Presentation of PMR Expression of Interest

Country: Peru

Presenter: David Dall'Orto Cacho

Date: Octubre, 2012

Content

1. • Overview: Economic Performance

2. • Peru and Climate Change

3 • Policy Context for GHG Reduction

4 • Iniciatives being implemented for GHG reduction in the Ministry of Economy and Finance

5 • Peruvian experience on CDM projects

6 • Interest in market instruments and support from PMR

7 • Organization

8 • Peru’s participation in the PMR

Peru and Climate Change: Impacts of Climate Change on GDP

Economic Impact of Climate Change on real GDP (millons S/.)

Without CC (BCRP)

With CC (BCRP)

Without CC (CAN)

With CC (CAN)

About 15% of GDP and one third of the labor force are associated to economic activities which are sensitive to the effects of climate change: agriculture, fisheries, mining, energy and water. The expected overall costs of not acting now goes from 5% to 20% of total GDP (damages and impacts). The amount of investment required to avoid incurring in a lost of 5% of GDP is about 1% of GDP.

Peru and Climate Change: Economic Growth and GHG Emissions

1994 98,816 Gg

2000 120,023 Gg

2009 146,311 Gg

Marginal emitter at global level (0.4%), but high carbon

intensity of the economy due to coupling between

economic growth and GHG emissions

Policy Context for GHG Reduction: Timeline

1993 • National Commission for Climate Change (updated in 2009)

1996 • National Environmental Agenda (1997 – 1999)

2002 • National Law for Regional Goverments (Law Nº 27867)

2003 • First National Strategy for Climate Change

2004 • Law for the National Environmental Management System (Law Nº 28245)

2005 • General Law for the Environment (Law Nº 28611)

2008 • Establishment of the Ministry for the Environment (Legislative Decree N° 1013)

2009 • National Policy for the Environment (Supreme Decree N° 012-2009-MINAM)

2012 • Update of the National Strategy for Climate Change

Policy Context for GHG Reduction: Voluntary Commitments for 2021

Net emissions declining to zero in LULUCF Baseline: annual deforestation 150,000 ha (1990-2000) –

53 MT CO2eq; Conservation of 54 million Ha of primary forests

Shift of the national energy consumption matrix to 40% of non-conventional

renewable energy and hydro-energy Mix of efficiency and renewable, including hydropower; biomass;

wind; solar; about 28% reduction as compared to 2000; potential reduction 7 MT CO2eq

Capture and use of methane from proper disposal of municipal solid waste

Country-wide program; priority in landfills for medium and large cities; potential reduction of 7 MT CO2eq.

Policy Context for GHG Reduction: National Strategy for Climate Change

Sectors and

governments at national, regional

and local levels conserve carbon

stocks and substantially improve the

management of GHG emissions

Government bodies and stakeholders implement

actions to enhance adaptation capacity of

the population, productive activities and

services specially in more vulnerable areas in

the country

Governments at national, regional

and local levels manage water resources in an integrated way,

with due consideration of the impacts of climate change

Government entities respond to the challenges of climate change with

strengthened capacities and organized institutional action at the

national, regional and local levels

The population acquires awareness about climate change and develops capacities to respond to its effects

Government authorities and stakeholders at national, regional and local levels have scientific and technical knowledge for an opportune and

effective response to events associated to climate change

Priority actions stated in the

National Strategy for

Climate Change count with

enough technical and

financial resources for its implementation

, that are managed

effectively, with accountability

and social equity

Iniciatives being implemented for GHG reduction in the Ministry of Economy and Finance

Creation of a Climate Change Unit in the Ministry of Economy and Finance.

This CC Unit is mainly working on two lines of action:

Economic Instruments

• Minimize impacts of CC, ensure efficient allocation of resources and create incentives for developing and implementing mitigation and adaptation actions

Production of information/knowledge

• Identify risks and potential economic impacts of climate change on the Peruvian economy

Economic Intruments: Implementation of Public Investment Programs (1)

• Objective: Reduce the vulnerability of the population

exposed to a high level of risk from one or multiple natural hazards.

• Budget allocated: US$ 53.4 million.

Budget Programme “Vulnerability Reduction and Emergency Response

to Natural Disasters”

• Objective: Decrease the amount and danger of uncontrolled solid waste disposal in the environment.

• Budget allocated: US$ 80 million

Budget Programme “Solid Waste Management“

• Protection scheme that allows subsistence farmers, located in areas of high risk and climate vulnerability, coping with the damage caused by catastrophic weather events.

• Budget allocated: US$ 15.4 million from 2011 to 2012.

Agriculture Insurance for Catastrophes

Economic Intruments: Implementation of Public Investment Programs (2)

• Introduces Risk Analysis criteria in the process of identification, formulation and evaluation of projects under the National Public Investment System (SNIP).

Methodological guidelines for the incorporation of

disaster risk analysis in Public Investment

Projects

• Incorporates in the National Public Investment System (SNIP) methodological guidelines and criteria that take into account plausible alternatives of adaptation to climate change.

Public Investment Programme and Climate Change

Adaptation (IPACC)

Economic Intruments: Other instruments

• Introduces the principle of proportionality to the degree of harm from contaminants they contain.

Selective Consumption Tax on fuels

•Promotes the shift from old vehicles to new ones that consume gasoline and natural gas (GNV) through the financial system.

Gas Convertion Programme - COFIGAS

•When a PIP produces a positive externality (reduction of GHG emissions), it will use a special discount rate (4%), in contrast to other projects, which use the regular discount rate (9%)

Social discount rate for public investment projects of

environmental services to reduce or mitigate GHG emissions

•Bidding of investment projects (wastewater treatment plants, renewable electricity generation, expanded use of natural gas, improvement of urban transport, etc.)

Promotion of Public – Private Infrastructure Investment Project

with high impact on emissions

Information: EIECCP & PLAN CC

Objective: Quantify the impacts of climate change on the availability of resources and the development of the more representative productive activities of the national economy (agriculture, energy, mining, livestock, trade and tourism, marine fisheries, health, infrastructure and services).

Economic Impact of Climate Change

Objective: Build capacity and generate quantitative evidence to maintain the economic growth trajectory and target government and social actions that allow, in the long run, achieving a low carbon economic growth.

Scenarios and Long Term Mitigation

Plans for Peru

82

30

Proyectos RegistradosRegister Projects

30

11

Proyectos Registrados Proyectos con CERsRegister Projects

Fuente: MINAM, 2012

In September 2012, the DNA (MINAM) has issued 82 Letters of Approval, of which 30 are already registered and of them, 11 have received CERs.

Number MW/year tCO2eq/year

• Projects with LoA 82 3,648 12,628,281

o Register Projects 30 1,037 3,314,755

– Projects with CERs 11 276 1,322,472

Projects with CERs

Peruvian experience on CDM projects: Energy Projects under the framework of the CDM

MINAM as Designated National Authority (DNA) has awarded 82 national letters of approval to CDM projects that meet the criteria of sustainable development, which is a pre- requirement for registration thereof with the CDM Executive Board of the UN.

Interest in market instruments and support from PMR (1)

• Peru has great disparities between economic sectors. This fact has made us realized that we should not intent to apply the same market instrument to all the economy, and that instead we should keep exploring both alternatives as we know that different instruments should be applied to different sectors.

• Peru needs PMR support in the following areas: – Further research and design of the ETS, including the

appropriate type, scope and scale. – Further explore the viability of developing sectoral ETS. – Developing necessary institutional tools and financial

instruments that will facilitate the implementation of the ETS. – Research on other additional / complementary sectoral

mechanisms, such as a scaled-up crediting, and its applicability, and legal and institutional feasibility in Peru.

Interest in market instruments and support from PMR (2)

• On other relevant areas where we need further assistance: – Generating additional information regarding the potential

impacts of the implementation of these financial mechanisms on the economy, paying special attention to impacts on economic growth and structural adjustments of the economy.

– Capacity building to carry on further research on market-based instruments.

– Quantifying the emissions reduction that will be achieved by the system.

– Establishing a measurement, report and verification system (MRV) with a suitable registry system that is consistent with the requirements of international carbon markets.

– Provide technical assistance on pilot an ETS and/or emissions crediting.

Interest in market instruments and support from PMR Prioritazing sectors to reduce GHG Emissions

Mitigation potencial has been identified in several sectors of the peruvian economy. The Government of Peru suggests choosing three of them: Energy, Transport and Forestry, based in the following criteria:

• Major source of emissions • Sectors with high emissions growth • Emission trends • Major potencial for reduction • Sinergies with other initiatives • Voluntary commintemnts

Energy

• After LULUCF, the energy sector is the second largest source of GHG emissions at a national level (MINAM).

• Emissions growth in the energy sector is the third largest (MINAM).

• Emissions will nearly tripled in 50 years (MINAM)

• Changing the current energy matrix, so that by 2020 renewable energy represent at least 33% of the energy consumed in the country.

Transport

• After LULUCF, transport (within the energy category) is the largest source of GHG emissions at a national level (MINAM).

• Tax on fuels

• Gas Convertion Programme

Forestry

• LULUCF activities are the firts source of GHG emissions at a national level (MINAM).

• Emissions growth in the LULUCF sector is the second largest (MINAM).

• Emissions will grow more than 100% in 50 years (MINAM)

• By 2012, reduce to zero net deforestation of primary and natural forests.

Organization: Implementation of Working groups

Inter-ministerial Working Group - IMWG

Ministry of Economy and Finance

Ministry of the Environment

Ministry of Agriculture

Ministry of Transport

Ministry of Mining and Energy

Determine rol of market-based instruments on Climate Change Policy.

Sectoral analysis of viability of market-based instruments.

National/Sectoral MRV

Selection of market-based instruments according to sectoral needs/preferences.

Pilot activities

Activities undertaken by Inter-ministerial Working

Group - IMWG

Peru’s participation in the PMR

• Peru is in the same status as many other PMR Implementing Countries – which are actively exploring and identifying a suitable market mechanism and other carbon pricing instruments to achieve the mitigation objective.

• Peru values the learning process under the PMR and is also prepared to share its experience with other countries.

• Despite the funding for Peru’s participation in PMR comes from a bilateral source, it is important for Peru to be fully integrated into the PMR process and follow the rules and criteria established under the PMR.

Thank you