Transcript The Governance of Clean Development: CDM and Beyond

Governing Clean
Development
Prof. Peter Newell
Contact: [email protected]
Background

ESRC Climate Change Leadership
Fellowship: 2008-2011
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Set of research activities over 3 years

Research: Field work, interviews &
questionnaires
Workshops & training events
PG conference
Dissemination: Working paper series,
academic publications & policy briefs
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The Challenge: Meeting
energy needs in a carbonconstrained world
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Today 1.6 billion people are without electricity.
Electricity demand in developing countries is
projected to increase three to five times over the
next 30 years
57% of future power sector investment will occur
in developing countries (UNFCCC 2007).
Without a significant change of course, most of
this will be fossil-fuel based electricity production
that will exacerbate climate change.
Need for large-scale transitions to low carbon
economy
Background

Growing interest in the potential for clean development projects,
supported through and beyond the CDM, to reconcile the needs of
poorer groups for access to affordable and reliable energy sources
with the need to tackle climate change.

Now a range of institutions, initiatives and mechanisms whose
common aim is to enable the provision of clean development,
ensuring social and environmental benefits, particularly for poorer
countries of the global South.
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Lack of systematic, comparative research across scales on
governance dimensions of clean development: …beyond CDM,
range of public and private actors involved
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Re-framing the question of clean development in terms of its role in
enabling broader socio-technical and political transitions in
energy sector: the governance of energy investment
Big Questions
1. Which features of the actors, institutions and
policy-making processes involved in the
governance of clean development are resulting
in effective outcomes in terms of climate action and
developmental benefits, which are not and why?
(and what can be done about it!)
2. Why do common international initiatives produce
such uneven impacts and outcomes once
mediated by national and local level institutions
and policy processes?
Why governance?
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Need for political analysis of the relationship between energy-economy-
environment since power and interests are at the heart of this.
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Collective ability to meet this challenge requires unprecedented political
and institutional change beyond merits or otherwise of particular
proposals, technologies and innovations: Overcome resistance, build new
coalitions
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Assessing issues of governance means addressing both the distributional
(who gets what and why?) and processual aspects (who decides and
how?) of the governance of clean development and the links between
them
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Existing work suggests that where robust and inclusive institutions are
in place, more equitable outcomes for host communities are likely (Brown
and Corbera 2003)
Cross-cutting governance
dimensions
a) Coordination and coherence among the ‘providers’ of CD
b) Questions of autonomy and power to steer and direct project and
investment flows in CD on the part of CD ‘recipients’
c) Processual issues of participation and consultation of other
‘stakeholders’ in relation to identifying energy needs and delivering
projects + ownership
d) Managing the conflicts and trade-offs between social and
environmental costs and benefits associated with projects and
investments and between investors and host communities
e) Competing mandates: reducing compliance costs over contributing to
sustainable development; a market? a development fund? a
renewables promotion mechanism?
f) Distributional issues: the circulation of CD finance within and
between countries.
Governance
Dimensions
Issues
Consultations around
national energy-climate
strategy
Accountability/
Responsiveness
Between governance
providers and
recipients
(international and
national)
Around priority setting
for investments in
energy sector and
selection of CDM
projects: Demanddriven?
Transparency as prerequisite to participation
and accountability
Tools
Interests of affected
groups and potential
beneficiaries not taken
into account
Key decisions often
taken in closed and
secretive manner:
issues of commercial
confidentiality
Uneven degrees of
democratic space and
distinct cultures of
participation
Ladder of participation:
Priority-settingImplementation
Feedback mechanisms
about key meetings,
outcomes of consultations
Publication of information
about key meetings,
invitations to comment
Means of redress
Liability for non-delivery
on projects, appeals
procedure?
Rights of participation for
stakeholders, affected
communities.
Governance
Dimensions
Issues
Tools
Within CDM executive
board, but range of
actors now active in this
field
Invitations to relevant
agencies to attend one
another’s meetings
Coordination/coherence
Among governance providers
Within the state- across levels of
decision-making (vertical
coordination)
Within the state- across departments
(horizontal coordination)
Compatibility between and within
institutional mandates (WB)
Alignment of climate, economic and
development goals (national &
international level)
Issues of duplication,
coherence, rational
division of labour
Initiatives by one part of
the state actively
undermined by another
Summits/meetings to
agree divisions of
labour by region, sector,
scale of investment
Policy integration:
Rhetoric and practice
Governance
Dimensions
Issues
Tools
Capacity
Quota systems by region
Power to attract & set the
terms of investment: to
steer investors to areas
where environmental and
developmental need is
greatest
Policy autonomy/policy
space
Capacity to oversee
effective implementation
of projects: manage
leakage beyond the project
Capacity to process
claims & project proposals
Larger LDCs (BRICS) have
the power to attract
investors on their terms,
others do not
Many DNAs are underresourced, suffer lack of
expertise, high turn-over of
staff.
Lack of capacity to verify
claims about process
(adequate notice and
consultation etc)
Capacity of DoE’s, donors
as well as DNAs
Bundling of projects to
reduce transaction
costs/sectoral approaches
Sweetners and
inducements: joint
ventures, tax relief, WB
seal of approval to reduce
risk
Increased donor funding
for capacity building
efforts: beyond those that
promise most costeffectiveness + better
screening on supply side to
lighten regulatory burden
Governance
Dimensions
Issues
Tools
Nature of the
political system
Political stability +
institutional strength
Conflicts over
allocations of
Degrees of federalism/
funds/projects.
de-centralisation in
Tensions between
relevant policy areas
centre & regions
(energy, agriculture, forests
etc)
Nature of the resource
base of the economy
Levels of democracy:
openings for
participation/contestation
The extent to which
energy politics are high
politics: role of veto
coalitions
Scope for critical
engagement of
strategy, government
Nature of party funding and
and corporate policy
interest group
representation v
autonomy from ‘private’
interests
National level
strategy for
establishing priorities
Needs-based proactive assessments of
where investment
needed + public buy-in
Packaging these to
potential
donors/investors
A governance framework
 Who
governs?
 How do they govern?
 What is to be governed (and
what is not)?
 On whose behalf?
Who governs?
In the world of the CDM
Phase
Documentation
Project Design
PDD
Validation Report
Key Players
Project Developers, Funds, Investors,
NGOs
Executive Board for new methodologies
Validation
Letter of Approval
DOE
DNA
Registration
Executive Board
Proper Documentation
Project Participants
Monitoring
Verification Report
Verification
DOE
Certification
Executive Board
Issuance of CERs
CERs
Executive Board, CDM Registry
Administrator
Project Participants
Adaptation Tax
Administrative Tax
CDM Executive Board
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Made up of 10 members from Parties to KP
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Political economy of lobbying around approval, country and
project/sector bias (Michaelowa & Michaelowa)
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Questions around capacity to deal with levels of applications,
demand for guidance on additionality etc
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Questions about transparency of information about decisions
(methodologies > specific project decisions)
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Transaction costs: screens out smaller projects with greatest
localised SD benefits.
Beyond CDM: Global
governance of CD
Climate Investment Funds
 IRENA
 REEEP
 Asia Pacific Partnership
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Private Governance
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Key yet neglected element
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Increasingly clear that what will decide the degree to which
climate change impacts the poor will be determined not
principally by governments but by powerful range of market
actors. Private sector investments currently constitute 86% of
investment and financial flows that will need to be steered
towards clean development goals (UNFCCC 2007).
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Private flows to areas already attracting FDI and with better
infrastructure: guided by profit or CSR value of CERs rather
than SD. Brand concerns could lead to race to top (gold
standard etc)
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Understanding their role, strategy and power implies broader
notion of governance: without formal authority, traditional
sanctions, through supply chains, co-regulation, partnership and
steering
What is to be governed
and what is not?
Spheres of governance/ungovernance
Un-governed CD
Governed CD
CDM: CERs
World Bank:
CIFs, IFC
Aid Flows
•Private finance in general
Export credit mechanisms
Bulk of business supplychains
Trade
VERs?
CDM in context
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Only a tiny fraction of trade, aid, production and
finance is governed by public bodies charged
with tackling climate change. Official Development
Assistance (ODA) funds are currently less than 1%
of investment globally (UNFCCC 2007).
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WWF has calculated that the amount of finance
that the CDM will mobilise is a fraction of not
only existing investment and ODA but also of
GEF- less than half what is provided by the GEF
Active neglect: The ungovernance of clean
development
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The regulated space of CDM governance is just
one small part of a much larger challenge of
governing flows into sectors that need to consistent
with the goal of a lower carbon future.
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As CDM Watch put it (2004:7): ‘Any discussion
about the future of the CDM must also address the
fact that it, and the carbon market itself, exist on
the margins of huge financial flows to carbonintensive energy projects in the South’.
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Challenge of mainstreaming clean development
Coherence & Contradiction
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Effectiveness of CD initiatives contingent on actions
(and inactions) of other key actors
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World Bank still key driver of fossil fuel investments:
less than 30 percent of the World Bank’s lending to the
energy sector has integrated climate considerations into
project decision-making. As late as 2007, more than 50
percent of the World Bank’s $1.8 billion energy-sector
portfolio did not include climate change considerations
at all (WRI 2008)
Coordination
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What is to be governed and by whom?
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GEF? World Bank CIF?
Multinational Climate Change Fund?
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Duplication, turf wars: implies different
patterns of participation, accountability and
voice & overall direction of CD investments
How do they govern?
Governance approaches
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Environmental regulation: legal (CDM, KP) and
soft law (standards and certification: Gold standard,
VCS)
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Non-environmental regulation: energy, trade
agreements (new trade round? Cooperation
agreements with EU + US + Australia on energy and
environment (Australia-China Partnership, EU-China
Partnership on Climate Change, US-India on
nuclear energy, EU-India energy cooperation)
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Also: Through partnerships, supply chains,
through aid
Governance forms
Public governance of public finance
 Public governance of private finance
 Private governance of private finance
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Different mandates, Constituencies, Resource bases
Accountability ties, Styles of consultation, Regions of operation
Sectoral biases
Complex, overlapping forms of CD with uneven outcomes
Examples
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Public governance of public finance
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Bilateral and multilateral aid
GEF
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Public governance of private finance
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Prototype Carbon Fund
Climate Investment Funds
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REEEP
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Private governance of private finance
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Voluntary Carbon Standard
Gold Standard
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Governance actors
Supply side governance
International governance of CD:
 Private governance: Through
and by market actors
 National and local governments
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Demand side governance
‘Governance from above’
‘Governance from below’
Public-Private Partnerships:
CDM
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CDM is underpinned by a collaborative
network structure in which nation and nonstate actors collaborate in a partnership
arrangement.
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This confers on non-state actors, such as
the DOEs ‘a variety of voluntary, self-formal
and formal roles in formulating policy
responses and implementing international
agreements’ (Streck 2004: 297).
Public-Private Partnerships:
Prototype Carbon Fund
‘The broad range of actors that cooperate and
play an active role in the success of the
operations of the fund, ranging from public and
private participants to country officials, private
entities in non-Annex 1 as well as Annex 1
countries, private verifiers and NGOs, are
crucial for the PCF’s success. Only because all
these actors play an integral role in making
the PCF work, in applying and revising its rules
and broadening its impact, can the PCF design
and implement successful projects’.
(Streck 2004:317)
REEEP
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The Renewable Energy and Energy Efficiency Partnership (REEEP) is an
international public-private partnership funded by governments, businesses and
development banks aimed at addressing this issue.
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REEEP is focussed on the development of market conditions that foster sustainable
energy and energy efficiency and works to structure policy and regulatory initiatives
for clean energy.
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Established in 2002 at the World Summit on Sustainable Development, REEEP is
today recognised by international processes, such as the G8, the Gleneagles
Dialogue and the Asia Pacific Economic Corporation Working Group, as a key
delivery vehicle for accelerating the global uptake of renewables and energy efficient
technologies.
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REEEP partners are from 71 countries although 22% originate in Asia.
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The partnership currently has more than a hundred projects in its portfolio and, in
October 2008, issued a new project call of more than €4.3 million, particularly for
projects in priority countries – Brazil, China, India and South Africa.
Asia-Pacific Partnership on
Clean Development & Climate
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(APP) is a public-private partnership that brings together the governments and private sectors of Australia,
China, India, Japan, Korea, the United States and, since October 2007, Canada – countries that collectively
account for more than half the world’s economy, population and energy use (APP 2008).
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Though the APP is voluntary and non-legally binding, it is intended to be ‘politically binding’. The
Partnership does not contain any emission reduction targets
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It aims to produce forms of cooperation to reduce ‘greenhouse gas intensities’ of economic activities thus
allowing overall emissions to grow as long as energy is being used more efficiently.
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The APP aims to facilitate investment in clean technologies, goods and services, accelerate the sharing
of energy-efficient best practices, and identify policy barriers to the diffusion of clean energy technologies.
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The APP created eight public-private Task Forces for specific sectors: aluminium, buildings and appliances,
cement, Cleaner Fossil Energy, coal mining, Power Generation and Transmission, Renewable Energy and
Distributed Generation, and Steel.
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The US based Policy and Implementation Committee (PIC), comprising representatives from the partners,
governs the overall framework, policies and procedures of the Partnership, guides the Task Forces and
periodically reviews progress of the Partnership.
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As of July 2008, 123 projects had been endorsed by the PIC, though it is too early to comment on delivery
of tangible benefits. The Partnership is based on a highly decentralised structure whereby a project or
activity involving any two or more Partners that contributes to the objectives of the Partnership is eligible for
inclusion in the Partnership.
Neo-liberal CD governance
Bears all hallmarks of broader forms of neo-liberal
environmental governance:
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Emphasis on market solutions
Efficiency over equity as central determinant of policy
State role reduced to ‘steering’ in co-regulation
arrangements
(Creative) accountancy and auditing as tools of
performance
Key role of many architects of neo-liberal economy (WB)
Many policy tools set up to deliver privatisation (deal with
monopolies, anti-competitive behaviour etc) not well
placed to deliver clean energy policies (Smith)
Varieties of national CD
governance
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Reflect power as:
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Capacity to attract investors on favourable terms/to align CD
finance with broader developmental goals
Resources to manage requests, oversee implementation
Global market position/attractiveness of domestic
markets/stability of investment climate
Political culture: channels of participation, democratic space
Regulatory styles: Uneven degrees of regulation (light touch –
highly interventionist)
Different ideas about how to achieve SD and significant
autonomy to define this for themselves- reflected in use of
taxation etc.
ARGENTINA
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An interesting case of a country with enormous potential to advance clean
development but currently has very few projects registered, particularly in
comparison to its neighbour Brazil.
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Establishing why this is the case and in turn, addressing what can be done
about it will be critical if Argentina is to fulfill its commitment to control
carbon emissions; a commitment that will require a reduction of emissions
of between 2-10% compared with the expected level of emissions.
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Argentina has begun establishment of a legal framework to support and
promote the use of renewable energy in the country. The objective of
Argentina’s renewable energy law is to promote renewable energy electricity
generation and technology research, demonstration, and implementation.
Argentina’s renewable energy policy calls for 8% of electricity to be
generated from renewable energy sources in 10 years. Future renewable
energy installations include geothermal, tidal, biomass, landfill gas, and
biogas facilities as well as large hydro facilities (over 30 MW).
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Beyond potential for a vast increase in the uptake of renewables, the forestry
and agriculture sectors present untapped potential.
INDIA
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Leading participant across all sectors and project sizes in the CDM to date.
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Vast range of projects in manufacturing (cement industry), wind power,
biomass, cogeneration, waste heat recover and many small-scale projects.
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Diversity of projects within the country provides a unique opportunity to
explore ideas about how institutions can create convergence and synergy
between social and developmental outcomes.
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According to the 11th New and Renewable Energy five-year plan proposed by
the government of India, from 2008-2012 the renewable energy market in India
will reach an estimated US $19 billion. The Indian government has also set
specific targets for renewable energy; expecting renewable energy to
contribute 10% of total power generation capacity by 2012.
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Furthermore, as home to one third of the world’s poor people, India
assumes a central role in donor efforts to tackle poverty and therefore projects
that can genuinely capture developmental as well as environmental benefits
are at a premium.
SOUTH AFRICA
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One of few African countries to have projects registered under the
CDM. These include projects on landfill gas, fuel switching projects and
urban housing energy upgrades.
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South Africa is also the continent's greatest emitter of greenhouse
gases, with energy production overwhelmingly dependent on fossil fuel and
with large coal reserves it amongst the world’s top coal exporters.
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Whilst South Africa faces a significant challenge in how to reduce the
energy intensity of its economy, particularly in the mining and
manufacturing sectors, the country has enormous potential for CDM activity
development: South Africa is the most advanced country both
technologically and economically in Africa and has a well developed
transportation, energy and communication infrastructure.
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With about a third of households, mainly in rural areas, lacking access to
electricity, projects have the potential to achieve sustainable
development objectives that are a high priority for the South African
government. It is important, therefore, to establish what lessons may be
gleaned from the governance of these projects that could be applicable both
within South Africa and beyond to the region as a whole.
Challenge presumptions
about nature of governance
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Assumptions about:
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state capacity
functioning markets and active participants in them and
engaged civil society with the political and democratic
space in which to operate
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……do not pertain to most of the world most of the time yet
often underpin policy models and academic theory
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Beyond ideal types towards actually existing
governance
On whose behalf?
Processual Issues
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Who is served by the existing structure of CD
governance?
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Whose priorities? Crowded field of actors seeking to
access resources and define role for themselves: at
expense of coordinated, effective, demand-driven
responses?
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Questions about responsiveness of key actors: WB in
particular
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If CD tied to broader neo-liberal energy reform agenda,
changes the priorities and could undermine support of
many LDCs
Distributional Issues
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Investment opportunities > environmental or
SD rationales: latter harder to quantify,
preference for quantifiable commodity
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Low-hanging fruit > enabling clean energy
transitions
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Uneven distribution by region
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70% of CERs in 1st 1.5 years were issued for abating
gases other than CO2
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Doesn’t always follow that RE and EE produce most
sustainable development benefits
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Also the case that the exhaustion of some of the HFC
opportunities and possible changes of rules may
produce more investments in RE and EE.
(Paulsson 2009)
Distribution by region
Distribution by host country
Key characteristics of CD
governance at moment
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Uncoordinated: across levels, between actors and within
government
Incoherent (from a point of view either of addressing
poverty or reducing GHGs)
Uneven (in terms of regional and sectoral coverage, who
they benefit, balance between public and private)
Network-oriented (APP, REEP): Multi-actor, across scale,
mix of public and private. Could make them more flexible,
adaptable, ‘light-footed’, but also leave key gaps in terms
of participation, accountability, responsiveness.
Un-governance of CD: The actors and institutions which
ascribe themselves the label clean development actors are
rarely those which yield most power over clean
development.
Worst case scenario
‘If it operates within the current policy
perversity in which the Kyoto Protocol and
CDM exist alongside massive North-South
financial flows to fossil fuels, then it will fail.
A real solution to climate change and
sustainable development must divert these
flows, not create carbon markets alongside
them’.
(CDM Watch 2004:8)
Best case scenario
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Unilateral CDM for those countries with capacity to do this:
fund projects, store or sell credits
Pro-active national energy strategies that address
energy-economy-environment nexus: forward-looking,
integrated participatory and deliberative
Sectoral approaches able to enable large-scale
transitions
New incentives to invest in neglected sectors and regions:
use of aid, trade, CDM rules to produce development and
SD weighting
Issue-linkages and side-payments: trade deal on energy
services and technologies combined with support for lowtech innovation, joint venture and partnerships on specific
technologies
Greater policy integration + coherence among key actors
Bridging parallel worlds

We have parallel worlds of clean development; the
self-identified, deliberate, intentional and
interventionist forms of CD and the every day
practices of project and development and
investment characterised as ‘(clean) development
as usual’, but which is either largely not responsive
to the social and environmental imperatives of clean
development, or responsive to one or other aspect
but not both.

This remains the greatest challenge: how to move
clean development from being the irregular and the
additional to being the normal and the
mainstream.
What does this sort of
framework illustrate?
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Governance blind-spots and their implications:
Where action is required
Processual issues: Accountability gaps, deficits in
participation
The importance of institutional design and policy
processes (mandates, consultation, resources, state
capacity) & need for reform
Scope for pro-poor clean development policy in
developing countries: Questions of autonomy and
power
Distributional issues: Sectoral and regional
differences (what level of public and private flows are
subject to clean development governance)
In Sum

Engage in policy debates about future of
clean development and how to integrate
climate and development policy more
effectively

Theoretically: develop and challenge existing
accounts of where governance occurs, how
and by whom (global governance, private,
hybrid, self and civil regulation) in this critical
area of policy
For more information…..
www.clean-development.com