Mechanism for Voluntary
Mitigation of GHG
Emissions in Colombia
GEF and Carbon Finance Meeting
Washington, DC - November 15th, 2010
Content
1. Project Context and Rationale
2. Justification of GEF Involvement
3. Objective of the project and components
4. 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 (EUETS), 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)
1. PROJECT CONTEXT AND RATIONALE
• Disadvantages
• Their non-regulated nature makes
them volatile and with limited
capacity
Advantages
• Reduced costs and time
• Forestry and REDD projects are
accepted
• After the wild west, a “regularization”
• Highly affected by international and
process has occurred:
national policy frameworks
- Verification and certification requirements
- Registration
• Higher risks of non-delivery and
- Uniformity of proprietary units transacted
permanence
(standards)
Transparency, credibility and
• Limited capacity to have a large scale
robustness
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:
(i)
creating a market platform for nationally produced VERs
accessible to national or international buyers;
(ii) supporting the issuing of VERs from agriculture, forestry and/or
REDD projects developed in Colombia; and
(iii) fostering local demand of VERs through corporate carbon
mitigation and offsetting strategies
3. PROJECT OBJECTIVE AND COMPONENTS
Certification and Issuance
(VCS, CCB, VER+)
INTERNATIONAL
Registry
VER
market platform
VERs supply
• Capacity building for MVR
• Support in the verification,
validation, certification, registry
and commercialization
• Financing instruments to support
implementation
• Marketing and promotion
NATIONAL
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
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
[email protected]