Designated National Authorities for CDM

Vivek Kumar              vivek@sdalt.ernet.in

Introduction

The modalities and procedures for a CDM (Annex decision 17/CP.7) require that Parties participating in the CDM shall designate a National Authority for the CDM. The Parties are invited to send designation of their national authorities for the CDM to the UNFCCC secretariat. So far, Argentina, Bolivia, Brazil, Columbia, Cuba, Germany, Morocco, The Netherlands, Nicaragua, Peru and Uruguay have established National Authorities for CDM in the respective countries. As national circumstances vary from one country to another, so does the legal nature and structure chosen for the National Authority.

The National Authority for CDM has a precursor in the national authority for AIJ. The national authority for AIJ acts as the primary national contact for AIJ, and is authorized to “accept, approve, or endorse activities implemented jointly and to report them to the COP through the secretariat. In the absence of a national authority for AIJ, the national focal point (the national contact for the UNFCCC) fulfils the responsibilities of the national authority for AIJ.

Latin American Experience during AIJ

The Latin American countries have shown exemplary progress with institutional development for AIJ and CDM. Countries like Costa Rica had set up a national authority for AIJ way back in 1994, other Latin American countries followed suit. The national AIJ entities created during 1994–2000 were all of experimental nature. They varied widely in their legal structure, sources of technical and financial support, and responsibilities with which they were entrusted.

The legal nature of these entities ranged from a totally private to a completely government owned institution. Costa Rica a mixed entity with equal participation of private, public and NGO sectors. El Salvador, Argentina, Bolivia and Paraguay have entities that are fully governmental whereas Guatemala has a private sector institution under the governance of a multi-sectoral board. Honduras and Panama have non-governmental organizations and Ecuador has one private sector entity and one public sector entity working as national authorities.

Finally, there are differences in the purposes for which the entities have been created. The entities in some of the countries carry out the evaluative role only viz. promoting, evaluating and approving projects, whereas in other countries the entities play a normative role as well i.e. they also develop national climate change policies. No one approach is better than the other; each country must design according to national needs and possibilities.
 

Steps in Creating a National Authority

From the experience of the Latin American and other countries that have set up National Authorities, it can be concluded that setting up a National Authority for the CDM entails following steps:

The steps mentioned here may not occur in the same order, some of these may even go on in parallel, but each of them need to be addressed at some or the other stage of development and implementation of the National Authority.
 

Functions of a designated National Authority

A designated National Authority broadly carries out two types of functions:

The regulatory function involves evaluation and approval process and includes the annual reporting of activities. The regulatory function is a prerequisite for the project validation and certification process and must be performed by all National Authorities in order to comply with international regulations.

The promotional functions involve capacity building and marketing. These are optional functions and do not have any international regulations. A National Authority may choose to design these functions unilaterally to fit the country’s needs.

Regulatory Functions

Evaluation and Approval: Evaluation and approval of CDM projects are the main regulatory functions of the National Authority. The evaluation and approval process must assess whether potential projects contribute to sustainable development in the host country and to ensure that projects being implemented within its territory pursue the objectives of the CDM in a manner congruent with relevant national policies, strategies and priorities. The evaluation should also assess whether projects will result in real, measurable and long-term benefits related to mitigation of climate change.

For a systematic evaluation and approval process a National Authority may like to do the following:

1.     Adopt international criteria

The key international criteria are as follows:

2.     Develop national criteria

Another very important goal of the national evaluation and approval process is to ensure a project’s contribution to national sustainable development. It is the host country’s prerogative to confirm whether a project activity assists in achieving sustainable development. The host country should, therefore, develop justifiable and transparent assessment criteria to ensure the same.

The key elements that a National Authority may like to evaluate are:

Compliance with relevant policy and regulatory regimes: The National Authority may like to evaluate the eligibility of a project proposal according to a positive or negative list of preferred technologies and/or sectors, eventually adopted by the host country. In the sector identified, the National Authority further evaluates compliance with related political and legal framework and environmental standards for that particular sector. The project activity should also be compatibility with local priorities, as stated in local development agenda.

Financial Review: While evaluating a project activity and approving it the National Authorities should make sure that project activity does not make use of any official development aid.
 

3.     Establish guidelines for the presentation of projects

        The guidelines for the presentation of projects need to be consistent and transparent, so that project developers are not subjected to confusion. In order to assess a project as per the national criteria, a National Authority should either add some sections to the Project Design Document (PDD) or design an additional document format for information on the national criteria.

4.     Establish national procedures for the evaluation and approval of projects

One of the key elements for attracting CDM investments is the host country’s application of quick and transparent procedures for screening, evaluating and approving projects. To achieve this goal, the NA should implement a standardized system to screen, evaluate and approve CDM projects.
 

Promotional Functions
 

Marketing CDM Projects

The CDM market has been diminished both by the stringent requirements imposed on the CDM by the Marrakesh Accords as well as by the exit of the United States from the Kyoto Protocol, and the market during the first commitment period may not reach volumes that were originally forecasted. So, only the high quality CDM projects will compete in the market.

Though it is not a mandatory function of a National Authority, yet it may wish to support project developers in the marketing of approved projects. Projects having following characteristics are deemed to be of high quality and stand a fair chance of successful marketing:

The National Authority can facilitate international investment by developing a portfolio of diverse high quality CDM projects that cater to the needs and interests of a wide spectrum of potential investors. However, in order to develop such a portfolio of projects, the host country / National Authority may like to put in place the following strategic institutions:

The CDM project cycle is a complex one and a project may find it difficult to do the complete cycle on its own. However, the specialised institutions mentioned above will facilitate the process. Successful participation in the CDM will depend on the effectiveness with which the National Authority provides an enabling environment by having appropriate institutions and rules and regulations in place.
 

National Authority for CDM in India

The Government of India is in the processes of setting up a National Authority for CDM. The structure of the Authority and its functions are being discussed by working groups consisting of the relevant ministries having stakes in the climate change issues, the research institutions and the civil society organisations. Historically, the Ministry of Environment and Forests (MoEF) is the focal point for the AIJ and has been carrying the flagship of climate change debate. However, the CDM being a project based initiative, various other ministries play important roles and should be properly represented in the National Authority.

Conclusion

The functions of a National Authority for CDM are many and varied. It may be difficult for a newly formed National Authority in a developing country to exercise all functions from the very beginning and a newly formed National Authority need not feel intimidated by the breadth of responsibilities outlined in this article. It is important to make a good start and in order to do so, a National Authority may like to begin with the evaluation and approval functions which cannot be delegated to a third party. Capacity building and technical training can be taken care of by specialized agencies and funded by different sources of official development aid. With time and growing maturity of the market, the National Authority may gradually assume the promotional responsibilities as well.  q