Environmental Financing for ODS Life-cycle Management

Various sources of funds need to be identified and harnessed throughout the entire Ozone-Depleting Substances (ODS) product life cycle. Complemented with other sources of funds, Multilateral Fund for the Implementation of the Montreal Protocol (MLF) investments are very important catalysts for change and on many occasions have helped mobilize additional sources of funding for the components of the conversion process that were not-eligible for funding under the MLF. MLF funds are therefore critical in ensuring the smooth phase-out of Hydrochlorofluorocarbons (HCFCs), just as they were in the phase-out of CFCs.

The Global Environment Facility (GEF) provides an important source of financing for countries with economies in transition, where it assumes the task of the MLF. GEF funding is also more flexible and can provide additional finance for enabling projects and feasibility studies, which would not qualify for MLF funding.

Leveraging carbon finance is more complex. It is important to note that Chlorofluorocarbons (CFCs) and HCFCs are not regulated under the Kyoto Protocol (KP). Hence, except for energy efficiency-related emission reductions, CFC and HCFC based emission reductions cannot be traded in the compliance market under the Kyoto Protocol (they do not qualify for “Certified Emission Reductions” (CERs) under the Clean Development Mechanism (CDM) or “Emission Reduction Units” (ERUs) under JI).

While CFC and HCFC emission reductions could potentially be traded in the voluntary carbon market (CFC and HCFC emission reductions can qualify for “Verified Emission Reductions” (VERs)), the purchase prices offered for VERs are generally much lower than those offered for CERs. Furthermore, VERs cannot secure upfront payment to cover capital, operation or transaction costs. It is therefore necessary to explore the potential combination and sequencing of different funding sources to cover immediate and deferred costs.

For examples of how UNDP is helping countries combine and sequence funds for the implementation of ODS pilot destruction projects, click here.

Through the provision of financial and technical solutions UNDP assists governments in transforming the markets, removing barriers for the introduction of energy efficient, ozone and climate friendly products and helps enterprises avoid job losses. UNDP does this by drawing on its expertise in a number of related areas:

Multilateral Fund for the Implementation of the Montreal Protocol (MLF). UNDP is one of the implementing agencies (along with the World Bank, UNEP, UNIDO and bilateral agencies). UNDP has a US$ 550 million programme funded by the MLF and has successfully assisted countries and their enterprises, large, medium and small, in their technology conversion processes, by providing the required technical assistance and policy advice.

Global Environment Facility (GEF). UNDP is one of the implementing agencies of the GEF and has a portfolio of climate change mitigation/energy efficiency projects funded through the GEF. UNDP-GEF’s Active Portfolio on Energy Efficient Appliances, Industrial Energy Efficiency and Energy Efficient Buildings totals US $185.7 million (excluding co-finance) and includes 47 projects in 39 Countries. UNDP portfolio of projects on ozone depleting substances totals US$ 24 million (excluding co-financing) and includes 31 projects in countries with economies in transition.

UNDP MDG Carbon Facility. UNDP has direct experience in developing and commercializing carbon finance projects under the Clean Development Mechanism (CDM) through the MDG Carbon Facility, and is currently piloting projects in the voluntary market. More.

UN-REDD: UNDP is one of the partner agencies implementing pilot projects, and providing support to the international dialogue on the United Nations Collaborative Programme on Reducing Emissions from Deforestation and Forest Degradation in Developing Countries (UN-REDD Programme). There are a number of parallels between UN REDD, with a fund-based model, and possible developments for ODS carbon finance activities. More.