed by national public monies? Not public monies as these do not enter the general budget but are earmarked taxes Clarify the offset part of the compensation/offset scheme Buyers are the fund itself which receives the money from the fuel tax i.e. indirectly the Colombian fuel users buy Colombian transport offsets thus the transport sector itself cleans up some of its emissions (new diagram included) The price of fuel might influence the consumers’ choice of vehicle technology and the choice of private vs. public transport. These “effects” are already included in the estimated

• elasticity. The effect of mode-switch, if it actually occurs,

would be reflected in lower fuel consumption and covered with the elasticity. It might be an efficient instrument in terms of low transaction cost and simplicity but not a useful instrument to reduce GHG emissions

Feedback and responses

“domestic offset scheme”:

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

BB1: The Big Picture

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

ENREDD+ ECDBC EPFD PNACC

National Development Plan 2010 – 2014 (CONPES 3700 / 2011: Policy for Climate Change)

The Colombian Low Carbon Development Strategy The REDD+ National Strategy The Strategy for financial protection against natural disasters The National Adaptation Plan for Climate Change,

Climate policies

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

BB2: Policy framework

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Conclusions of instrument assessment

• NAMAs could be established for urban transport projects

as well as for CO2 performance standards of vehicles.

• A domestic offset scheme, funded by the income from a

low carbon levy, could be implemented at the same time

• r in a 2nd step.
• A stand-alone carbon tax in the transport sector, or the

inclusion of transport in an ETS, are not considered viable

• A performance standard is considered as an interesting

instrument and can be effectively combined with a MBI based on allowance or permit trading.

• Work in Colombia on NAMAs, compensation funds,

performance standards strengthen the implementation

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

BB3: Core Technical and Institutional/Regulatory Market Readiness Components

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Proposed institutional setup for PMR implementation

NAMA Entity & Domestic Offset Administrator

UMUS

Program / NAMA Participant 1

Municipality

Program / NAMA Participant 2

Private Transport Company

Program / NAMA Participant 3

Transport PPP

Second-Level Verificator

ICONTEC/Expert Panel

Fiduciary & Fund Financial Manager

APC or UMUS

Management Board

Inter-Ministerial Committee

MinTrans

UMUS

MinHac

CONFIS

MADS

DCC

DNP

DIES

Liaison to UNFCCC

DCC

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Proposed financial setup for MBI management

tbd

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

BB4: Planning for market- based Instruments in Colombia’s transport sector

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

• 1. Scaled-Up GHG Crediting Instrument for Transport

NAMAs

• NAMAs developed following a standardized

and structured step-wise development

• methodology. Proposed:

– urban transport NAMA, – NMT/TOD NAMA (NMT+) – vehicle performance standard NAMA

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Existing transport NAMAs in Colombia

Action Stage Sector Sub-sector Objective Improvement of road-based freight sector Proposal/Planning Transport Road vehicles cargo Accelerate the renovation of the cargo vehicle fleet with the aim to improve economic competitiveness and environmental performance of the freight transport sector Electric vehicles NAMA Concept Transport road vehicles cargo and passenger Substitute conventional vehicles with electric

• vehicles. The penetration of electric vehicles

should reach 20% for the passenger sector, 30% for taxi fleets and 30% for urban freight. Transit-oriented development Concept Transport Passenger transport Integrate climate change mitigation variables into local land-use plans and urban planning. Supported by NAMA Facility. Non-Motorized Transport idea Transport NMT No specifics yet Urban Transport idea Transport Passenger transport No specifics yet Demonstration and assessment of battery-electric vehicles for mass transit in Colombia Pilot studies (being analyzed with GEF cooperation) Transport Passenger transport Promote battery-electric, large-capacity vehicles for mass transit in Colombia by means of removing technology, regulatory, awareness and financial barriers, as a measure to reduce GHG emissions and improve local air-quality Low-carbon and Efficient National Freight Logistics Initiative Pilot studies (being analyzed with GEF cooperation) Transport Freight transport To reduce GHG and criteria pollutants emissions from freight transportation operations in Colombia

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

• 2. Domestic Offset Instrument for Transport
• National compensation fund

for domestic transport

• ffsets.
• Compensation fund

financed from a carbon tax

• n transport fuels
• Funds used to finance

domestic reduction projects in the transport sector.

• Carbon levy would partially

replace the fuel surplus tax (see graph)

75 75

25 24.5

0.5

20 40 60 80 100 120

Existing fuel price composition Proposed fuel price composition

carbon tax Surcharge Regular cost

Indicative exercise with 1 USD / liter consumer price (w/ 0.5 cent carbon tax/levy)

bajo, cuantos ‘ ’

2012 gasoline price: 128 c/ l

levy

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Offset fund/credits logic

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

• 3. Performance

Standard for Vehicles with Permit/allowance trading

• Performance standard for vehicles combined with allowances
• Allowances can be traded between importers and producers.
• EU: maximum CO2 emissions per km for car fleets (manufacturer or

importer level).

• Legislation sets binding emission targets for new car and van fleets.
• Only fleet average is regulated: manufacturers balance vehicles w/

emissions above the limit value curve and vehicles below the curve.

• If average CO2 emissions of a manufacturer's fleet exceed its limit

value in any year, it has to pay an excess emissions premium for each car registered

• Based on the penalty price, importers or manufactures can therefore

have an incentive to sell cars with low GHG emissions with a lower profit rate and put a levy on cars with higher GHG emissions (avoiding the penalty).

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

An example scenario

146.67 177.50 125.00 50 100 150 200 250 300

Car A1 Car A2 Car A3 Fleet Average Car B1 Car B2 Car B3 Car B4 Fleet Average Car C1 Car C2 Car C3 Fleet Average Importer A Importer B Importer C

Example: Vehicle emissions (grCO2/km)

150 grCO2 max trading

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

BB5: Organization, Communication, Consultation and Engagement

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Key agencies

Main agencies involved

• Ministry of Environment and Sustainable Development (MADS)
• Ministry of Transportation
• Ministry of Finance
• National Planning Department
• APC (Government Cooperation Agency)

Others identified as relevant agencies:

• Ministry of Mines and Energy
• Ministry of Industry, Commerce and Tourism
• Ministry of International Commerce

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Capacity needs to be addressed

ID Capacity Building Area Description 1 Baseline setting, GHG ER estimation, SD valuation and MRV principles Methods of baseline setting in transport; determination of ERs including baseline, project and leakage emissions; identification and quantification of SD impacts; MRV elements. 2 Management Domestics Offset (DO) fund Key aspects and guidelines for managing a DO fund including project identification, project approval process, control, guidance documents, QA, communication strategy, reporting etc. Includes initial training and follow-up / hand-holding 3 NAMA Operation and Management UMUS will have to train its staff and develop internal guiding documents to operate the NAMAs 4 Verification: Training of Trainers UMUS/ICONTEC will need to train validators / verifiers. This TA will prepare them to be trainers. 5 NAMA / Domestic Program IT System Operation UMUS will have to use IT-based solutions to manage, record and track progress of the Domestic Offset Program and the NAMAs 6 Knowledge Management (KM Strategy Operation The IT Program mentioned above should contain KM provisions and UMUS will have to be trained specifically on using those to avoid losing the acquired capacity.

7 Local level

Capacity building at the local level on issues of carbon market instruments in transport sector, where relevant

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

MRP budget, counterparts, timeline, and assessment of fund

• perationalization

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 29

Activity Deliverable Timing Funding

MBI 1: NAMA Development Urban public transport NAMA development NMT+ NAMA development Performance Standard NAMA development External validation of NAMAs 3 entities Overall Budget $1,200,000 Request to PA $100,000 MBI 2: Domestic Compensation Fund Detailed fund structuring Development of guiding documents and templates Procedures and guidelines for assessing baselines Overall Budget $550,000 Request to PA $140,000 MBI 3: Performance Standard for Vehicles Study to assess international experience Stakeholder involvement for performance standards Detailed MRV system for implementation Overall Budget $100,000 Request to PA $150,000

Activities, Deliverables, timing and Funding for PMR (1)

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 30

Activity Deliverable Timing Funding

Capacity Building Packages Baseline setting, GHG ER estimation, SD valuation and MRV principles Management of the Domestics Offset fund NAMA Operation and Management Verification: Training of Trainers IT System Operation Knowledge Management Overall Budget $400,000 Request to PA $200,000 Operation of MBI Management Entity Development of manual for costing, management of entity and running MRV Training to potential participants to the DO Program Overall Budget $1,300,000 Request to PA $900,000 MRV development Baseline Determination Monitoring Verification Overall Budget $1,650,000 Request to PA $1,150,000 Communication and stakeholder engagement Communications strategy Consultation mechanisms Capacity building and knowledge management Overall Budget $700,000 Request to PA $360,000

Activities, Deliverables, timing and Funding for PMR (2)

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Timeline (1)

ID Activity Year 1 Year 2 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 MBI 1: NAMA Development 1 Urban public transport NAMA development, including baseline studies (fuel efficiency studies, occupation rate studies), MRV concept and financial structuring 2 NMT+ NAMA development, including baseline, MRV concept, household survey design and approach and pilot household surveys and financial structuring 3 Performance Standard NAMA development, including regulatory assessment, baseline setting, MRV concept and financial structuring 4 External validation of NAMAs 3 entities MBI 2: Domestic Offset Scheme 4 Detailed fund structuring, including regulations and work concept 5 Development of guiding documents, templates for project development, validations and verifications 6 Procedures and guidelines for assessing baselines, emission reductions and MRVs for domestic offset programs MBI 3: Performance Standard for Vehicles 6 Study to assess international experience with performance standard and design possible approaches for Colombia 7 Stakeholder involvement for performance standards 8 Establishment of a detailed MRV system for implementation

mantenerlas ‘ ’ y para dar el

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

Timeline (2)

ID Activity Year 1 Year 2 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Capacity Building Packages 9 Baseline setting, GHG ER estimation, SD valuation and MRV principles 10 Management of the Domestics Offset (DO) fund 11 NAMA Operation and Management 12 Verification: Training of Trainers 13 NAMA / Domestic Program IT System Operation 14 Knowledge Management (KM System Operation) Operation of MBI Management Entity 15 Administration costs: Set-up, training of dedicated staff,

• perational costs (NAMA Entity)

16 Staff and office costs UMUS for MBI program 17 Management costs: Document management, GHG accounting, issuance, tagging and certification of generated ERs, cost of

• ther decision-support tools

18 Marketing & Communication Costs 19 Training to potential participants to the DO Program/NAMAs

• n the type of projects, methodologies, GHG ER and SD

calculations, etc. 20 IT management 21 Costs for running MRV system TOTAL

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

MRV timeline

ID Activity Year 1 Year 2 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Baseline Determination 1 Occupation rate studies 2 Fuel efficiency studies 3 Overall baseline urban transport 4 Household survey design and approach 5 Household surveys (pilots) 6 Overall baseline NMT+ Monitoring 7 MRV detailed approach urban transport 8 MRV detailed approach NMT+ 9 Passenger surveys year 1 (4 cities) 10 Household surveys year 1 (4 cities) 11 Monitoring report urban transport year 1 12 Monitoring report NMT+ year 1 Verification 13 Detailed system design incl. procedures and templates 14 Capacity building verifiers 15 Capacity building registry 16 Cost validations international (2 units)

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

BB5 activities timeline

ID Activity Year 1 Year 2 Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 1 Communications strategy 2 Consultation mechanisms 3 Capacity building and knowledge management

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 35

Summary of Total PMR Funding Request for Implementation Phase

Issue / component Total Budget Request to PA

MBI 1: NAMA Development $1,200,000 $100,000 MBI 2: Domestic Compensation Fund $550,000 $140,000 MBI 3: Performance Standard for Vehicles $100,000 $150,000 Capacity Building Packages $400,000 $200,000 Operation of MBI Management Entity $1,300,000 $900,000 MRV $1,6500,000 $1,150,000 Communication and stakeholder engagement $700,000 $360,000

TOTAL

$6,200,000 $3,000,000

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 36

 Colombia acknowledges the need to review options

to potentially receive funds from PMR

 Work has moved forward in evaluating how to

• perationalize the funds, to avoid delays in

implementation

Steps taken towards operationalization of PMR Fund

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

How to operationalize PMR funds?

• Assessment developed PMR Colombia team

– Fiscal year, assignment of funds – Previous experience from MoE – Existing funds and executing agencies – Advise from governmental entities, World Bank

PMR Partnership Assembly – Cologne, Germany May 25-27, 2014

How to operationalize PMR funds?

General

• ption

Pro’s Con’s Assessment Single entity – APC (Col coop agency) Available budget allocation 2015 Can receive and administer funds Not WB approved Adds one step to contractual process Once WB approval is done, best

• ption.

Single entity – UMUS WB approved executing entity

• Not enough

2015 budget allocation

• May not be able

to receive funds Second best option Multiple entities (MoT, MoE, DNP, MoF) Directly with each entity involved Very difficult to

• perationalize

Last resort