Letter 5: Constructing the Climate Change Project Portfolio
To: Nani G. Oruga, The Bees Trees
From: Chris N. Eppers, Solar Musketeers
Re: The climate change operational strategy, pilot phase projects and NGO views.
Dear Nani,
I'm glad to hear that there is such an interest in wind power in your region
and that your government is trying to get some funding for pilot projects. I
wish I could say my government was as interested. Anyway, here is the information
on the climate change operational strategy. I've also thrown in some of the
NGO concerns from the pilot phase and briefly mentioned some aspects of NGO
involvement in this focal area. Currently, about a third of GEF resources are
allocated to climate change projects.
The Pilot Phase
During the Pilot Phase, the GEF Participants approved a variety of projects
which included investment in and technical assistance for biomass, wind energy,
solar photovoltaic, carbon sequestration, energy efficiency, fuel conversion,
arid supply-side efficiency. For example, in Mauritania, there is a project
to demonstrate the potential for using wind electric generators to support off-grid
delivery of essential electricity-based services in rural areas. One climate
change project in China involves rehabilitation of gas transmission and distribution
systems to eliminate methane gas losses. Some research projects were also funded,
such as on methane emissions from rice fields, and alternatives to slash and
burn agriculture. Many of these Pilot Phase projects are now being implemented
and a few have been completed.
The Independent Evaluation did not give a rave review to the climate change
portfolio, and was particularly critical with regard to the strategies arid
criteria for selecting projects. One of the principal objectives of the focal
area was to develop a menu of technologies that offered the greatest possible
emissions reduction at the lowest cost. However the political need for a geographical
balance undercut this objective, because projects had to be spread out rather
than focused on the countries that had the highest emissions. Another difficulty
that became apparent was that rigorous application of the incremental cost criteria
would prevent support for activities such as energy efficiency projects which
are not implemented to the extent one would expect, given the usually positive
returns on such investments. The Operational Strategy appears to address most
of these problems. The Climate Change Operational Strategy
The general idea underpinning the climate change operational-strategy (Chapter
3 of the Revised Operational Strategy (GEF/C.6/3), is that there should be some
sort of balance between investments that achieve permanent reductions in greenhouse
gas emissions over the long term and those which give an immediate (short term)
reduction, but don't necessarily produce a shift to an environmentally friendly
energy base. It is based on guidance from the Parties to the Framework Convention
on Climate Change (FCCC). (In fact it was the GEF that proposed several alternatives
for guidance, and then the Parties chose the middle of the road proposal.)
Within the framework of this strategy, the GEF will fund enabling activities,
adaptation activities and mitigation measures: the latter could be either long
or short term. Adaptation activities are those such as building dikes and sea
walls to avoid flooding associated with sea level rise and severe storms. Small
island states and other countries with low lying coastal areas are particularly
vulnerable to the impacts of global warming. This is recognised by the Climate
Convention and the Conference of Parties has provided guidance to the GEF regarding
adaptation activities.
While financing is supposed to be available, donor countries do not want to
commit support. Adapting to climate change would be very expensive because of
all the infrastructure work. The compromise that was reached by the Conference
of Parties allows the GEF to fund planning for adaptation, but not investment
projects for actual adaptation activities.
Long Term Operational Programmes
Measures to reduce greenhouse gas emissions over the long term will generally
involve making it easier and cheaper to adopt climate-friendly commercially
available technologies by removing barriers such as price distortions, lack
of information, low management capabilities, and regulatory barriers and biases.
The costs of removing barriers, such as learning costs (capacity building, awareness
raising) are incremental costs. This helps to address some of the criticisms
of the Pilot Phase, namely that some types of projects such as energy efficiency
ones were not being funded. The other approach that will be taken is to reduce
the cost of promising technologies so that they become economically viable.
The strategy recognises that long term reduction of greenhouse gas emissions
will require the use of technologies, such as renewable energy ones that avoid
emissions. All the same, there is the possibility of funding fossil fuel projects,
such as supply side efficiency or coal to gas conversions. These would lower,
but certainly not avoid, CO2 emissions. Furthermore, they would not contribute
to switching to a fossil fuel free energy base. There are differences of views
among both NGOs and Council members as to whether the GEF should fund these
types of projects. Some believe that the GEF should not fund anything that would
contribute to climate change even if it slows it down. Others argue that developing
countries should be able to use they own natural resources, such as coal, and
should have assistance in acquiring the technology to use it efficiently.
Three operational programmes for long term mitigation have been identified
so far:
1. Removing barriers to energy conservation and energy efficiency. Projects
might include developing demand side management programmes, encouraging supportive
legal regulatory, and policy changes, or establishing and strengthening integrated
resource planning.
2. Promoting adoption of renewable energy by removing barriers and recurring
implementation costs. Examples of possible projects included on and off grid
photovoltaic installations, combustion of agricultural residues to generate
heat and power, methane control technologies for waste disposal, and wind power.
Supporting measures include organisational reform and 'innovative' financing
such as revolving funds.
3. Reducing the long-term casts of low Greenhouse gas-emitting technologies.
With this operational programme, it is expected that through learning and economies
of scale, the costs of manufacturing will become commercially competitive. Solar-thermal
power generation, advanced biomass power, fuel cells, and advanced fossil fuel
technologies were some of the technologies that were thought to be "particularly
well suited to this approach" [of this operational programme]. (One sentence
that NGOs were disappointed to see. removed from the final version of the strategy,
stated that "the emphasis will be on renewable energy, and support for
applications of fossil fuel technologies will be relatively modest".)
NGOs were disappointed that there would not be an operational programme on
reducing emissions in the transport sector and felt that increased emphasis
on using agricultural residues was needed. Some projects will receive support
as short term response measures. The idea is to develop more experience and
a better perspective of the GEF's role before developing a transport operational
programme. Another concern of some NGOs was the social cost of changes in energy
pricing policies. As you know, even small price increases for energy could hurt
many people in developing countries.
Enabling activities
The guidance from the Parties to the Climate Convention says that these are
aimed at facilitating implementation of effective responses to climate change.
Initially these activities will be emphasised. They would include planning and
capacity building, such as institutional strengthening, training, research and
education. Some activities, such as assistance for preparing the reports called
national communications, are also considered to be enabling activities. Preparation
of these communications is required by the Climate Convention. They include
information on sources and sinks of greenhouse gases, and a description of steps
taken or planned for implementing the Convention. As I mentioned earlier, planning
for adaptation (known as a Stage 1 adaptation activity) is included in enabling
activities.
Short term projects
The last category of projects includes those that reduce emissions in the
short term. The reason for funding these kinds of activities is that they would
reduce emissions very quickly and should be inexpensive. They are likely to
include fossil fuel projects. However they would only postpone carbon accumulation
because countries would still be emitting CO2. The criteria for these projects
are: cost effectiveness (only projects whose cost per tonne of carbon not emitted
is below a certain ceiling would be eligible); likelihood of success; and that
projects are country-driven, for example included in the national climate change
plan. A footnote (#27) points out that at the suggested threshold of $10 per
ton of carbon, every $200 million spent on short term measures would postpone
carbon accumulation by only one day.
If the GEF should ever develop a policy on targeted research, NGOs have proposed
that, in the climate focal area, research and analysis should relate to exploring
some of the macroeconomic and other causes of investment in climate unfriendly
technologies, including MDBs and private, foreign direct investment. They have
also been concerned that the operational strategy does not clearly outline how
the GEF would work to catalyse changes in other multilateral, national, and
private sector initiatives, particularly those of the World Bank.
NGO involvement
Climate and energy NGOs are fairly comfortable with the strategy. It is important,
though, to monitor the portfolio as a whole in order to ensure that it is not
overwhelmed with fossil-fuel based activities. NGO participation in GEF projects
has been mixed, however I wouldn't say that every project needs an NGO per se.
Some projects may be concentrated on a single plant or electrical installation.
If public awareness programmes could be built into all projects, then NGOs might
play a role there. It would be great though if NGOs had access to GEF funds
in order to carry out smaller projects. The most important aspect, though, is
that, in a given project, all the actors that should be involved are involved,
and that it is country-driven. NGOs can play a role in making sure that this
happens, for example by facilitating communication, suggesting ideas for possible
projects, reviewing project proposals, and monitoring projects. Some examples
of country-driven projects, with reasonably good participation are the Jamaica
Demand Side Management Demonstration project, the Peruvian Technical Assistance
to the Centre for Energy Efficiency, and the Electricity, Fuel and Fertiliser
from Municipal and Industrial Organic Waste in Tanzania: A Demonstration Bio-gas
Plant for Africa.
