DNA Peru's Framework

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DNA- Perus Framework
Njeri Wamukonya

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

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

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Process of establishing DNA (1)
1. Determining the market potential and Perus
likely piece of the pie

• 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 Perus 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 origins
  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?

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

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

• 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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What has Peru done to attract FDI?

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

• 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

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INSTITUTIONAL SET-UP WHERE IS CONAM
PRESIDENT OF PERU
Chaired by a President
MINISTERIAL CABINET (14 ministers)
Also chair of CONAM
Responsible for 7 public agencies ONE of which is
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
Ad hoc committee
Experts from CONAM
Environmental expert

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Legitimising the DNA

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

• 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

• 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

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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.

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