TECHNICAL COOPERATION PROFILE (CO-T1227)

I. Country: Program/Project Name/Number: Colombia. Preparation of Full-Sized GEF Project Mechanism for Voluntary Mitigation of Greenhouse Gas Emissions in Colombia-CO-X1008 / CO-T1227. Duval Llaguno, Team Leader (CEC/RND); Carolina Jaramillo (INE/RND); Axelle Boulay (INE/RND); Luisa Fernanda Lema (Consultora-RND); Carlos Echevarra (INE/ENE); Michael Rattinger (INE/ECC); Diego Buchara (LEG/SGO); y Elizabeth Chavez (INE/RND). March 17, 2010. Fundacin Natura, the Ministry of the Environment, Housing, and Land Development (MAVDT), the National Council for Sustainable Business (CECODES) and the National Stock Exchange (BVC). Fundacin Natura Global Environment Facility GEF (Project Preparation) GEF (Project Preparation -nonreimbursable-): Local: Total: Approval US$100,000 US$ 52,000 US$152,000 May 2010 BASIC PROJECT DATA

Team Leader and Members:

Date of Request: Beneficiaries:

Executing Agency: Name of the Fund: Financing plan:

Tentative dates:

II. BACKGROUND AND PROBLEM STATEMENT 2.1 Although Colombias contribution to global Greenhouse Gas (GHG) emissions is marginal (approximately 0.37% of the worlds total), between 1990 and 2004 emissions increased by 39%, reaching an approximate of 180,01 million tons of CO2 equivalent. Despite uncertainty as to the extent of annual deforestation in Colombia, this is undoubtedly one of the countrys major sources of emissions1. IDEAM (Hydrology, Meteorology and Environmental Studies Institute of Colombia) calculates that the annual average forest cover loss in Colombia is about 101,700 hectares2, which, in terms of nationwide emissions, is equivalent to 9.24% of estimated 2004 emissions.

See Colombias GHG National Inventory at: http://www.cambioclimatico.gov.co/documentos/InventarioGasesEfectoInvernadero/IDEAM_cap1.pdf DNP, 2007. Visin Colombia II Centenario 2019. Consolidar una gestin ambiental que promueva el desarrollo sostenible. P.28. Document can be found at: http://www.dnp.gov.co/PortalWeb/Portals/0/archivos/documentos/2019/Documentos/101040CARTILLA%20AMBIENTAL.pdf

-22.2 Beginning with its ratification of the UNFCCC through Law 164 of 1994, Colombia has made progress in addressing the issue of climate change. In 2000, it formulated a national strategy study for implementing the Clean Development Mechanism (CDM); and in 2001, it submitted its First National Communication to the UNFCCC, under the coordination of IDEAM. This seminal document identified the main vulnerability challenges and the initial progress made in terms of adaptation; and it calculated the first GHG emission inventory. In 2002, the MAVDT and the DNP prepared guidelines for a climate change policy. In the same year, the MAVDT created the National Climate Change Office, which became the Climate Change Mitigation Group in 2005. Colombia is currently preparing a second communication, under the coordination of IDEAM, scheduled to be published in 2010. The formulation and implementation of a National Climate Change Policy, as stipulated in the 2006-2010 National Development Plan (PND), is a priority. A study commissioned by Fundacin Natura for a preliminary mapping of the potential in Colombia for a carbon offsets market confirms a growing interest from national buyers on GHG offsets, which stems from various business interests, including corporate social responsibility policies and business strategic approaches that include voluntary actions to manage, reduce and offset their carbon footprint. Furthermore, there is a broad range of institutional programs to support the private sector in undertaking climate change mitigation actions. Despite these advances, Colombia lacks the institutional arrangements and technical capacity to enable voluntary mitigation efforts and investment from private companies, and mixed and/or public-sector institutions. Participation in trading verified emission reductions is very limited due to the high transaction costs, lack of familiarity with the subject matter and procedures, technical barriers, and inability to guarantee the quality and credibility of the emission reductions offered. In this context, the proposed project seeks to develop a reliable and lasting mechanism for promoting and facilitating voluntary GHG emissions mitigation and offsetting in Colombia. The proposed mechanism seeks to foster the supply and demand of Voluntary Emission Reduction Units (VERs), on an exchange-type trading platform, which will operate under principles of market transparency, credibility and competitiveness. This endeavor requires creating an enabling environment for potential market participants to overcome the financial, legal, institutional and cultural barriers that constrain their capacity to reliably generate, validate and commercialize VERs. In addition, demand for such VERs will be promoted through the establishment of GHG mitigation and offsetting program for large-scale, high-impact companies and other relevant entities interested in advancing their climate change mitigation agenda. The project will take into account existing institutional and technological infrastructure to create the mitigation mechanisms to ensure cost-effectiveness and integration of existing initiatives and capacities. As a result of the activities of this operation, the proposed GEF project Mechanism for voluntary mitigation of greenhouse gas emissions in Colombia CO-X1008, will finance activities grouped under three components: i) creation of

2.3

2.4

2.5

-3a Colombian-based market platform for Verified Emission Reduction (VERs) units that can be accessed by companies and institutions, both nationally and internationally, which are interested in mitigating or offsetting their carbon footprint; ii) validation, registration and verification of a nationally-based stock of VERs generated by agriculture, forestry and/or reduced emissions from deforestation and degradation (REDD) projects in Colombia; and iii) creation and implementation of a nationally-based program for corporate and institutional voluntary mitigation and offsetting activities. III. PROGRAM OBJECTIVE AND DESCRIPTION A. 3.1 Goal and purpose The general objective of this Technical Cooperation (TC) or Project Preparation Grant (PPG) is to support the preparation of the Full-sized Project Mechanism for voluntary mitigation of greenhouse gas emissions in Colombia CO-X1008. Major components, activities and expected outputs The TC has five major components with the following respective activities: a. Component 1 Analysis of forestry-based emission reductions market and private-sector led business opportunities in Colombia: The resources allocated to this component will finance the hiring of consulting services to carry out the following activities: i) identification of the institutional and governance scheme to assure VERs compliance with sustainable development and traceability criteria; ii) stakeholder assessment and involvement for the operation and governance of a trading platform for forestry-based VERs in Colombia; and iii) technical/operational recommendations for the design of the first component of operation CO-X1008, based on cost-effectiveness analysis, baseline assessment and result indicators, indicative terms of reference of project activities, and detailed budget. Component 2 Identification of potential Afforestation/Reforestation (A/R) and REDD projects for voluntary carbon mitigation markets: The resources allocated to this component will finance the hiring of consulting services to carry out the following activities: i) preliminary portfolio-related stakeholder sensitization, consultation, and engagement; ii) assessment of emission reduction potential and business as usual emissions scenario of the preselected portfolio; iii) baseline analysis of carbon-related information for forestry species suitable for REDD and A/R projects; iv) benchmarking of voluntary carbon market standards for REDD and A/R and recommendation of the voluntary market standard to be used in the national trading platform; v) definition of basic criteria to incorporate REDD and A/R projects in the project portfolio; vi) technical diagnosis and design of project component activities for forestry-based VER supply; and vii) estimation of costs for A/R and REDD project implementation, within the preselected portfolio. Component 3 Diagnosis of international and national programs and approaches on corporate voluntary GHG mitigation: The resources allocated to this component will finance the hiring of consulting services to

B. 3.2

b.

c.

-4carry out the following activities: i) a review of similar experiences in other countries, with special emphasis in Central and South America; ii) a review of the state of affairs of corporate carbon footprint mitigation and offsetting in Colombia, including identification of financial or other institutional incentives or programs and support mechanisms; iii) an assessment of the institutional capacity, at the national level, to support voluntary mitigation actions and practices; iv) an assessment of corporate emission baseline and potential reduction; and v) recommendations for the preparation of a corporate mitigation and offsetting program based on cost-effectiveness analysis, including a baseline assessment and performance/result indicators, terms of reference of project activities, and detailed budget. d. Component 4 - Elaboration of project communication and stakeholder outreach design: The resources allocated to this component will finance the hiring of consulting services to carry out participatory stakeholder workshops and sensibilization activities about the project CO-X1008 and its expected outcomes. The consultancy will also define the parameters and channels for the education/ communication strategy for stakeholder engagement and public dissemination of the overall activities and componentes financed by the project CO-X1008. Component 5 - Design of Project Monitoring and Evaluation Framework: This component will finance inputs for the Plan of Operations CO-X1008 of the first 18 months and the Operational Manual for the project execution, based on the activities and baselines defined in Components 1 to 4. In addition, it will finance the Monitoring and Evaluation Plan of the project, which will include data collection and management protocols, definition of methodologies for the monitoring of carbon emission mitigation of the different project activities and the establishment of other parameters that could influence the achievement of project goals. This plan will also indicate the institutional, technical and financial arrangements needed for its implementation. IV. COST AND FINANCING 4.1 The total cost of this Technical Cooperation is estimated at US$152,000, of which US$100,000 will be finance with resources of the Project Preparation of the Global Environmental Facility (GEF) on a non-reimbursable basis. The remaining US$52,000 will constitute in-kind contribution (staff time, facilities, etc) to be provided by FUNDACIN NATURA, the MAVDT, the CECODES and the BVC.

e.

-5Local Counterpart $15.000 $12.000 $10.000 $5,000 $0 $10,000 $52,000 34.2%

Components Analysis of business opportunities and design of a market platform for VER Identification of potential VER offer Diagnosis of potential VER demand Design of project communication and outreach campaign Design of project monitoring and evaluation framework Project administration TOTAL Percentage

GEF PPG $20,500 $51,500 $12,000 $8,000 $8,000 $0 $100,000 65.8%

Total $35,500 $63,500 $22,000 $13,000 $8,000 $10,000 $152,000 100%

V. 5.1

EXECUTING AGENCY AND EXECUTION STRUCTURE

Executing Agency. All technical and execution responsibility is under the Vice Direction of Local Development of Fundacin Natura, which will be the executing agency as well for the operation CO-X1008. The Executing Agency will follow the Banks procurement policies and procedures indicated in documents GN-2350-7 (Consultants Policy) and GN-2349-7 (Goods and Services). Additional support will be provided by the Environment, Rural Development and Disaster Risk Management Division (INE/RND) of the Bank, and the Country Office (CAN/CCO). Fundacin Natura is a Colombian non-governmental organization; the entity is established under Colombian law as a non-profit private organization, for public benefit. Fundacin Natura has over 25 years of experience as a leader in Colombia in the contribution to biological diversity and the quest for sustainable uses of natural resources. It also has a wide experience as a certifier for environmental seal and certification programs, which makes it a familiar name to the private sector. The organization has worked for several years in the promotion and development of climate change mitigation projects, particularly in the areas of land use and land use change. It has proved to be highly reputed in both the private and public sector, and possesses the competitive advantage for the implementation of this project of bridging both sectors and being able to foster market responses as well as policy reactions. Supervision. A GEF Specialist/coordinator will be hired to lead and coordinate the delivery of the inputs, and the formulation of the GEF project of reference (COT1227), in coordination with INE/RND staff and Fundacin Natura; the Consultant will also direct the implementation of the TC, supervise the analyses required by IDB and GEF for Project approval, coordinate the involvement and participation of all project-related stakeholders (including MAVDT, Fundacin Natura, IDEAM, CECODES, BVC) during Project formulation and in consolidating the Projects design. The GEF Specialist will support Fundacin Natura and the IDB on the supervision of the work of the consultants contracted to carry out the consultancies of this TC, including orientation for an adequate coordination and execution of their terms of reference and outputs; review consultants deliverables; provide

5.2

-6technical advice and guidance to Fundacin Natura, the IDB and the consultants for delivery of high-quality products consistent with requirements of the Bank and GEF; and provide support in resolving bottlenecks and/or barriers during TC execution. The GEF Specialist should present final versions of project preparation inputs to the Bank and the Beneficiaries for their technical review and approval. VI. ISSUES 6.1 The timing and adequate coordination amongst consultants hired by Fundacin Natura and amongst partner institutions (FUNDACION NATURA, BVC, CECODES and MAVDT) could cause minor delays in the execution of the TC if not well defined or executed. To attenuate this risk, the GEF Specialist to be hired by the Bank will be responsible for this. VII. ACTION PLAN 7.1 Fundacin Natura, with the support of the GEF Specialist and the Project team, will prepare the Terms of Reference for the various consulting services to be financed with the resources allocated to this TC. Fundacin Natura will ensure that previous consultation with other executing partners has been made before initiation of activities. The duration of this TC is estimated for six (6) calendar months, and seven (7) months for disbursement. A detailed operations plan will be prepared previously to the initiation of the activities. VIII. ENVIRONMENTAL AND SOCIAL STRATEGY 8.1 This TC is designed to support the preparation of an operation that will attain benefits of climate change mitigation and ecosystem protection. Thus, it is not anticipated to have negative direct environmental or social impacts and has been classified as a C according to the Safeguard Classification Tool. IX. CERTIFICATION 9.1 The Grants and Cofinancing Management Unit (VPC/GCM) certifies receipt of the GEF Councils Endorsement letter dated on January 20, 2010 for project Preparation of Full-Sized GEF Project Mechanism for Voluntary Mitigation of Greenhouse Gas Emissions in Colombia-CO-X1008 / CO-T1227 for US$100,000, chargeable against the GEF Trust Fund (GEFTF). ***ORIGINAL SIGNED**** Marguerite S. Berger Chief Grants and Cofinancing Management Unit VPC/GCM May/07/10 Date

-7X. APPROVAL May/11/10 Date: ____________________

***ORIGINAL SIGNED*** ______________________________ Hector Malarin, Chief INE/RND

CO-T1227 ANNEX I Page 1 of 2

PROCUREMENT PLAN (FOR FULL EXECUTION)

Source of financing and percentage BID%

Description of the contract and estimated cost of procurement

Estimated Procure- Review costs ment (prior or (000 USD) method post)

Estimated dates Prequalification (Yes/No) Procurement Completion Local/Other notice of contract

Consultancy services
Consultancy 1 Design of development of market platform for VER Consultancy 2 Identification of VER offer potential and stakeholder analysis Consultancy 3 Diagnosis of potential demand for VER and emission reduction baseline Consultancy 4 Design and implementation of communications strategy Consultancy 5 Development of monitoring and evaluation scheme for full-size project Consultancy 6 Project Audit 16 QCBS Ex post 100 0 No Q2 2010 Q3 2010

45

QCBS

Ex post

100

No

Q2 2010

Q3 2010

12

NICQ

Ex post

100

No

Q2 2010

Q3 2010

NICQ

Ex post

100

No

Q2 2010

Q3 2010

3.5

DC

Ex post

100

No

Q3 2010

Q3 2010

QCBS

Ex post

100

No

Q2 2010

Q3 2010

Non-consulting Services

CO-T1227 ANNEX I Page 2 of 2 Source of financing and percentage BID%

Description of the contract and estimated cost of procurement

Estimated Procure- Review costs ment (prior or (000 USD) method post)

Estimated dates Prequalification (Yes/No) Procurement Completion Local/Other notice of contract

0 No Q3 2010 Q3 2010

Consultation workshop 1 Consultation with stock market stakeholders Consultation workshop 2 Consultation with potential forestry, landuse and REDD projects Start-up workshop Presentation to partners, stakeholders and consultants Logical Framework workshop Discussion of consolidation of components' logical framework Final workshop Final presentation of full-size project design

PC

Ex post

100

6.5

PC

Ex post

100

No

Q3 2010

Q3 2010

PC

Ex post

100

No

Q3 2010

Q3 2010

PC

Ex post

100

No

Q3 2010

Q3 2010

PC

Ex post

100

No

Q3 2010

Q3 2010

DC: Direct Consulting, based on continuation of services. NICQ: National Individual Consultant selection based on Qualifications PC: Price Comparison. QCBS: Consulting Firm Quality and Cost-Based Selection. VER: Verified CO2 Emission Reduction