2. NAMAs and their Importance for RE Deployment

ANAMA is a voluntary activity or set of activities, ranging from implementation of RE pilot projects to entire national development plans covering a wide range of sectors, policies, strategies and programmes. This broad scope is deliberate as policy makers wanted to preclude concentration on specific "fashionable" policy instruments. Through this "low-carbon development" strategy, well-designed NAMAs bring benefits in addition to GHG emission reductions. These co-benefits can include sustainable development effects (i.e. economic, social and environmental). Often it is precisely these co-benefits that act as the main driver for the policy labelled "NAMA".

Besides gaining international recognition, the NAMA can harness financial, technical and capacity building support from international partners and donors. This can be part of the USD 30 billion "fast-start finance" agreed at the 2010 Cancun UNFCCC Conference, or part of the USD 100 billion pledged by industrialised countries to be available from 2020 onwards1.

The only formal requirement for a NAMA is compliance with national development plans and achievement of GHG reductions that could be measured, reported and verified (U NFCCC , 2007)2. For example, a country could propose a regulation/standard (e.g. a building code requiring integrated PV modules) and implement it as a NAMA. For advanced developing countries, a system of tradable permits or a fossil fuel tax recycled into RE investments could be an option. FiTs or reverse auctions for RE capacity are policy instruments that have shown their ability to mobilise RE rapidly. Information measures, such as capacity building programmes or information campaigns, could serve as a NAMA foundation. Other instruments that could be part of a NAMA include R&D support, electricity labelling and urban planning. In many cases, the NAMA will therefore be a combination of different policies and specific activities implemented as a concerted effort. A NAMA could even be defined as an overall increase of RE deployment or a certain quantitative goal of RE penetration in the long term, without specifying the policy instruments used in detail. However, such an approach risks remaining inef-ficient and thus is not recommended.

NAMAs entered the climate policy agenda back in 2007 when the Conference of the Parties (COP) to the UNFCCC coined the term as part of the so-called "Bali Action Plan". In late 2011, the 17th session of the COP to the UNFCCC in Durban, South Africa, made a number of important NAMA-related decisions, such as the establishment of a prototype registry, an international Measurement, Reporting and Verification (MRV) process (UNFCCC, 2011a), and further rules for NAMA implementation that are likely to emerge in the coming years. NAMAs will become an important pillar of mitigation attempts if countries can agree on an ambitious future global climate policy regime, especially if sig-nificant volumes of climate finance from industrialised countries are channelled through supported NAMAs. It is important to be clear about the nature of support: besides pure financial aid, support can also comprise elements of technology transfer and/or capacity building. Support is envisaged to come from bilateral or multilateral sources. This includes financial mechanisms under the UNFCCC, such as the Global Environment Facility (GEF) or the Green Climate Fund, once the latter is up and running.

NAMAs could also harness revenues from carbon markets if emission reductions under the NAMA generate emission credits. Whether this becomes possible depends on future decisions of international climate negotiations. In this context, one must distinguish between existing and future market mechanisms. The Clean Development Mechanism (CDM) created by the Kyoto Protocol is a good example for the former. The CDM is an economic instrument designed to generate emissions reduction credits and is the most successful of the market mechanisms under the UNFCCC to date. Under the CDM, emission reductions are usually generated by comparing reference levels ("baselines") with project emission scenarios (i.e. the situation after a project has started). This can involve comparing a grid energy mix before and after the launch of a wind farm, or the penetration rate of diesel generator sets before and after the introduction of solar water heating systems. Emission credits for the emission reductions are issued by the UNFCCC in a complex process and can then be traded on the carbon market. CDM activities are either realised as stand-alone projects or as Programmes of Activities (PoAs), which allow bundling an unlimited number of similar projects. Today the CDM has resulted in issued emission credits of more than one billion tonnes of CO2 equivalent (CO2e). Potential CDM co-benefits include technology transfer and sustainable development. Text Box 1 lists the key differences between NAMAs as currently defined and the CDM.

The first NAMA concepts were submitted immediately after the Copenhagen Accord (UNFCCC, 2009a) in early 2010. These concepts were very heterogeneous, both in the type of action and the degree of details provided. Since then, more countries have submitted NAMAs to the UNFCCC (see the compilation in UNFCCC, 2011b) and currently many are preparing detailed NAMA proposals. These NAMAs address a broad scope of sectors, such as transport, energy, waste, industry, buildings or agriculture and cover a variety of actions ranging from the design of low-carbon development strategies to plans for introducing certain policies (see Text Boxes 2 and 4) and specific projects (see Text Box 3).

Box 1

KEY DIFFERENCES BETWEEN NAMA AND CDM

The concept of a NAMA differs from that of a CDM in a number of ways:

» NAMAs are most likely to be driven by national governments and may be undertaken in partnership with the private sector, whereas CDM projects are typically driven by firms involved directly in the carbon markets.

» NAMAs are more suited to the implementation of policies, strategies and programmes, whereas the CDM is implemented at the project level. A programmatic CDM (PoAs) is closer to the NAMA concept and indeed could provide a starting point for conceptualising a NAMA.

» The CDM has strict rules for testing each project for additionality, (i.e. the difference from Business As Usual (BAU)). So far no rules for additionality determination of a NAMA exist; commonly, an assessment of incremental NAMA costs is undertaken.

» CDM projects generally have quite stringent MRV requirements that require demonstration of emissions reductions, whereas NAMA MRV requirements could vary significantly, depending on the nature of the activity and the financing approach.

» NAMAs will not necessarily result in emission credits, whereas the generation of credits is the key purpose of the CDM.

Source: Regional Centre for Renewable Energy and Energy Efficiency (RCREEE), 2011

Box 2

SOUTH AFRICAN RENEWABLES INITIATIVE (SARI)

The SARI is a project developed by the South African Government to scale up power generation from renewable resources (Department of Energy, (DoE), 2011). The initiative is flexible and identifies four different scenarios. The numbers in this text refer to the current (most likely) scenario. The ramp-up of renewable energies should lift RE power production to 19 GW (i.e. 9% of electricity supply) by 2025. Compared to the baseline scenario, this would represent an annual emissions reduction of about 27 Mt CO2 (Megatonne of carbon dioxide).

The NAMA is based on an Integrated Resource Plan for Electricity and aims to support the scaling-up of RE in South Africa. The plan, inter alia, seeks to increase private sector participation in power generation by developing a framework for Independent Power Producers (IPP) and removing the quasi-monopoly of the public power company Eskom. In this context, the RE IPP Procurement Programme was launched in August 2011 and is scheduled to remain in place until 2014. Furthermore, the electricity tariff is to be further raised and subsidies completely removed. It was first planned to establish a FiT to incentivise RE generation. Now, competitive bidding as an alternative instrument is envisaged.

The investment needed is estimated at USD 36 billion by 2030 with incremental costs of USD 8.0-8.9 billion. The necessary investment should be attracted by a blend of different finance solutions. To leverage sufficient private capital (USD 24 billion), it is estimated that around USD 10 billion low-cost loan solutions, including insurance, are needed. A share of the low-cost loans (USD 3 billion) as well as the residual incremental costs (USD 3 billion) are to be financed by the international community based on a payment by performance as NAMA support.

In addition to the environmental benefit, it is expected that the measures undertaken by the plan will create 35,000-40,000 new jobs. On the other hand, there might be adverse effects on farmers, households and amenity users from the competition for water resources. However, the plan should include safeguards to address these issues.

Source: South African Renewables Initiative (SARI), 2011

Unilateral and Supported NAMAs

Two kinds of NAMAs have been defined. Domestically supported NAMAs ("unilateral NAMAs") are those developed with domestic means, while internationally supported NAMAs ("supported NAMAs") are those requiring international support to cover implementation costs. Theoretically, supported NAMAs could receive complementary funding through carbon offset credits generated for the amount of emission reductions achieved (often called "NAMA crediting") and be traded on the carbon market3. However, the concept of credited NAMAs is not yet oficially defined under the UNFCCC. According to the UNFCCC (2011a), NAMA costs should be regarded either as full or incremental costs. While there is no universally accepted definition of these cost concepts, they may be more appropriate for specific mitigation projects than for policies. Full NAMA costs might be differentiated as follows, depending on the activity covered:

» Investment in a concrete RE project: The sum of investment costs plus operating and maintenance costs;

» Research activities: The sum of costs covering both researchers' time and necessary equipment; and

» Policy: Costs for policy design development and administration of the NAMA, including elaboration of the NAMA concept; possibly also costs of the implementation of measures under the policy (e.g. costs of capacity building measures, converting equipment or costs of inputs that are different from those used to date).

Incremental costs have been defined by the GEF as the differential between costs of a baseline development and costs incurred in a project or policy scenario. In other words, incremental costs are "additional costs associated with transforming a project with national benefits into one with global environmental benefits" (GEF, 2011). For instance, to meet the national goal of power generation, a country could choose a more expensive option, which - in addition to local benefits (e.g. reduction of air pollution, job creation) - produces global benefits, such as GHG reductions. The difference between the two options is the incremental costs.

A great number of NAMAs proposed to date are looking for support, and the requests have become more elaborate over time (NAMA Database, 2012). It is useful to think about the different NAMA types as "tiers" that can co-exist within the same overall framework or sector of the economy and be applied under various circumstances, particularly with respect to the differ-ent levels of GHG abatement costs. Unilateral NAMAs would target the "low hanging fruits" (i.e. those emission reductions with negative abatement costs) and allow the developing country to utilise its own low-cost abatement options. Financial support provided by industrialised countries under a supported NAMA could either be targeted at lower positive cost options or at very high-cost options that are not economic for the carbon market to capture. In consequence, and only once they become an official variation of NAMAs, credited NAMAs could harness the emission reduction potential that has positive GHG abatement costs remaining below a carbon credit price. Any support offered by industrialised countries under a supported NAMA would help cover the incremental costs of the policy or action but would not go beyond this limit. Under such a structure, the host country would be required to engage in mitigation action but only to the extent it could afford to do so. Still, the country could envisage mitigation impacts beyond this level by acquiring international support. Figure 1 introduces the different tiers of NAMAs.

FIGURE 1: DIFFERENT TIERS OF NAMAs (THEORETICAL CONCEPT)

Source: Wehner et al., 2012

NAMA Registry

The UNFCCC is currently elaborating a NAMA Registry, which will become a voluntary web-based "matchmaking" platform for developing countries that are proposing NAMAs, international donors and other relevant stakeholders. The Registry will be used by developing countries to attract international support and ensure transparency. Under the NAMA Registry database, governments will be able to submit NAMA proposals in three sections:

» NAMAs seeking international support (either for preparation or implementation), filled in by developing countries;

» NAMAs submitted for recognition (most likely unilateral or already implemented NAMAs), filled in by developing countries; and

» Information from developed countries about NAMA support, filled by these industrialised countries.

For the NAMAs submitted by developing countries, standardised formats are to be used, with different templates for NAMAs seeking support and NAMAs seeking recognition. Industrialised countries are to provide information on the NAMA types they wish to support and on the potential financial resources reserved for NAMA funding. The database is to provide a "match-making algorithm" that will enable an automated matching of NAMAs seeking support and donors wanting to support NAMAs based on criteria, such as technology or sector. The software will automatically inform NAMA proponents about potentially suitable donors.

Box 3

NAMA ON JORDANIAN INDUSTRIAL WASTE WATER TREATMENT

This NAMA consists of the construction of a wastewater treatment plant. It is a pilot project that is currently being implemented and should serve as a blueprint for other NAMAs in this sector, showcasing the functioning of public-private partnerships in sustainable infrastructure projects. The plant is projected to treat 1 million m3 of wastewater annually and produce enough biogas to generate 1.4 GWh of electricity. This will lead to emission reductions of around 13,000 tCO2e per year.

The private sector is in charge of the technical, corporate and financial design of the project, as well as its operation and maintenance. The public sector provides an appropriate regulatory framework, such as power off-take agreements, RE incentives and infrastructure contributions (e.g. grid interconnection or roads).

The project also includes a strong capacity building component. For instance, a workshop was held in Amman to identify possible NAMAs. At the workshop, findings of this process were discussed and the suggested methodology was presented to representatives from Jordan and other Middle East and North African (MENA) countries.

The capital expenditure of the project is USD 13-18 million. On the equity side, a blend of private funding (i.e. beneficiary companies and the plant operator) and the Green Climate Fund are envisaged. On the debt side, development banks, export credit agencies, the Green Climate Fund and capital markets are targeted.

Other benefits include improved air quality, reduced use and improved quality of groundwater and avoided waste disposal of organic biomass.

While the Registry is expected to go online in 2013, the UNFCCC Secretariat has put in place a webpage for early submissions to the NAMA Registry prototype. This will enable parties to list NAMAs that seek support for preparation and implementation and to provide information on NAMA support (UNFCCC, 2012a)4. It should be noted that the Registry is a voluntary tool and therefore the development of NAMAs, and in particular the interaction with donors, can also take place without the use of this Registry.

While the NAMA Registry does not require a very transparent and comprehensive approach for the NAMA documentation to be uploaded, NAMA coordinators, as well as donor agencies, may want a more detailed dataset, as well as a more transparent understanding of emission reductions achieved by the NAMA. For information included in the NAMA documentation, as well as issues of transparency and MRV, see Chapter 4. Moreover, NAMAs will involve a broad range of public and private, national and international institutions and actors. The role of institutions, donors and stakeholders is also outlined in Chapter 4.

Overview of the NAMA "Pipeline"

As of September 2012, there were 54 NAMAs in 25 countries at different stages of development in the NAMA "pipeline" (http://nama-database.org), of which 47 were listed as concepts, 4 as proposals and 3 as being in the implementation stage (NAMA Database, 2012). All involved a support component. With respect to the geographical distribution, the majority of NAMAs was based in Latin America (46%) and Africa (42%), while only 12% were located in Asia. Regarding the sectoral distribution, the transport and the energy supply sectors represented the largest shares (27% each), followed by industry (14%), buildings (11%) and waste (10%).

FIGURE 2: SECTORAL DISTRIBUTION OF NAMAs, SEP 2012

More than 75% of all NAMAs are national initiatives (13% sub-national), while almost every second NAMA involves strategies/plans (47%), followed inter alia by policies/programmes (20%) and projects (15%).

Box 4

GAMBIA ENERGY NAMA

This NAMA includes various measures in the energy sector. It addresses both energy efficiency and energy generation from RE. The NAMA is still in the concept phase, but its plans build on the country's Programme for Accelerated Growth and Employment (PAGE). This general development plan includes a Climate Change Action Plan (CCAP). The NAMA aims to cut emissions from the year 2000 by 10 MtCO2e, until 2030, which is a 50% reduction.

The NAMA includes energy efficiency measures and two components of RE deployment. It seeks to increase the share of RE in the energy matrix by 20% by 2030. This goal will be achieved by installing small wind turbines with a capacity of 150-200 kW along the coast and by constructing solar PV plants.

Financial support of about USD 120 million is needed. However, a comprehensive finan-cial plan was not publicly available at the time of publication of this study. In addition to the financing need for the implementation of this NAMA, support for the following capacity building activities is required: 1) elaboration of a low-carbon development strategy; 2) analysis of the incremental costs of investments over the period 2012-2030 and beyond; and 3) development of projections for national and sectoral GHG emissions to the year 2030 and beyond.

Source: NAMA Database (2012)

1 However, it remains unclear how these funds are accounted for (see Stadelmann, Roberts and Michaelowa, 2011; following on directly from Stadelmann, 2011).

2 The general guidelines for domestic MRV of NAMAs are discussed under the Subsidiary Body for Scientific and Technological Advice (SBSTA) of the UNFCCC during the course of 2012.

3 The Cancun Agreements point in this direction, as they define market mechanisms as complementary funding source for NAMAs (UNFCCC, 2010, paragraph 80). In 2011 COP 17 in Durban reiterated this stance (UNFCCC, 2011a, paragraph 83).

4 Available at http://unfccc.int/cooperation_support/nama/items/6945.php