Climate Revolving Investment Civil Fund

CONCEPT NOTE
Implementation of “Intended Nationally Determined Contributions” of the Republic of Armenia
in rural communities

Background
Armenia stated its commitments under Paris Agreement in “Intended Nationally Determined Contributions” (INDC), approved by the Government decision N42, dated September 10, 2015 and submitted to the UNFCCC. This document formulates mitigation commitment not to exceed the total 633 million tons of CO2 equivalent emissions for the period of 2015 to 2050 (35 years). This cap is defined as per the “top-down” approach, which is based on i) the condition to keep the global average temperature below 2 degrees, ii) equality of the mankind to benefit from climatic resources, iii) the right of future generations to use climatic resources. It is also committed to reach “net zero” emissions by 2050, when the emissions do not exceed the amount of absorption and accumulation by the Earth’s ecosystem, which, according to the IPCC is about 2 tons per capita per annum. The implementation of the commitments under INDC (including mitigation and adaptation measures) is highly dependent on deployment of new technologies, strengthening local capacities, introduction of transparent Measurement, Reporting and Verification (MRV) system and, most importantly, establishing sustainable financial mechanism for implementation of those programs.

Introduction of “green procurement” mechanism
The civil society is considered as the key beneficiary of the mitigation measures, and therefore, it is essential to ensure direct participation of civil society in those processes. Moreover, civil society, should take over the role of a “green purchaser” and have the necessary and sufficient resources, competence, control mechanisms and, most importantly the financial resources. These aspects are outlined in Armenia’s INDC, and the latter in the “Finances” component with the following formulation:
Develop an appropriate legislative and institutional framework for adequate financial assistance. For this purpose, a targeted financial mechanism consisting of two components should be created to finance climate change mitigation and adaptation projects:
1) The first – internal (domestic) climate revolving investment civil fund, to be replenished on permanent base by allocations from environmental fees, ecosystem service fees, including “carbon taxing”.
2) The second – external (international) financial mechanisms with resource provision following the principle of additionality, such as the Green Climate Fund, the Adaptation Fund, the Global Environment Facility, bilateral and multilateral funds, and other sources.
The emerging financial mechanism will:
a. Create realistic and operational grounds for establishment and development of the reliable public-private partnership (PPP),
b. Ensure the right of future generations to ‘use climate resources’.

 

Since communities are the cradle where the civil society is formed, it is reasonable to start creating civil funds at the community level. The idea was tested within the SGP-administered EU-NGO project funding in 5 regions of northern Armenia during 2015-2016. As a result, 22 rural and urban communities expressed willingness to establish revolving climate investment civil funds. However, it is extremely important that the initiative come from the communities, so that the residents bear the responsibility for oversight and thus, effectiveness of the projects implementation. The results of the SGP-implemented pilot project showed that although residents could perceive the idea and welcome the implementation of investment projects, there is a lack of necessary knowledge
and skills for needs assessment and proposal formulation. It should be also noted that even in the communities where the SGP projects have been successfully
implemented, there is still a lack of information and awareness of the local population about the specific objectives of the GEF grant. The proposed project will fill this gap in terms of increasing the knowledge of local communities to monitor and follow up the CC mitigation projects. The quantitative outcomes of the projects, including monetary savings, as well as reduction of CO2 emissions have to be viewed as a source for replenishment of the climate revolving fund, thus
creating additional incentives for communities in proper formulation and monitoring of the mitigation projects outcomes. The project aims to select communities or community unions ready to establish revolving funds through their active involvement in implementation of mitigation measures envisaged under INDC.
The important component of the project will be training and capacity strengthening for establishing appropriate instruments for management and oversight of the funds operation. There are some examples of the community level revolving funds piloted by the SGP in Basen community of Shirak region, and UNDP-GEF “Urban green lighting” project established for energy efficiency in Yerevan and other cities. It is necessary to make the next step to transfer those funds to climate revolving investment civil funds, which envisages different ownership and management scheme. As defined by INDC, actions will be taken to direct subventions currently paid to local communities from environmental fees to those funds, thus formulating local climate change funds (e.g. Odzun community of Lori region directed subventions provided to the community for 2017 for energyefficient lighting project).
The knowledge built within “Technological Needs Assessment” (TNA- UNEP / DTU) project can be
used for identification and evaluation of mitigation projects.
The proposed project will also provide recommendations for corresponding legislation which will lay a ground for implementing Armenia’s INDC in a more comprehensive manner. Brief description of the project The project objective is to introduce a sustainable financial mechanism with its relevant
technological and organizational components in medium and small urban and rural communities, aiming to contribute to the mitigation targets under Armenia’s INDC. The projects will be aligned with the social and economic objectives stated under four-year  development plans of the selected communities. The selection of communities will be made on a competitive basis, preceded by a wide awareness raising campaign.

 

Description of the problem and its reasons
With adoption of the Paris Agreement Armenia also assumed quantitative commitments to limit greenhouse gas emissions, and the main burden related with implementation of those commitments is put on communities. However, the communities actually do not participate in the formulation
and implementation of projects. Hence, it is obvious that a solution must be found in communities through strengthening local capacities and skills. Although these problems are diverse (technical, technological, knowledge, experience), and ultimately the need for forming a sustainable financial mechanism is becoming
essential.

Project activities
Through a large awareness raising campaigns 3-4 communities will be selected, where projects aimed at mitigating climate change through innovative financial mechanism – revolving investment civil funds will be initiated and implemented. These activities must be transparent and demonstrative, supplemented by awareness raising and involvement of other communities. Simultaneously, recommendations on creating preconditions for institutional and legal framework to promote this process in Armenia will be developed.

 

The project will include the following major activities:

  • Wide awareness campaign for selection of 3-4 communities willing to implement investment
    projects on climate change mitigation;
  • Development of project proposals (investment projects) on climate change mitigation with
    the assistance of initiative groups from the selected communities;
  • Launch of selected projects, actual creation of civil funds;
  • Development of a legislative package on “Revolving Climate Investment Civil Funds” based
    on practical experience;
  • Development of a proposal on incorporation of the climate change mitigation component in
    the “Community development plans” and in “Regional development plans” for 2016-2025;
  • Organization of kick-off, interim and final conferences, where development and replication
    potential will be presented and discussed;
  • Creation of public control system for monitoring and evaluation of the investment projects;
  • Ensuring women’s participation and strengthening their role in all project stages.

The project co-benefits will depend on the concrete project nature, however, the major co-benefits
are as follows:

  • Creation of jobs, that will contribute to the GHG migration;
  • Strengthening local capacities for self-management;
  • Formation of inter-community cooperation for flow of knowledge and experience;
  • Reducing health risks due to clean energy use and reduction of air pollution;
  • The public ownership will stimulate local initiatives;
  • Reduction of forest wood used for fuel as a result of introduction of renewable energy use
    and energy efficiency practices;
  • Environmental co-benefits, including climate change adaptation, due to application of
    ecosystem-based approach;
  • Strengthening solidarity through equal participation of all citizens in the com munity

Project funding and budget
The project funding will consist of two components:

    • The key funding will be provided through the SGP strategic grant – $150,000. Each
      investment project (3-4 in total) will be provided around US$ 35,000, and the rest – around
      $30,000 will be allocated to the development of legal package and expert advisory work,
      workshops and transportation.
    • To ensure the expected 1:1 co-financing ratio, additional financing will be provided through
      community funds (not civil) established by different projects within the climate change
      mitigation focal area, subventions received by the communities from environmental fees, etc.

The project duration is 24 months, taking into account the fact that the Governmental Decision
on establishment of the “Revolving investment civil funds” is extended by the Government
protocol decision N6 of February 18, 2016 till the 2nd semester of 2018.