Draft Market Readiness Proposals (MRP) Presentation MEXICO MR… · Mexico's Draft Market Readiness Proposal (MRP) (October 2012) 9 Historical and Projected emission trend Mexico´s

Mexico's Draft Market Readiness Proposal (MRP) (October 2012)

Draft Market Readiness Proposals (MRP) Presentation

MEXICO

SEMARNAT Ministry of Environment and Natural Resources

October 2012


2

Overview MRP Objective(s) and Focus

MRP Development Process

Market Readiness Proposal 1. Policy Context and the Big Picture

2. MRP Target Areas: Assessment and Rationale

3. Core Technical and Institutional Readiness Components, including Regulatory Components

4. Planning for a Market-based Instrument

5. Organization, Communication, Consultation and Engagement

6. Schedule and Budget

Outline of Template


3

Overview


4

MRP Objectives and Focus

1. Contribute to reach the voluntary pledge of Mexico regarding GHG emissions reduction

2. Create additional mitigation interventions to what its ongoing or planned

3. Prepare 3 NAMA proposals in relevant sectors for their implementation & creation of ERs

4. Estimate their implementation cost, mitigation potential & co-benefits


5

MRP Development Process

ANFAD: National Association of Domestic Appliances Manufacturers BANOBRAS: National Bank of Public Works CICC: Inter-Ministerial Climate Change Commission CONAVI: National Housing Commission DRN: Domestic refrigerators NAMA GOM: Government of Mexico IE: International Experts UTN: Urban transport NAMA UN: Urban NAMA WB: World Bank


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Market Readiness Proposal


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1. Policy Context and the Big Picture


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Institutional and Policy framework

• First National Communication to the UNFCCC includes first national inventory 1990 1997

• Creation of the CICC (Inter-Ministerial Climate Change Commission) 2005

• Publication of the Climate Change National Strategy 2007

• Publication of PECC (Special Climate Change Program) 2009

• Publication of the General Law for Climate Change (LGCC), 5th Nat. Comm. to UNFCCC 2012


9

Historical and Projected emission trend

Mexico´s 2006 GHG emissions inventory accounted for a total of 709 million tCO2e.

Estimated growth of Mexican GHG emissions

• 2020 –24%

• 2030 –37%

• 2050 –54%

0%

10%

20%

30%

40%

50%

60%

70%

Transport Powergeneration

Industrialgases

Waste andagriculture

Expected emissions growth on relevant sectors (base year 2006)

2020 2030GHG 2010: 748.2 MtCO2e

5NC (2012)


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Mitigation pledge

PECC goal to reduce emissions in 51 MtCO2e/year in 2012 Expected accomplishment 53 MtCO2e/year (104%)


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Mitigation pledge

18.03

11.87

15.29

5.46

Energy production Energy use Land use Waste

0

2

4

6

8

10

12

14

16

18

20

MtC

O2e

PECC’s mitigation goal per sector

MtCO2e 11.87

MtCO2e

15.29 MtCO2e

5.46 MtCO2e


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Distribution opportunities for mitigation actions

Expand PECC actions and create new ones to achieve 30% reduction from BAU


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Carbon market

Limited access to CDM market • European Union (largest purchaser of CERs) will limit buying credits from

LDCs.

• Mexico ranks 5th in CER’s issuance Mexico is willing to participate in new market instruments including NAMAs & NMM

• Aims to accomplish voluntary mid- and long-term reduction goals.

Design a National Office for NAMA management.

Create a NAMAs registry system: permitting accountability of emission reduction sold through crediting.


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2. MRP target areas


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Selected areas

3 Crediting NAMAs proposed by Mexico for PMR assistance: 1. Housing-Urban 2. Appliances refrigeration 3. Urban Transport

Initial NAMAs portfolio Interested donors & sectors: 1. Appliances (refrigeration) 2. Appliances (washing machines) 3. Housing-Urban 4. Urban Transport 5. Freight Transport 6. EE in SMEs 7. Cement 8. Chemical Industry 9. Mining 10. Municipal waste to energy 11. EE oil and gas

Interested donors plus government and sectors under negotiation phase: 12. Steel Industry 13. Pulp and Paper Industry


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Criteria for selection

Main Criteria:

- Environmental challenges

- Economic benefits

- Social benefits

- Country capabilities

- Alignment to national priorities

- Strong commitment of stakeholders for collaboration

- Involvement of private sector & local governments

- Existing institutional and financial capacities of previous programs

- Selected sectors & mitigation potential aligned with national priorities

- National Scope

- Replicability in other sectors or regions

- Synergies among NAMAs


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Rationale of urban transport NAMA

Objectives

Mitigate GHG through optimization of public transport systems in high density urban centres based on UTTP & PROTRAM • PROTRAM (Federal Mass Transit Program) - promotes investment in mass

transit through federal financial participation and loans

• UTTP (National Urban Transport Transformation Project) - finance projects of less than 500,000 inhabitants and complementary infrastructure


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Current situation • Transport sector emits 20% of GHG emissions • Uncontrolled expansion of urban areas • Gasoline subsidies disincentivize use of public transport

Policy framework - General Climate Change Law (LGCC) mandates:

• Integrated & Sustainable Mass Transport Systems • Non-motorized transport infrastructure • EE Standards for new light and heavy duty vehicles


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NAMA components Use revenue from carbon credit sale to promote:

• Mass Transit Systems • Optimization of existing routes • Vehicle technology & alternative fuels • Non-motorized transport • Transport Demand Management (parking, car-sharing) • Intelligent Transit Systems

Non- GHG benefits • Reduces travel times & sedentarism • Reduces air pollution & decreases health impacts • Reduces traffic fatalities & injuries • Reduces congestion • Promotes energy conservation • Money savings to the government (subsidies) and end user


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Rationale of domestic refrigerators NAMA

Objectives

Nationwide accelerated penetration of HFC´s free energy efficient domestic refrigerators


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Current situation

• Cambia tu Viejo por uno Nuevo – seeks refrigerators replacement with 10 or more years with energy efficient appliances. FIDE offers a credit with a preferential rate, charged through the electricity bill

• The Montreal Protocol established the phase-out of the CFCs introducing the HFCs

Policy framework

Law for Sustainable Use of Energy (LASE)

• National Program for Sustainable use of Energy

• National Commission for the Efficient Use of Energy

• Advisory Council for the Sustainable Use of Energy

• National Information Subsystem

Energy efficiency standards - NOM

• Energy efficiency & user safety requirements for commercial refrigeration equipment

• Energy efficiency & freezer appliances limits, test methods and labeling



22


Elements of the NAMA Use revenue from carbon credits sale to promote:

• Phase-in of HFC-free energy efficient technology to cover 100% of domestic market

• Replace old HFC based refrigerators • Recover & destroy HFC refrigerant from old refrigerators

Non- GHG benefits • Environmental co-benefits - mitigation of criteria pollutant

emissions from power generation • Energy savings for users ($) • Reduced cost of subsidies from

electricity tariffs

NOx SOx PM2.5/10


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Rationale of urban NAMA

Objectives

• Reduce demand for delivered services • Improve emissions efficiency of delivered services • Achieve credited GHG emissions reductions through deployment

of sustainable urban communities at national scale

http://www.gcdusecc.com/inmobiliaria/images/stories/h2.jpg


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Current situation • Housing developers purchase cheap land for urban centers • Urban centers built with poorly implemented municipal services • Population will grow to 160 million in 2050 • 11 million new residences required by 2030 • “Hipoteca Verde” & “Esta es tu casa” mortgage programs provide loans

to cover incremental cost of energy-efficient appliances in new homes

Policy framework - LGCC Promotes: • Sustainable production & consumption patterns • Energy efficiency practices & renewable energy • Compliance urban development plans: energy efficient

and mitigation criteria • Issuance of regulatory provisions for construction

of sustainable buildings


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Elements of the NAMA

• Implementation of payments for environmental services based on sale of carbon credits

• SEMARNAT and CONAVI will create standards & technology packages that community developers & urban planners will use to access supplementary funding

• Training for builders so that they can properly install, operate & maintain low carbon technologies

Non GHG Benefits

• Improve quality of life • Promote economic development • Support domestic industries



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3. Core Technical and Institutional Readiness Components


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Existing data sources used for the proposal

• SIAT-PECC - GHG mitigation registry of PECC

• RETC - Pollutant Release and Transfer Registry

• Programa GEI Mexico - voluntary report of corporate GHG inventories and mitigation actions

Data sources


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• Developed & operated by SEMARNAT

• Being reliable & nation-wide data base (projects and transactions)

• Objectives - ensure project tracking, avoid double counting & funding

• Includes projects in voluntary markets, bilateral schemes & future NMM

Registry/Tracking tool characteristics


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Registry/Tracking tool description

Governance structure: SEMARNAT Criteria for register • Crediting action • Developed in/for Mexico Functions • Registration • Information extraction • Comparison with other schemes


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4. Planning for a Market-based Instrument


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Urban transport NAMA

General Description and frontiers

• Focus on 29 metropolitan areas with more than 500,000 inhabitants – covers 78% of urban population

• Enhance and complement existing financing to develop new projects & ensure continuity of exiting projects

• To define the spatial boundary more work need to be done • NAMA period is 10 years


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Elements of the NAMA COMPONENTS

• C1 - Mass Transit Systems (Bus Rapid Transit) • C2- Transport Demand Management • C3- Optimize existing routes • C4- Vehicle technology & alternative fuels • C5- Non-motorized transport

PARTICIPANTS • BANOBRAS (National Bank of Public Works ) • SEMARNAT (Ministry of Environment & Natural Resources) • SCT (Ministry of Transport and Communication) • SEDESOL (Ministry of Social Development) • State government • Municipalities


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Mitigation potential Mitigation potential 2010-2025 estimated to be 22.3 MtCO2e

• Potential mitigation considers following variables: • Fleet size

(number of vehicles) • Gross efficiency

(km per litre of fuel) • Net emission rate

(kgCO2e/km)


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Monitoring parameters Indicator Components

GHG Emissions per year (MtCO2/year) All components

Distance of bus-lane built for BRT (km/year) C1

Distance traveled by BRT (km/year) C1

Number of vehicles using parking meters per year (# vehicles/year) C2

Frequency of use of the parking meters (# uses/year) C2

Average occupancy in public transport vehicles (# passengers/vehicle/year) C1,C3

Number of scrapped vehicles (# vehicles/year) C3

Number of optimization studies (# studies) C3

Progress in route optimization (%/year) C5

Fuel consumption (liter/year) C4

Number of new hybrid buses per year (# hybrids/year) C4

Distance traveled by bicycles (km/year) C5

Progress in coverage by the public bicycle system (%/year) C5


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Domestic refrigerators NAMA

General Description and elements Description

• Build upon existing programs: • Change old one for a new one • Recovery of old refrigerants based on CFCs

• NAMA implementation period of 5 years and a crediting period of 15 years

Barriers: • No protocols to safely destroy HFCs • There is not a Mexican Official Standard for

destruction method of HFC • High subsidy for domestic tariff in electricity

Benefits: • Promote national production and

consumption of high quality products • Awareness to use energy efficient

appliances • Create jobs

Components 1. Newer technology based on

refrigerants with lower GWP. 2. Newer technology more energy

efficient. 3. Recovery & destruction of HFCs

from old refrigerators.


36

Domestic refrigerators NAMA Boundary and participants

NNRRG: National Network for Recycling of Refrigerant Gases CFE: Public Power Company


37


Mitigation Potential Estimated mitigation potential is 4.6 MtCO2e along crediting period

Emission reduction sources: • Electricity consumption

(83% of mitigation) • Refrigerant switch, (17% of

mitigation)

Assumptions: • Market penetration of new

technology of 20% per year • Market annual growth 3%


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Parameter Description Responsible

New Refrigerator Number of units sold ANFAD

Record of annual electricity consumption for the new refrigerator ANFAD

Replacement Number of old refrigerators collected for disposal NNRRG

Phase-out Features of the old refrigerator NNRRG

Estimated quantity of refrigerant gas (HFC), storage in tanks NNRRG

Parameter Description Responsible

New refrigerator Record of number of units sold during the purchase of a new unit CFE Record of annual electricity consumption and saving

Replacement Number of old refrigerators collected for disposal NNRRG

Phase-out Actual energy consumption of the collected refrigerator NNRRG

Quantity of refrigerant (R134a) destroyed NNRRG

Verification parameters

Monitoring parameters

NNRRG: National Network for Recycling of Refrigerant Gases CFE: Public Power Company ANFAD: National Association of Domestic Appliances Manufacturers


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Urban NAMA

General Description and frontiers General description

NAMA builds on current green housing programs - Incentivize installation of energy efficient equipment

through mortgage assistance. Leverages from current program operations:

• Additional mitigation options • Mitigation actions include urban services • Attract sustainable development funding and

generates carbon credits Barriers

• Technical – Lack of knowledge low carbon technologies

• Institutional - No institution to coordinate low carbon communities

• Financial -Insufficient public funding & incentives for end users

• Operational – Lack of MRV infrastructure, no collaborative framework between federal and local stakeholders

NAMA boundary and its components

Crediting period is 10 years


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Urban NAMA

Elements of the NAMA and participants


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Urban NAMA

Mitigation Potential In absence of mitigation actions emissions would rise to 60 MtCO2e by 2020

NAMA areas considered for baseline: 1. Housing envelope 2. Water and sewage

management 3. Street lighting 4. Solid waste management NAMA approach for emission quantification: • Electricity consumption • Gas consumption • Water consumption • Sewage generation • Solid waste generation


42

Urban NAMA

MRV principles

• Institutions responsible for the implementation & MRV NAMA – SEMARNAT & CONAVI

• Reporting prepared on annual basis, based on the monthly or bi-monthly monitoring records

• Monitoring parameters: • Electricity consumption • Fuel consumption • Water & sewage • Solid waste

http://www.123rf.com/photo_14258746_electrical-outlet-with-power-cord-and-plug-against-wood-paneling.html


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5. Organization, communication, consultation and engagement


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Stakeholders

Stakeholder consultation methodology: 1. Direct interviews - Get detailed insight perception of project 2. Workshops - Review and refine planning of projects

Stakeholders Engagement

PMR

Stakeholder identification

1

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45

Organizational structure

COMEGEI GT VINC

ADVISORY COUNCIL (C4)

·

·

FEDERAL GOVERNMENT:

· CONAVI· SEDESOL· SEMARNAT· SENER· SHCP· SE

·

FEDERAL GOVERNMENT

PRIVATE SECTOR

CIVIL SOCIETY ORGANIZATIONS

(OSC)

LOCAL GOVERNMENT

CIVIL SOCIETY ORGANIZATIONS

(OSC)

ACADEMIA

DGPCC-SEMARNAT

·

·

NAMAS·

REFRIGERATORS

PUBLIC TRANSPORT

URBAN

INTERNATIONAL ORGANIZATIONS

FUNDING

SECTORIAL CHAMBERS OR ASSOCIATIONS

CONSULTING FIRMS

DESIGN

NAMA PROJECT

IMPLEMENTATION

CICC (Federal Government)

CONAGO / ANAES

Organization will be lead by CICC. Organization will support decision making with help of three groups within its own

organization (COMEGEI, GT VINC, Advisory Council on climate change)


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6. Roadmap, Schedule and Budget


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Timeline Financial overview

Activities Time

(months)

1 Pre-investment Studies 6

2 Application for Funding & Approval 4

4 Bidding process 6

5 Construction 10

6 First year of operation 12

7 Verification 6

8 Credit sale 4

9 Distribution of funds 3

Total 53

Budget for pilot ready NAMA

Entry Cost

(USDX1000)

Institutional arrangement 150

Development of MRV 450

Development for co-benefits quantification 300

Ca

rbo

n C

red

iting


48


Timeline for the NAMA Financial overview

Activities Time

(Months) NAMA Design 4 Design of the pilot 2

Implementation of the NAMA pilot 9 Implementation crediting NAMA (1st year) 12 Total 27

Budget for NAMA’s pilot

Entry Cost

(USDX1000)

Operation cost

Coordination 300

Capacity building & Institutional strengthening 85

Stakeholders engagement 85

Implementation cost

Incentive for incremental cost 1,600

Substitution cost 1,650

Credit for final user 21,160


49

Urban NAMA

Timeline for the NAMA Financial overview

Activities Time

(months) Phase 1 - Pre Pilot Activities 12 Phase 2- NAMA pilot activities 24

Phase 3 - Full scale NAMA launch activities 6 Total 42

Budget for NAMA’s design

Entry Cost

(MUSD)

Phase 1 1.5

Phase 2 5

Phase 3* 100+

*Depends on national scale rollout


Draft Market Readiness Proposals Presentation

MEXICO

Documents

Draft Market Readiness Proposals (MRP) Presentation MEXICO MR… · Mexico's Draft Market Readiness Proposal (MRP) (October 2012) 9 Historical and Projected emission trend Mexico´s