Colombia Final Market Readiness Proposal May 25, 2014 PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
MRP focus and objective The MRP is aimed at developing carbon market instruments in Colombia’s transport sector. Final MRP contains same instruments as draft: • (i) Credited NAMAs in the urban transport sector; • (ii) Domestic offset scheme • (iii) Assessing the introduction of a performance standard for vehicles combined with allowances PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Process of Revising MRP MRP draft presentation (Mexico) PMR Colombia team discussions and own summary of issues Discussion with PMR consultants on issues where clarification was sought Development of new version for internal review PMR feedback received PMR feedback responded and included into final MRP Final MRP produced Discussion with high-level government stakeholders in 4 ministries (MoT, MoE/MADS, DNP, MoF) Assessment of PMR fund operationalization 3 PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Update on Context DNP, MoE and MoT provide greater feedback as to past and current projects, which help structure counterpart funding: Sustainable transport policy concept (MoT) Performance standard assessment (MoE/MADS) Carbon tax (DNP) Government cooperation agency created and involved in assessment of PMR funds operationalization 4 PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Feedback and responses Issue / question Response Clarification sought on the Covered via seeking avoidance of double-counting difference between domestic offset scheme and NAMA crediting A little bit puzzled on ‘performance During implementation a study is previewed which shall “domestic offset scheme”: standard & ‘ feebates ’, and its look at different systems for performance standards potential and different experiences thereby suggesting a system apt for Colombia and learning from other experiences Offset scheme would be financed by Not public monies as these do not enter the general national public monies ? budget but are earmarked taxes Clarify the offset part of the Buyers are the fund itself which receives the money from compensation/offset scheme the fuel tax i.e. indirectly the Colombian fuel users buy Colombian transport offsets thus the transport sector itself cleans up some of its emissions ( new diagram included ) These “effects” are already included in the estimated The price of fuel might influence the consumers’ choice of vehicle elasticity . The effect of mode-switch, if it actually occurs, technology and the choice of would be reflected in lower fuel consumption and covered private vs. public transport. with the elasticity. It might be an efficient instrument in terms of low transaction cost and simplicity but not a 5 PMR Partnership Assembly – Cologne, Germany May 25-27, 2014 useful instrument to reduce GHG emissions
BB1: The Big Picture PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Climate policies The Colombian Low The REDD+ Carbon Development National Strategy ENREDD+ Strategy ECDBC EPFD The Strategy for PNACC The National financial Adaptation Plan for protection against Climate Change, natural disasters National Development Plan 2010 – 2014 (CONPES 3700 / 2011: Policy for Climate Change) PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
BB2: Policy framework PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Conclusions of instrument assessment • NAMAs could be established for urban transport projects as well as for CO 2 performance standards of vehicles. • A domestic offset scheme, funded by the income from a low carbon levy, could be implemented at the same time or in a 2 nd step. • A stand-alone carbon tax in the transport sector, or the inclusion of transport in an ETS, are not considered viable • A performance standard is considered as an interesting instrument and can be effectively combined with a MBI based on allowance or permit trading. • Work in Colombia on NAMAs, compensation funds, performance standards strengthen the implementation PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
BB3: Core Technical and Institutional/Regulatory Market Readiness Components PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Proposed institutional setup for PMR implementation MinTrans MADS DNP MinHac UMUS CONFIS DCC DIES NAMA Entity & Liaison to Management Domestic Offset Board UNFCCC Administrator Inter-Ministerial UMUS DCC Committee Second-Level Fiduciary & Fund Financial Manager Verificator ICONTEC/Expert Panel APC or UMUS Program / NAMA Program / NAMA Program / NAMA Participant 1 Participant 2 Participant 3 Transport PPP Municipality Private Transport Company PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Proposed financial setup for MBI management tbd PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
BB4: Planning for market- based Instruments in Colombia’s transport sector PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
1. Scaled-Up GHG Crediting Instrument for Transport NAMAs • NAMAs developed following a standardized and structured step-wise development methodology. Proposed: – urban transport NAMA, – NMT/TOD NAMA (NMT+) – vehicle performance standard NAMA PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
Existing transport NAMAs in Colombia Action Stage Sector Sub-sector Objective Proposal/Planning Transport Improvement of Road vehicles Accelerate the renovation of the cargo vehicle fleet cargo road-based freight with the aim to improve economic competitiveness sector and environmental performance of the freight transport sector Concept Transport Electric vehicles road vehicles Substitute conventional vehicles with electric NAMA cargo and vehicles. The penetration of electric vehicles passenger should reach 20% for the passenger sector, 30% for taxi fleets and 30% for urban freight. Concept Transport Transit-oriented Passenger Integrate climate change mitigation variables into development transport local land-use plans and urban planning. Supported by NAMA Facility. idea Transport NMT No specifics yet Non-Motorized Transport Urban Transport idea Transport No specifics yet Passenger transport Transport Demonstration and Pilot studies (being Passenger Promote battery-electric, large-capacity vehicles transport assessment of analyzed with GEF for mass transit in Colombia by means of cooperation) battery-electric removing technology, regulatory, awareness and vehicles for mass financial barriers, as a measure to reduce GHG transit in Colombia emissions and improve local air-quality Transport Low-carbon and Pilot studies (being Freight To reduce GHG and criteria pollutants emissions transport from freight transportation operations in Colombia Efficient National analyzed with GEF cooperation) Freight Logistics Initiative PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
2. Domestic Offset Instrument for Transport Indicative 120 • National compensation fund exercise with 0.5 for domestic transport 1 USD / liter 100 offsets. consumer 25 24.5 price (w/ 0.5 • Compensation fund 80 cent carbon financed from a carbon tax tax/levy) 75 75 on transport fuels 60 levy carbon tax • Funds used to finance Surcharge domestic reduction projects 40 Regular cost in the transport sector. bajo, cuantos ‘ ’ • Carbon levy would partially 2012 20 gasoline replace the fuel surplus tax price: (see graph) 0 128 c/ l Existing fuel Proposed fuel price price PMR Partnership Assembly – Cologne, Germany composition composition May 25-27, 2014
Offset fund/credits logic PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
3. Performance Standard for Vehicles with Permit/allowance trading • Performance standard for vehicles combined with allowances • Allowances can be traded between importers and producers. • EU: maximum CO2 emissions per km for car fleets (manufacturer or importer level). • Legislation sets binding emission targets for new car and van fleets. • Only fleet average is regulated : manufacturers balance vehicles w/ emissions above the limit value curve and vehicles below the curve. • If average CO2 emissions of a manufacturer's fleet exceed its limit value in any year, it has to pay an excess emissions premium for each car registered • Based on the penalty price, importers or manufactures can therefore have an incentive to sell cars with low GHG emissions with a lower profit rate and put a levy on cars with higher GHG emissions (avoiding the penalty). PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
An example scenario Example: Vehicle emissions (grCO2/km) 300 trading 250 200 177.50 150 grCO2 146.67 max 150 125.00 100 50 0 Car A1 Car A2 Car A3 Fleet Car B1 Car B2 Car B3 Car B4 Fleet Car C1 Car C2 Car C3 Fleet Average Average Average Importer A Importer B Importer C PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
BB5: Organization, Communication, Consultation and Engagement PMR Partnership Assembly – Cologne, Germany May 25-27, 2014
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