DNA- Peru’s FrameworkDNA- Peru’s Framework

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Njeri WamukonyaNjeri Wamukonya

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Demonstrate with a real case what countries may wish to take into account when establishing DNA

Aim of the presentation

•Not imply that PERU is ‘clone’ to African country and hence lessons should be contexualised

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1. Determining the market potential and Peru’s likely piece of the pie

Process of establishing DNA (1)

•Factors taken into account:

•International

•Regional and

•National context

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Process of establishing DNA (2)

• International factors:

•USA participation

•Supplementality issues

•Level of implementation of potential CDM projects

•Market regime (hot air, competition)

•(shifts to annex 1- Kazaskhan)

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Process of establishing DNA (3)

• International factors:

•Competition across mechanisms

•ET- hot air e.g. has zero transaction costs compared to CDM projects

•Shifts to annex 1- Kazaskhan- hence increase in hot air stock

•Non participation by Australia – implying 15% of projected reductions

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Process of establishing DNA (4)

• Regional factors:

•Relatively high marginal abatement costs compared to India, China

•Lower dependence on carbon-rich fuels compared to Asia

•More experience in carbon market compared to Asia

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Process of establishing DNA (5)

• National factors:

•The extent to which Peru can influence CER prices

•Price taker since Peru’s mrkt 1%

•Availability of projects

•Barrier is mainly development and implementation of potential CDM projects

•Financing project design and development is difficult due to high dependence on external $

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Process of establishing DNA (6)

• National factors:

•Less than 20% of GDP is used to finance pre-feasibility and investment compared to developed countries –100%.

•Carbon component is 1-10% of total investment (how to get the rest??)

•Transaction costs can exceed CER revenues (especially small scale)

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FDI status- why investigate this?

•Where is FDI coming from and what is the origin’s opinion on CDM

•What is the origins possibility for investing in CDM in Peru?•main FDI source

•UK

•Spain

•USA

•Netherlands

•Panama

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Key Sectors attracting FDI

•Communications

•Industry

•Finance

•Mining

•Energy (by order of importance)

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What has Peru done to attract FDI?

•Law is Complimented by Framework Law for Private Investment Growth AND Regulations of the Private Investment Guarantee Systems

•Established a Foreign Investment Promotion Law in 1991- lays clear rules

•Foreigners are treated in the same way as Peruvians and there are no restrictions on what they can invest in except should Not be within 50 km from the national borders

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•A new Private Investment Promotion Agency, PROINVERSION, was created with the aim of attracting private national and foreign investment

What has Peru done to attract FDI?

•coordinates and negotiates international investment treaties

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Environmental Institutional Framework

• 1996 the National Council for the Environment (CONAM) was established (Equivalent to Ministry)• Prior to this international environmental

matters were handled by the Ministry of Foreign Affairs

• Most ministries have an environmental Unit • CONAM acts as coordinator and

facilitator of these units

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Environmental Impact Assessment Process

• The EIA Act mandates that projects have an environmental certificate

• The EIA is implemented by each ministry in accordance to its needs

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The choice of DNA

• CONAM was appointed as the DNA through a supreme decree in 2002.

• Rationale? : CONAM had been handling the CC issues and was chair of the National Climate Change Commission which coordinates implementation of UNFCCC. In addition CONAM works with all gov and private agencies on environmental matters

INSTITUTIONAL SET-UP: WHERE IS CONAM

PRESIDENT OF PERU

MINISTERIAL CABINET

(14 ministers)

Chaired by a

President

Responsible for 7 public agencies ONE of which is CONAM

Also chair of CONAM

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Role of DNA

• PERU views the role of DNA as being

• purely approval of projects

• Mobilising local institutional structure to embark on the project evaluation process

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The DNA Structure

• Within CONAM operation of DNA is delegated to the Climate change unit which is mainly responsible for other CC issues and hence not DEDICATED to DNA

• The CC Unit comprises of 2 persons; head and an environmental expert

• The CC Unit can seek support from the CC Cooperation Program or other divisions within CONAM

• Evaluation of SD is done by a multisectoral ad hoc committee

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The DNA Structure

EXECUTIVE SECRETARY

HEAD OF CLIMATE CHANGE UNIT

CC Cooperation Program

Experts from CONAM

Ad hoc committee

Environmental expert

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Legitimising the DNA

• CONAM needed cooperation of Ministries where potential for CDM projects Lay

• CONAM’s president communicated with the respective Ministers explaining challenges and opportunities in CDM

• CONAM hence sealed the commitment of relevant ministries to adhere to CDM approval procedures

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How CONAM works • CONAM receives the CDM proposal• CONAM then convenes a technical

committee with relevant Ministerial representative, expert on project type, expert on EIA, NGO, Private sector rep, Foreign Affairs, National Environmental fund rep

• Approval letter from CONAM is hence supported with report from the ad-hoc committee and the relevant ministry. Report indicates;• EIA okay• Tech proven• Project is within national and sectoral

policy

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How CONAM works

• Approval takes 45 days– enforced by including in ISO (threat of loosing the ISO certificate)

• CONAM has signed an MOU with Proinversion to promote CDM (as a way to address conflict of interest). This is the agency promoting FDI

• Ad-hoc committee must visit project site to ensure public is aware of project: meetings organised by local authorities – CONAM meets the costs

• Efficient assessment of project in terms of sustainable development

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Work done so far

• CONAM has approved 3 projects

• CONAM encourages PP to undertake activities demonstrating social responsibility

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Financing the DNA

• Estimated cost of approval USD 4800• This is based on the following activities• Receiving proposal• Summary preparation• Expert opinion time• Visit to project area (to ensure local

consultation)• Ad hoc committee meeting • Approval response (time spent)• Support activities

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Financing the DNA

• The DNA is funded by government money• CONAM has employees responsible for

implementing the CDM strategy – I.e the climate change unit

•Peru currently does not charge the investor for CERs in order to compete with other suppliers and promote private investment.