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Assessing Investment & Financial flowsfor Mitigation in the ENERGY Sector
UNDP I&FF Methodology Guidebook: Mitigation
Gambia 11-13 November 2009
Relevance of energy sector Primary source of global greenhouse gas
(GHG) emissions Emissions from this sector have grown faster
than those in any other sector since 1970, and will continue to be the largest source of global GHG emissions.
Energy sector key to development: energy-related GHG emissions are growing fast in most highly dynamic (high growth) developing countries
Some mitigation options bring important local co-benefits: energy security, low cost energy options, improved local environmental and health conditions, etc.
Characteristics of energy sector in Gambia
In Gambia, the energy sector accounts for 1593.39 Giga grams (Gg) of CO2 in 2006 compared to 885.7 Gg of CO2 in 1995
This is an increase 707.69 or 80% increase in CO2 over the period
Residential sector account for 78%, transport sectors 11% and and electricity generation 8%
The energy sector, which is now the most polluting sector, could contribute significantly in mitigating national GHG emissions with adoption of mitigation options.
Energy needs in rural areas are largely met by biomass fuel. Supply of wood for fuel is increasing due to bush encroachment in some parts of the country
I&FF ASSESSMENTSUMMARY OF KEY STEPS
Establish key parameters of assessment (scoping)
Collect data (historic- present - projections) Define baseline scenario and associated I&FF Define CC (mitigation) scenario and
associated I&FF Estimate incremental I&FF to implement
mitigation Evaluate policy measures
Define scope & boundaries for the assessment What are the key subsectors to be
included? Define the institutional framework Specify the time horizon for the
analysis: 2005-2030 recommended, base year 2005 recommended
Build on existing model for the sector where possible
1. Establish key parameters of the assessment
Define boundaries for the assessment1. Establish key parameters of assessment
Subsectors Data availability
Investment (baseline & prior 10 years)
Priority in mitigation scenario
High Medium
Low Rank
Fossil-fired generationTotal electricity
Oil supply
Gas supply
Coal supply
Petroleum refining
Electricity, gas distribution and water supplyGas distribution
Nuclear generation
Transmission and distributionRenewables including Large and small hydro
Example list of subsectors for screening and prioritization
Focus: Local data at adequate aggregation level to identify investment types (e.g. wind energy facilities, biomass fired power plant, etc.), public programmes (e.g. energy efficiency program to replace incandescent bulbs), their costs and financing sources
Recommended options: Sector investment & public programmes data, projections and development plansGHG Inventories, National Communications to UNFCCC
2. Compile historical I&FF data and other input data for scenarios
Data collection, rely on national accounts data
The System of National Accounts (SNA) constitutes the primary source of information about the economy
Systems of integrated environmental and economic accounts (SEEA) were developed to address statistical gaps
2. Compile historical I&FF data and other input data for
scenarios
Data collection, rely on national accounts data
Examples of I&FF data disaggregation in each sub-sector
Define the physical basis for the Baseline Scenario
A baseline scenario: description of what is likely to occur in the absence of ADDITIONAL policies to address climate change; expected socioeconomic trends (e.g., population growth and migration, economic growth), technological change (if relevant), and expected business-as-usual investments in the sector.
3. Define Baseline Scenario
3. Define baseline scenario
Characterizing baseline for each relevant energy supply and energy end-use subsector over the assessment period. Assuming no new climate change policies
are implemented Baseline scenario reflects
Current sectoral and national plans Expected socioeconomic trends Expected investments in the subsectors
Use of available model/s (e.g. used for National Communication) may facilitate scenario definition
Define baseline scenario
3. Define baseline scenario
Define physical basis for the Baseline Scenario
Information should be disaggregated by: year (starting 10 years before the
assessment’s Base Year) source (by corporations and
government) type (national funds, foreign direct
investment, official development assistance)
3. Define baseline scenario
Define physical basis for the Baseline Scenario
Energy scenarios used so far in Gambia:
Climate change scenarios the inventory was calculated using methodologies recommended in the GHG inventory reference manual produced by the IPCC.
This inventory used 1993 as the base year because more data was available that year than any other. In fact specific surveys were conducted in 1993 to generate data needed for the inventory exercise.
National Energy Policy, Strategy and Action Plan developed in November 2001
Compile annual estimates, disaggregated by investment entity, source, investment flow type, and financial flow type & disaggregate costs of conventional and unconventional sources of energy
Calculate the total investment cost in real, unannualized terms over the planning period
Estimate annual investment costs associated with the new plan
Develop a breakdown of total investments into major categories (e.g., ODA, FDI, domestic funds)
4. Derive I&FF for baseline scenario
4. Derive I&FF for baseline
scenarioEstimate annual I&FF
Cumulative investment(2005-2030)
Funding entity category
Source of funds (billion2005 $)
(%)
Governments Domestic funds (budgetary)
Foreign borrowing (loans)
Foreign aid (ODA) Domestic equity Foreign investment Domestic debt Foreign borrowing Government support Foreign aid (ODA) Total
Adding costs to baseline scenario
Mitigation scenario: incorporates measures to reduce GHG emissions
The mitigation scenario should describe expected socioeconomic trends, technological change (if relevant), relevant measures to mitigate GHG emissions, and the expected investments in key areas of the energy sector (e.g. end-use and supply subsectors) to implement those mitigation measures.
Costing tools and international information sources may help to identify I&FF needs for different mitigation options
5. Define Mitigation scenario
5. Define mitigation scenario
Category of Mitigation Measure
Energy Supply Measures Energy End-Use Measures
Reduce Combustion Emissions
Reduce Fugitive Emissions
Reduce Combustion Emissions
Reduce Energy Demand
Improve efficiency of energy use
Efficiency improvements in energy supply processes
Efficiency improvements in energy end-use technologies
Energy conservation measures
Reduce emissions per unit of energy production or use
Switch to lower carbon fuels
Switch to lower carbon fuels
Switch to alternative energy sources
Switch to alternative energy sources
Reduce fugitive losses (including recovery and use)
Energy Sector Mitigation Measures
5. Define mitigation scenario
Energy Sector Mitigation Measures
Options identified in the Initial National Communication of Gambia
Promote energy efficiency and reduce energy use as well as use of renewable energy
Replacement of firewood/charcoal by LPG for domestic energy, revitalization of river transport.
Greenhouse gas abatement using improved cooking stoves to reduce fuel wood consumption
5. Define mitigation scenario
Two approaches to define Mitigation Scenario
Approach #1: assume an end point for energy supply emissions E.g. setting a target in 2030 for emissions
from the energy supply sector Approach #2: assume a set of
technologies for energy supply: E.g. Review national potential for energy
policy that articulate a set of technological options, such as renewable energy, and other carbon-reducing options to meet future energy demand.
Compile annual estimates, disaggregated by investment entity, source, investment flow type, and financial flow type
Estimate annual investment costs associated with the alternative management plan
Calculate the total investment cost in real, unannualized terms over the planning period.
Develop a breakdown of total investments into major categories (e.g., ODA, FDI, domestic funds)
6. Derive I&FF for Mitigation Scenario
Projecting Investments6. Derive I&FF for mitigation scenario
Adding costs to mitigation scenarioCumulative
investment(2005-2030)
Funding entity category
Source of funds (billion 2005 $)
(%)
Households Equity and debtGovernments Domestic funds
(budgetary)
Foreign borrowing (loans)
Foreign aid (ODA) Domestic equity Foreign investment Domestic debt Foreign borrowing Government support Foreign aid (ODA) Total
Subtract the baseline annual I&FF, by entity and source, from the mitigation annual I&FF, by entity and source.
Subtraction of the Baseline Scenario from the Mitigation Scenario.
Sum incremental amounts over all years, by entity and source.
7. Estimate changes in annual I&FF needed to implement adaptation
[
Subtract the baseline annual I&FF from the mitigation annual I&FF
7. Estimate changes in
annual I&FF needed to implement mitigation
For each chosen energy mitigation option, the analysis should identify the incremental investment (total dollars) by source (domestic funds, ODA, FDI etc.) up through 2030 necessary for its implementation
[
Summarizing incremental investments
7. Estimate changes in annual I&FF
needed to implement mitigation
Investment (billion 2005 $)
Cumulative (2005-2030)
Incremental
Funding entity category
Source of funds Baseline scenario
Adaptation Scenario
Households Equity and debt Baseline value
Adaptation value
Baseline minus Adaptation value
Governments Domestic funds (budgetary)Foreign borrowing (loans)
… … …
Foreign aid (ODA)
… … …
Domestic equity … .. …Foreign investment
… … …
Domestic debt … … …Foreign borrowing
… … …
Government support
… … …
Foreign aid (ODA)
… … …
Total Sum(Baseline)
Sum (Adaptation)
Sum (Baseline minus Adaptation)
Objective: Analyze additional efforts, funding and policy needs to implement measures identified in the mitigation scenario
Determine policy instruments and measures to encourage changes in I&FF
Identify the entities that are responsible for the significant incremental changes in I&FF
Determine the predominant sources of their funds, particularly important to distinguish between public and private sources of finance
8. Evaluate policy implications
Assess contribution and suitability of different policy options given country conditions
8. Evaluate policy
implications
Examples of mitigation & policy option Policy options
Mitigation measure
Economic Instrument
Regulations
Information
provision
Other instruments
Energy efficiency Improvement
Energy taxTradable permitsFiscal incentives for efficient appliances
Performance standards for electric applicances
Information campaignsLabelling of energy efficient equipment
Voluntary AgreementsR&D programme (to develop more efficient technologies)
Energy source switching (e.g. substitute biomass for fossil fuels)
GHG taxTradable permits
Power plant fuel portfolio standards
Information provision/campaigns
R&D programme (e.g. to develop Hydrogen)
Increased Renewable Energy Capacity
Capital grantsFeed-in tariffsTradable permits
Renewable targets
Green electricity validation
Voluntary Agreeements
For more information on synthesizing results, documentation & the completion of the report, please refer to the Reporting Guidelines
9. Synthesize results and complete report
Additional Information Possible models and methods
Name Developer
Platform
Metho-
dology
Cost (US$)/
Licensing
Web Site/Contact
Description
CO2DB IIASA, Windows Database
Free WWW.IIASA.AC.ATdowds@iiasa.ac.at
Database of CO2 emitting energy technologies
ENERGY COSTING TOOL
UNDP Excel Accounting
Free WWW.UNDP.ORGMINORU.TAKADA@UNDP.ORG
Estimates the amounts and types of energy investments required to meet the Millennium Development Goals
ENPEP Argonne National
Windows Various Depends on modules used and type of institution.
WWW.DIS.ANL.GOV GUENTER@ANL.GOV
Suite of Models for Integrated Energy/Environment Analysis
HOMER National Renewable Energy
Windows Optimization
Free www.nrel.gov/homer
Design of off- and on-grid electrification options
LEAP Stockholm Environment Institute
Windows Physical Accounting, Simulation
Free to qualified users from developing countries.
WWW.ENERGYCOMMUNITY.ORGLEAP@SEI-US.OR
Integrated Energy/Environment Analysis
… … … … … … …
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