Evaluation of Mitigation / Adaptation policy portfolios ... · Evaluation of Mitigation /...

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PROMITHEAS – 4 Knowledge transfer and research needs for preparing mitigation/adaptation policy portfolios (Contract No. 265182) E E v v a a l l u u a a t t i i o o n n o o f f Mitigation / Adaptation policy portfolios for Azerbaijan Author: Enver SHIRINBAYLI Scientific Research Institute of Geotechnological Problems of Oil, Gas and Chemistry Co-authors: Dr. Popi KONIDARI, Anna FLESSA M.Sc., Eleni-Danai MAVRAKI MSc. National and Kapodistrian University of Athens - Energy Policy and Development Centre Baku, 2013

Transcript of Evaluation of Mitigation / Adaptation policy portfolios ... · Evaluation of Mitigation /...

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Author: Enver SHIRINBAYLI

Scientific Research Institute of Geotechnological Problems of Oil, Gas and Chemistry

Co-authors: Dr. Popi KONIDARI, Anna FLESSA M.Sc., Eleni-Danai MAVRAKI MSc.

National and Kapodistrian University of Athens - Energy Policy and Development Centre

Baku, 2013

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PROMITHEAS-4: “Knowledge transfer and research

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This document is part of the relevant report prepared for the FP7 funded project

“PROMITHEAS-4: Knowledge transfer and research needs for preparing

mitigation/adaptation policy portfolios”, coordinated by Prof. Dimitrios MAVRAKIS,

Energy Policy and Development Centre (Greece). The whole report contains twelve

(12) documents for each one of the emerging economies that participate in the

project: Albania, Armenia, Azerbaijan, Bulgaria, Estonia, Kazakhstan, Moldova,

Romania, Russia, Serbia, Turkey and Ukraine.

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CCOONNTTEENNTTSS

Contents ____________________________________________________________5

List of Tables ________________________________________________________5

List of Figures _______________________________________________________5

Abbreviations ________________________________________________________6

Assessment of the three developed scenarios for Azerbaijan, through the multi -

criteria method AMS __________________________________________________8

General comments _______________________________________________________ 8

Required data ___________________________________________________________ 8

Assignment of grades _____________________________________________________ 9

Results ________________________________________________________________ 19

References_____________________________________________________________ 20

Conclusions ________________________________________________________21

LLIISSTT OOFF TTAABBLLEESS

Table 4: Total emissions for the country. ______________________________________________8 Table 5: Emissions per sector for the country. __________________________________________8 Table 6: Other environmental effects for the country under each scenario, __________________9 Table 7: Water use for cooling (Energy sector). _________________________________________9 Table 8: Mean CEI for each sector depending on the policy instruments of the BAU scenario. _11 Table 9: Mean CEI for each sector depending on the selected policy instruments of the OPT

scenario. ___________________________________________________________________12 Table 10: Mean CEI for each sector depending on the selected policy instruments of the PES

scenario. ___________________________________________________________________13 Table 11: Overall cost efficiency for the three scenarios._________________________________14 Table 12: Equity measurement. _____________________________________________________15 Table 13: AMS results for each scenario. _____________________________________________19

LLIISSTT OOFF FFIIGGUURREESS

Figure 30: ClimAMS-2012.__________________________________________________________9 Figure 31: Environmental performance of the scenarios. ________________________________10 Figure 32: Political acceptability.____________________________________________________16 Figure 33: Feasibility of implementation. _____________________________________________18 Figure 34: Final grades. ___________________________________________________________18

AABBBBRREEVVIIAATTIIOONNSS ADB Asian Development Bank

CDM Clean Development Mechanism

DNA Designated National Authority

EBRD European Bank for Reconstruction and Development

EC European Commission

EE Energy Efficiency

EIA Energy Information Agency

ENP European Neighboring Partnership

EPR Environmental Progress Report

EU European Union

GEF Global Environmental Fund

GDP Gross Domestic Product

GHG Greenhouse Gas

HESs Hydro energy Systems

IPCC Intergovernmental Panel on Climate Change

MoU Memorandum of Understanding

NC National Communication

NMVOCs Non-Methane Volatile Organic Compounds

R&AE Renewable & Alternative Energy

RES Renewable Energy Sources

SAARE State Agency for Alternative and Renewable Energy Sources

SOCAR State Oil Company of the Azerbaijan Republic

SOFAZ State Oil Fund

TESs Thermal Energy Systems

UN United Nations

UNDP United Nations Development Programme

UNECE United Nations Economic Committee for Europe

UNFCCC United Nations Framework Convention on Climate Change

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The three scenarios have been assessed trough the multi criteria method AMS. This method is combines three multi-criteria methods: Analytical Hierarchy Process (AHP), Multi-Attribute Utility Theory (MAUT) and Simple Multi-Attribute Ranking Technique (SMART) (Konidari and Mavrakis, 2007; 2006). AMS is developed for evaluating climate policy instruments (PI) or relevant Policy Mixes (PM) and with suitable modification for evaluating their interactions as well.

Three criteria are applied: environmental performance, political acceptability, and feasibility of implementation. The evaluation results for each criterion are reviewed below.

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The LEAP model provides the following outcomes for all three scenarios:

Table 1: Total emissions for the country.

Total GHG emissions (in MtCO2eq) Scenario

2000 2020 2050

BAU - 28,905 64,628 OPT - 22,190 52,748 PES - 25,412 58,532

Table 2: Emissions per sector for the country.

Scenario GHG emissions (in MtCO2eq)

2000 2020 2050

Households BAU - 7,726 17,036 OPT - 5,512 12,861 PES - 6,835 15,486 Agriculture BAU - 1,397 3,491 OPT - 1,354 3,383 PES - 1,376 3,437 Non-specified BAU - 0,200 0,500 OPT - 0,200 0,504 PES - 0,200 0,504 Industry BAU - 1,063 2,656

OPT - 0,977 2,567

PES - 1,020 2,612

Transport BAU - 5,973 14,925

OPT - 5,023 13,542

PES - 5,490 14,225

Electricity generation

BAU - 12,125 25,599

OPT - 8,669 19,521

PES - 10,089 21,871

Heat generation

BAU - 0,421 0,421

OPT - 0,383 0,370

PES - 0,402 0,396

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Table 3: Other environmental effects for the country under each scenario,

Scenario Million Metric Tonnes CO2 eq

2000 2020 2050

Environmental effects (Carbon Monoxide (CO)- Nitrogen Oxides (NOx)- Non Methane Volatile

Organic Compounds- Sulfur Dioxide)

BAU - 0,956 2,363

OPT - 0,843 2,238

PES - 0,900 2,304

Table 4: Water use for cooling (Energy sector).

Billion cubic meters Scenario

2000 2020 2050

BAU - - -

OPT - - -

PES - - -

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The software ClimAMS-2012 is used (Fig. 26) for the evaluation of the scenarios.

Figure 1: ClimAMS-2012.

Criterion 1: Environmental performance

Direct contribution to GHG emission reductions: For this sub-criterion, the outcome of LEAP for the total expected GHG emissions in year 2020 are used (Table 9). The scenario with the fewer amounts of emissions has the best performance for this sub-criterion. Negative values are inserted to the software.

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Indirect environmental effects: The total amount of the total environmental effects provided by LEAP (Table 11) is used to assess the sub-criterion. Negative values are inserted to the software.

As a next step, the 2020 data is entered in ClimAMS (with negative value) to calculate respectively the direct effect on GHG emissions and indirect environmental effects.

Figure 2: Environmental performance of the scenarios.

Criterion 2: Political acceptability

Cost efficiency: For the first sub-criterion the mean CEI for each sector was calculated depending on the policy instruments that were under each scenario (tables 13,14 and 15). Each value was multiplied with the respective amount of GHG emission reductions that were estimated by LEAP outcomes. For measures that concern adaptation additional calculations were done.

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Table 5: Mean CEI for each sector depending on the policy instruments of the BAU scenario.

Mitigation Scen. Sector Technological options Policy instrument CEI Mean CEI

Buildings - - -

Industry - - -

Regulatory standards (emission limits of cars (Decree No. 45/2010))

-1,75 Transport Energy efficiency

Economic instruments (tax exemptions ) -0,25

(-1,75-0,25)/2 = -2/2 = -1

Promotion of RES technologies Subsidy (Feed-in-tariffs) (Presidential Decree No. 341/2005, Resolution of the cabinet of Ministers No. 247/2005)

-0,25

BA

U

Energy

Energy efficiency Tradable permits (Presidential Decree No. 727/2005) -0,25

(-0,25-0,25)/2 = - 0,25

Adaptation

Water management

Economic instruments (water fees) -0,25 -0,25

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Table 6: Mean CEI for each sector depending on the selected policy instruments of the OPT scenario.

Mitigation Scen. Sector Technological options Policy instrument CEI Mean CEI

Energy management Performance standards (building code) (Proposed) -5,75

Energy efficient appliances Energy standards for household appliances (Proposed) -2,5

Buildings

Energy management Building isolation requirements (Proposed) -1,5

(-5,75-2,5-1,5)/3 = -3,25

Energy efficiency Regulatory standards (proposed) -1,25

Best available technologies Performance standards (Combined type) (proposed) -0,5

Industry

Energy efficiency Tradable permits (Presidential Decree No. 727/2005) -0,25

(-1,25-0,5-0,25)/2 = -2/2 = -1

Energy efficiency Regulatory standards (emission limits of cars) (Decree No. 45/2010)

-1,75

Promotion of biofuels Fuel switch 0,25

Energy efficiency Regulatory standards (metering)(Proposed) -1,75

Energy efficient vehicles Economic instruments (tax exemptions ) -0,25

Transport

Energy efficiency Performance standards (Transport management) (Planned) +0,5

(-1,75+0,25-1,75-0,25+0,5)/5 = -0,600

Promotion of RES Economic policy instrument - Subsidy (Feed-in-tariffs, tax exemptions) (Presidential Decree No. 341/2005, Resolution of the cabinet of Ministers No. 247/2005)

-0,25

Energy efficiency Tradable permits (Presidential Decree No. 727/2005) -0,25

Best available technologies Regulatory standards (combined type) (Proposed) -0,5

Technologies and practices for GHG emission reductions

Regulatory standards (emission standards) (Proposed) -0,75

OP

T

Energy

Energy efficiency Economic instruments (tax exemptions, subsidies for energy efficient investments)

-0,25

(-0,25-0,25-0,5-0,75-0,25)/5 = - 2/5 = -0,400

Energy efficient technologies Economic instruments (Subsidy –tax exemptions) (Proposed) -0,25 Agriculture

Dissemination policy instruments (Awareness – training)(Planned /Proposed)

-1/6

(-0,25-1/6)/2 = -0,208

Adaptation

Water management

Economic instruments (Fee - tariffs) -0,25 -0,25

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Table 7: Mean CEI for each sector depending on the selected policy instruments of the PES scenario.

Mitigation Scen. Sector Technological options Policy instrument CEI Mean CEI

Energy management Performance standards (building code) (Proposed) -5,75

Energy efficient appliances Energy standards for household appliances (Proposed) -2,5

Buildings

Energy management Building isolation requirements (Proposed) -1,5

(-5,75-2,5-1,5)/3 = -3,25

Industry - - -

Energy efficiency Regulatory standards (emission limits of cars) (Decree No. 45/2010)

-1,75

Promotion of biofuels Fuel switch 0,25

Transport

Energy efficient vehicles Economic instruments (tax exemptions ) -0,25

(-1,75+0,25-0,25)/3 = -0,250

Promotion of RES Economic policy instrument - Subsidy (Feed-in-tariffs, tax exemptions) (Presidential Decree No. 341/2005, Resolution of the cabinet of Ministers No. 247/2005)

-0,25

Energy efficiency Tradable permits (Presidential Decree No. 727/2005) -0,25

PE

S

Energy

Energy efficiency Economic instruments (tax exemptions, subsidies for energy efficient investments)

-0,25

(-0,25-0,25-0,25)/3 = -0,25

Adaptation

Water management

Economic instruments (Fee - tariffs) -0,25 -0,25

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Table 8: Overall cost efficiency for the three scenarios.

Mitigation/Adaptation Cost (pseudo-monetary units)

Buildings Agriculture Industry Transport Energy Total

Scen.

M A M A M A M A M A

BAU 0 0 0 0 0 0 0 0 0 0 0

OPT -7,196 0 -0,009 0 -0,009 0 -0,570 0 -1,398 0 9,258

PES -2,896 0 0 0 0 0 -0,120 0 -0,005 0 -3,021

For dynamic cost efficiency, there are no available data from LEAP so the SMART procedure is used. RES technologies according to the potential that the country has (described in a previous session) are promoted mostly in the OPT scenario compared to the other two scenarios.

The policy portfolio of BAU does not support RES technologies due to: i) no elaborated incentives so as to attract investments (see session about “Main characteristics of the policy portfolio”); ii) lack of technical capacity to support any investment interest (see session about “Main characteristics of the policy portfolio”) and iii) lack of a comprehensive, clear tariff methodology (see session about “Main characteristics of the policy portfolio”). It does not support also the promotion of such technologies under the CDM due to low incentives for companies (see session about “Main characteristics of the policy portfolio”).

The situation is improved in OPT scenario due to more incentives compared to the BAU scenario. For the PES policy portfolio the situation is slightly better than BAU, but less effective than in OPT.

In all three scenarios no information was found regarding the promotion of research on such technologies (exiting policy instruments or planned ones were not available). No official studies about the potential of the country in RES or energy efficiency were available, implying that such studies capable of supporting research are lacking.

The assigned grades are: BAU – 4, OPT – 6, PES – 5.

For competitiveness there are no available results from LEAP, therefore the SMART procedure is used. Azerbaijan is a country with an economy that depends strongly on its oil and gas sector. Therefore, the performance of the three scenarios under this sub-criterion needs to be understood under this framework.

Until now, Azerbaijan has successfully attracted large investments for the oil and gas sector due to a favorable operating environment for investors (EBRD, 2010). The country has focused mainly on foreign investment in the Caspian region in its oil and gas sectors since it is emerging as one of the Caspian region’s most important exporters of oil and natural gas (US Yearbook, 2009). Investing in this sector is justified by the facts that the country’s currency reserves reached the amount of 18 billion USD by the end of 2008, while they are expected to reach the amount of $200billion by 2024 (Ciarreta A, Shahriyar N., 2012).

On the other hand the domestic energy prices are still below the average international prices, with the Azeri oil and gas sector being for a long time period responsible for subsiding inefficient public enterprises and utilities (Cassinadri Elisa, 2008). The competitiveness of the national economy and unsuccessful preparation of domestic enterprises for open competition are affected negatively by the domestic energy pricing policy combined with low levels of payment to state energy enterprises (Cassinadri Elisa, 2008). The government intends to implement a five-point strategy so as to eliminate the negative consequences of the current pricing and subsidy system (Cassinadri Elisa, 2008).

One more challenge for the government is to be successful also in attracting investments in the non-oil economy and furthermore to RES and energy efficiency investments (EBRD, 2010). The government is interested in developing the country’s energy efficiency and renewable energy potential also through the CDM framework. Investment in CDM projects

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seems to be attractive1 (BMU, 2008). Four Azeri CDM projects are registered up to date (UNEP Riso, 2012). This low number of projects is attributed to the current unfavorable investment climate (see session about “Main characteristics of the policy portfolio”). The situation in slightly improved in the OPT policy portfolio since there are additional financial incentives for the energy sector and particularly for RES.

The increase of the domestic prices will not only increase the Azeri competitiveness, but will support the penetration of RES. The BAU policy portfolio does not seem to affect the competitiveness of the country since it retains the current situation. The OPT policy portfolio will retain the competitiveness of the country in the oil and gas sector because of two reasons. First, higher prices as explained will increase the competitiveness, while a regional or international climate policy aiming at the reduction of GHG emissions will decrease the sales of Azeri oil and gas sector. If the country changes the investor climate for CDM projects then its competitiveness will increase. No other sector such as agriculture and industry appear to affect the national competitiveness.

In the PES policy portfolio since the efforts of the Azeri government remains the oil and gas sector with an intention to encourage RES, but without strong incentives the situation is similar to that of BAU.

The assigned grades are: BAU – 6, OPT – 7, PES-6.

For equity the ratio GHG emission reductions in MtCO2eq to capita is used. It is considered that the larger the ratio is the fairer is the scenario in sharing the burden among the sectors.

Table 9: Equity measurement.

Scenario Total amount of 2020 GHG emissions (MtCO2eq)

Reductions compared to BAU

Population in 2020 (in million)

Ratio reductions tCO2eq per capita

BAU 28,905 0 10,013 0

OPT 22,190 6,715 10,013 0,670

PES 25,412 3,493 10,013 0,349

For flexibility the scenarios are compared towards the incentives and the options that they offer to target groups. Under BAU there are limited incentives (tax exemptions and feed-in-tariffs) for only two sectors (transport and energy). In OPT the incentives are of the same range but now more sectors are involved. PES scenario represents a policy portfolio better than BAU, but less effective when compared to OPT.

Under the OPT scenario The assigned grades are: BAU - 5, OPT - 7, PES - 6.

For stringency for non-compliance, the level of stringency is determined by sanctions, penalties and other rules-influencing mechanisms for transgressors. No other information is available for the performance of the three policy portfolios under this sub-criterion. So, all are assigned with 4.

1 the web-sit of “East-Invest provides information of indicative CDM projects (http://www.east-invest.eu/en/Investment-Promotion/Azerbaijan-2/AZ-alternative-energy)

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Figure 3: Political acceptability.

Criterion 3: Feasibility of implementation

The scenarios were evaluated against 3 sub-criteria.

For implementation network capacity - The existing implementation network does not provide the necessary information – at least in English - for the full range of climate change policy issues in the country. There is very limited number of official reports regarding national climate change policy issues for Azerbaijan. For the category of “Climate Statistics” in the session of the “Key assumptions” the authors could not find relevant information from official sources.

Also the collection of data regarding climate change policy issues was difficult and not all groups of data were found. According to the Second National Communication of the country to UNFCCC the State Statistics Committee does not possess data on transport up to the IPCC standard, so it is impossible to conduct a large-scale GHG inventory in this sector. However, an inventory was completed for the automobile and aviation categories (Ministry of Ecology and natural Resources, 2010).

In the past Azerbaijan needed technical guidance in the preparation of new baseline and monitoring methodologies and in the testing of additionality (BMU, 2008). The Cabinet of Ministers also needed and still needs support for the management of CERs, the improvement of the legislative framework for CDM activities, and the reorganization of the State Committee on Climate Change (BMU, 2008). Having these challenges in mind, Azerbaijan needs capacity building as a first step (BMU, 2008).

Until, now the UNDP provided capacity building for the development of GHG inventories, two National Communication (First and Second) and for the Clean Development Mechanism (BMU, 2008).

The entities that form the Azeri implementation network are:

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- Ministry of Ecology and natural Resources2. Climate change issues are under the topic Hydrometeorology3. There are no publications, no information on Laws, Strategies or Programs.

- Ministry of Industry and Energy. No web-site accessible.

- Ministry of Agriculture4. The English version of the web-site is not activated.

- State Agency for Water Reserves under the Ministry of Emergency Situations5 (EEA, 2011) was recently established Agency by Presidential order. The Charter and Manual of the Agency were under preparation (EEA, 2011). No visible link to an English version.

- State Agency for Alternative and Renewable Energy Sources6. There is an English version, but there are no publications regarding the RES in Azerbaijan only presentations.

- Designated National Authority (DNA). The Ministry of Ecology and Natural Resources

was nominated as DNA with the Presidential Decree № 727 dated 1 April, 2005 (Policy Portfolio of BAU scenario). Azeri DNA suffers from major capacity constraints (BMU, 2008). In order to proceed with the significant CDM potential, mainly in the energy sector, the Government needs to establish a functional national institutional framework for review and approval of CDM projects which should be incorporated in the overall governmental structure and policies for the implementation of UNFCCC and Kyoto Protocol (BMU, 2008). There is also an urgent need to start developing a pipeline of projects candidates for CDM. No web-site is available and no other updated information was available.

In the case of the OPT and PES scenario their performance under this sub-criterion is even worse. Both policy portfolios have additional need for a more capable implementation network. The assigned grades are: BAU -4, OPT -3 and PES -3.

For administrative feasibility—there were delays with the implementation of the policy instruments, while the preparation and participation of target groups in proper time. The BAU scenario perfomrs abdly in this sub-criterion according to the comments in the session “Main charactersistcs of the policy portfolio”. The time interval between the submission of the First and the Second National Communication was almost ten years7. The main institution responsible for the climate change policy of the country needs to address many issues (framework for CDM, GHG inventories, third National Communication, energy efficiency issues etc) within a short time period due to the on going international efforts to conclude with a post Kyoto agreement. Taking into consideration the above the grade is (3) for all scenarios.

For financial feasibility – there is a 14 million EURO budget support programme aiming to assist the Azeri Ministry of Energy in developing a legislative and regulatory framework for renewables and energy efficiency (EC, 2012). Simultaneously, the European Bank of Reconstruction and Development (EBRD) intends to continue supporting Azerbaijan’s infrastructure development with emphasis on the power sector and energy saving investments (EBRD, 2010). Additionally, Azerbaijan’s economic conditions are favorable for increasing national capacity to maintain, manage and ensure development results into the future (UNDP, 2010). There is also a discussion to increase the Government co-funding of UNDP programs in Azerbaijan (UNDP, 2010).

2 http://www.eco.gov.az/en/ 3 http://www.eco.gov.az/en/ozon.php 4 http://www.agro.gov.az/ 5 http://www.fhn.gov.az/ 6 http://abemda.az/?lang=3&id=310 7 the First was submitted in 2000 and the second in 2011 (http://unfccc.int/national_reports/non-annex_i_natcom/items/2979.php)

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In BAU financial resources were canalized mainly to the capacity building of the implementation network and to the development of the oil and gas sector. In OPT if financial resources are allocated to the CDM framework that will benefit the support of RES and energy efficiency. Otherwise part of the revenues from the oil and gas sector can be used for stimulating the development of the climate policy actions. In PES due to the national priorities (see session “General comments”), the financial feasibility of the Azeri climate policy is poor. The assigned grades are for BAU -3, OPT – 4 and PES-3.

Figure 4: Feasibility of implementation.

Figure 5: Final grades.

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The overall final score for each policy portfolio is presented in figure 30. The results for each scenario are presented in Table 13.

Table 10: AMS results for each scenario.

Scenarios Criteria

BAU OPT PES

Direct contribution to GHG emission reductions (0,833) 0,000 83,300 43,331

Indirect environmental effects (0,167) 0,000 16,700 8,276

Environmental performance (0,675) - A 0,000 100.00 51,607

Cost efficiency (0,390) 0,000 47,300 15,435

Dynamic cost efficiency (0,227) 3,550 8,981 5,669

Competitiveness (0,103) 2,371 3,757 2,371

Equity (0,188) 0,000 17,500 9,116

Flexibility (0,056) 0,982 2,464 1,555

Stringency for non-compliance (0,036) 1,133 1,133 1,133

Political acceptability (0,259) - B 8,036 81,135 35,279

Implementation network capacity (0,228) 13,534 8,683 8,683

Administrative feasibility (0,685) 19,367 19,367 19,367

Financial feasibility (0,088) 3,091 4,818 3,091

Feasibility of implementation (0,065) - C 35,991 32,868 31,141

Total (A+B+C) 9,314 79,767 37,633

The calculations show that the policy portfolio in OPT is by far the best one in terms of overall performance. The policy portfolio in BAU is the worst one.

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RReeffeerreenncceess

Cassinadri Elisa, 2008. Resource Depletion, Dependence and Development: Azerbaijan - Working paper. November 2008. Available at: http://www.chathamhouse.org/sites/default/files/public/Research/Energy,%20Environment%20and%20Development/13358_1108rddd_azerbaijan.pdf Christiane Egger, Reinhold Priewasser, Michaela Kloiber , Lucia Bezáková, Nils Borg , Dominique Bourges, Peter Schilken, 2012. SURVEY REPORT-Progress in energy efficiency policies in the EU Member States - the experts perspective, Findings from the Energy Efficiency Watch Project. Available at: http://www.energy-efficiency-watch.org/fileadmin/eew_documents/EEW2/EEW_Survey_Report.pdf Ciarreta A, Shahriyar N., 2012, Development trends in the Azerbaijan oil and gas sector: Achievements and challenges, Energy Policy, 282–292

EBRD, 2010. Strategy for Azerbaijan 2010 – 2013, as approved by the Board of Directors at its meeting on 7 December 2010. Available at: http://www.ebrd.com/downloads/country/strategy/azerbaijan_2010.pdf

Ernest & Young, 2012. Renewable energy country attractiveness indices. Issue 34, August 2012. Available at: http://www.ey.com/Publication/vwLUAssets/Renewable_energy_country_attractiveness_indices_-_August_2012/$FILE/Renewable_energy_country_attractiveness_indices_Aug_2012.pdf

Konidari P. and Mavrakis D., 2006. Multi-criteria evaluation of climate policy interactions. Journal of Multi-Criteria Decision Analysis 14, pp 35 – 53.

Konidari P. and Mavrakis D., 2007. A multi-criteria evaluation method for climate change mitigation policy instruments. Energy Policy 35, pp 6235-6257.

UNDP, 2010. Energy and Environment Outcome Evaluation - Final Draft. Prepared by United Nations Development Programme and Government of Azerbaijan. Available at: http://www.un-az.org/undp/doc/20100406_EE_Outcome_Evaluation_Final.pdf UNEP Risoe, 2012. CDM Pipeline. Available at: http://cdmpipeline.org/

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CCOONNCCLLUUSSIIOONNSS This report concerns the development and assessment of three (3) climate change

mitigation and adaptation policy portfolios for Azerbaijan. Each of them is characterized by a different policy mixture and is named after it as Business As Usual (BAU), Optimistic (OPT) and Pessimistic (PES).

All scenarios take into consideration the following national objectives: i) 20% share of renewable energy in electricity by year 2020 and ii) 9,7% share of renewable energy in all energy consumption, also by year 2020. Azerbaijan as a non-Annex I country has no obligation to reduce its GHG emissions under the Kyoto Protocol.

BAU scenario

The BAU scenario concerns the time evolution of the already implemented mitigation and adaptation policy instruments (set into force before 31 December 2010) in Azerbaijan until the year 2050 and serves as the reference against which the outcomes of the other scenarios are compared.

The currently implemented Azeri mitigation climate policy has only one main component, the promotion of RES. There are no specific obligations to purchase renewable energy, only defined tariffs exist for the generating companies so as to sell energy in the wholesale market The adaptation climate policy concerns water management with only one policy instrument implemented, that of water fees.

According to the outcomes of the model Long range Energy Alternatives Planning System (LEAP) for the BAU scenario in 2020 the share of RES in electricity generation will be 0,7%.

OPT scenario

The Optimistic scenario concerns the time evolution of an enhanced mitigation/adaptation policy portfolio that Azerbaijan will implement during the time interval 2011 - 2050. This enhanced policy portfolio takes into account the policy instruments adopted after 1st January 2011 as well as plans of the country and supports: i) the introduction of efficient technologies in almost all sectors, targeting to the maximum reduction of GHG emissions through the maximum exploitation of the potential of the country in energy efficiency and renewable energy sources and ii) the necessary infrastructure for the adaptation of the country towards the minimum – in size and extent - expected climate change impacts.

The policy portfolio of this scenario includes a wider range of policy instruments compared to those that synthesize the BAU scenario. Energy efficiency standards, financial policy instruments (subsidies and grants) are proposed for the main economic national sectors.

According to the outcomes of the model Long range Energy Alternatives Planning System (LEAP) for the OPT scenario in 2020 the share of RES in electricity generation will be 9,79%.

PES scenario

The Pessimistic scenario concerns the time evolution of a mitigation/adaptation policy portfolio that the country will implement up to 2050 without exploiting fully the national potential in energy efficiency and renewable energy sources and by facing the worse expected impacts of climate change, taking into account the policy instruments adopted after 1st January 2011.

This scenario assumes less ambitious mitigation policy by limiting the possible technological options only to a selected number of sectors with the highest energy efficiency

PROMITHEAS-4: “Knowledge transfer and research

needs for preparing mitigation/adaptation policy portfolios”

22

potential and the most promising for the country types of RES. The scenario considers the implementation of all policies approved (existing or planned) policies, but no additional policies apart from in line with the EU climate change policy and the country priorities.

Given that the country has not approved any policies beyond 2020, it will be assumed under this scenario that the ones adopted before 2020 will be extended until 2050, as well as that minimum additional policies will be enforced after 2020. Despite the huge needs of adaptation (driven by the high global GHG emission levels and the related temperature changes), only the planned adaptation measures, concerning the water management will be implemented.

According to the outcomes of the model Long range Energy Alternatives Planning System (LEAP) for the BAU scenario in 2020 the share of RES in electricity generation will be 4,02%.

Assessment outcomes8

Using the multicriteria method AMS, the three (3) policy portfolios were assessed against their environmental performance (amount of GHG emissions and secondary environmental effects), political acceptability (attitude of the involved entities (target groups) towards the relevant policy portfolio) and feasibility of implementation (applicability of the policy portfolio from the point of the governmental and national pertinent entities).

The OPT scenario has the highest direct contribution to the GHG emission reductions, followed closely by the PES scenario, while BAU scenario has the lowest. The same situation appears in the indirect environmental effects.

The policy portfolio of the OPT scenario has the best performance in political acceptability since it is the best cost effective for the target groups (residential, industrial, energy and transport sectors) compared to the other two policy portfolios. It offers a fair distribution of the “climate change” burden among the respective sectors. Moreover, OPT and partially PES encourage the introduction of innovative technologies, such as biomass, biogas and wind. All the scenarios are in same low level of stringency of non-compliance,.

The performance of the three policy portfolios under the third criterion is almost equal. BAU policy portfolio appears to be easier to implement, mostly due to the implementation network capacity that already exists, in comparison with the other two. Apart from that sub-criterion, in the other cases, the three scenarios are very close together.

Given the above, the mitigation/adaptation policy portfolio which characterizes the Optimistic scenario is the one that allows the achievement of most goals of the climate change policy of Azerbaijan. Nevertheless, the success of this policy portfolio requires the demonstated effectiveness of the implementation network, availability of financial resources and a more stringent frame for non-compliance.

In this report, the component of adaptation in climate change policy is not fully developed since the country hasn’t set an adequate framework to reduce its vulnerability to climate change. Moreover, the design and assessment of relevant policy instruments require data related to the frequency of extreme events, water resources and use, low-income groups, biodiversity, the health sector, etc., which are not available at the moment.

Concluding, the scenarios of this report were developed under the same assumptions for the evolution of GDP and population for the period 2011-2050. In order to perceive the performance and applicability of the three (3) policy portfolios, the report should include six (6) more scenarios with the combinations “low population growth – high GDP growth” and “high population growth-low GDP growth”, according to the socioeconomic frameworks presented in the IPCC pathways (new generation of IPCC scenarios).

8 The assessment outcomes depend on the level of expertise of the person who makes the assessment as well as the degree of justification concerning the sub-criteria.