COSTA RICAN OFFICE ON JOINT IMPLEMENTATION(OCIC)

ACTIVITIES IMPLEMENTED JOINTLY

NATIONAL PROGRAMME

(COSTA RICA)

List of Programmes

1. Designated national authority for activities implemented jointly

Item	Please fill in if applicable
Name of the national authority:	Oficina Costarricense de Implementación Conjunta
Name of the national authority (English)	Costa Rican Office on Joint Implementation
Acronym:	OCIC
Post code:	P.O. Box: 7170-1000
City:	La Uruca, San José
Country:	Costa Rica
Telephone:	(506) 220-0036 / ext. 346
Fax:	(506) 290-1238
E-mail	crocic@sol.racsa.co.cr
Contact person	Franz Tattenbach
Job title:	National Coordinator
Direct tel:	(506) 240-2624
Contact person	Adalberto Gorbitz
Job title	General Manager
Direct tel:	(506) 290-1283

Structure of the program:

The National Program of AIJ is executed by the Costa Rican Office on Joint Implementation (OCIC). OCIC was created as a cooperative effort between the government, represented by the Ministry of Environment and Energy (MINAE), as the rector entity, and a private organization specialized in the attraction of foreign investment CINDE (Costa Rican Trade and Development Board) and two non-governmental organizations, FUNDECOR and ACOPE, of respectively recognized experience in the area of forestry management and in the private generation of electricity.

By Executive Decree, the OCIC was legally consolidated to define, within the framework of the UNFCCC, ratified by the Costa Rican Congress in June 1994, the policies and criteria for the preparation, evaluation, and approval of AIJ projects, including international marketing to attract additional investment to finance the country's long term sustainable development priorities.

OCIC, the designated national authority under the UNFCCC for Activities Implemented Jointly (AIJ), set the objectives, goals and parameters to evaluate and to endorse the projects that has been presented to United States Initiative Joint Implementation (USIJI) and to other countries such as Norway, The Netherlands, Canada, Germany, etc.

OCIC'S OBJECTIVES

• Define the AIJ policies and goals by sector, agreeing with the national development policies.
• Establish the national criteria for projects approval and promote AIJ bilateral agreements.
• Represent the country's interests within international forums.
• Identify and analyze the options of mitigation in the different sectors.
• Develop mechanisms (financial, legal and administrative) to direct financing and marketing of AIJ projects to decrease transaction costs and open AIJ to a large number of participants.
• Develop and promote the Certified Tradable Offsets (CTO), to be traded within the international stock market with a commodity approach.
• Develop the legal and administrative framework to consolidate the national "Forest Environmental Services Payment" (FESP) program, to internalize the cost of the AIJ GHG abatement benefits.

1. Process for obtaining approval
2. Brief description of procedure:

The OCIC Evaluation Panel is who receives and evaluates the AIJ project proposals, and gives the recommendations for the leading Minister endorsement.

For the project evaluation, OCIC established a minimum time limit of eight weeks from the date received. The project developers will be kept informed about the revision, and at the same time, the Evaluation Panel will make observations to the projects before they are sent to the investor country.

The proposals that receive the leading Ministry endorsement will be sent to the counterpart AIJ Office. No proposal will be conducted without the host and investor country approval.

Project proposals should be sent to:

General Manager

Oficina Costarricense de Implementación Conjunta (OCIC)

CINDE Building, La Uruca

San José, Costa Rica

Tel.: (506)-220-0036

Fax.: 506-290-1238

E-mail: crocic@sol.racsa.cr

B) Description of the criteria for acceptance of AIJ:

All proposals submitted to the OCIC should contain sufficient supporting data and analyses to allow for a full evaluation by the Evaluation Panel, according to the criteria listed below. Fulfillment of all criteria is the prerequisite for official project acceptance by the Costa Rican Government.

The criteria are meant to fulfill the following objectives:

• Minimize red tape : as few criteria as possible, and highest possible levels of consistency with existing sets of criteria in established national programs of industrialized nations.
• Meet current international standards: criteria should meet current pilot phase standards set by the Conference of the Parties to the UNFCCC.
• Represent Costa Rica's particular interests (country driven): criteria should address Costa Rican development priorities, as distinct from the considerations of the investor country or of other developing nations.
• Address GHG abatement benefits sharing among participants: criteria should address quantification and monetary valuation of the GHG abatement, including the sharing of the monetary surplus between the buyers and the sellers.

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Criteria applied nationally

Basic Project Considerations and Domestic Priorities Legal Compatibility Is the project consistent with applicable Costa Rican laws and regulations? Investor Home Acceptance Is the project acceptable to the home country government, or does the project proponent intend to apply for such acceptance? 3. National Sustainable Development Priorities Is the project compatible with and supportive of Costa Rican national environment and development priorities and strategies, including: biodiversity conservation, reforestation and forest conservation, sustainable land use, watershed protection, air and water pollution reduction, reduction of fossil fuel consumption, increased utilization of renewable resources, enhanced energy efficiency and, Support for Costa Rica's efforts to fulfill its obligations under the UNFCCC, Biological Diversity and Agenda 21. Enhancement of income opportunities and quality of life for the Costa Rican civil society. A minimized or acceptably low level of adverse consequences of the project through site selection, scale adjustment, timing, attenuation, and mitigating measures. Local capacity building such as the transfer and adaptation of know-how and high quality technologies. 4) Local or Community Support Will the local community support and participate in and/or benefit from the project? Environmental Feasibility Offset Additionality Will the project bring about real, measurable and long-term environmental benefits related to the mitigation of GHG that would not have occurred in the absence of such activities? The proposal should include a defensible reference or baseline case for emissions reductions or sequestration processes in the absence of the project. Monitoring Does the project have a monitoring plan that includes the participation of organizations capable of successfully monitoring the project? The monitoring plans should include actual measurements of the project's emissions or sequestration in order to establish a high degree of certainty that the predicted benefits were achieved by the project. Verification Will the proposal allow for the verification of the project's progress through inspection by a qualified third party verificator? Durability or Quality of Offset Does the project have a high likelihood that the greenhouse gas offset will be maintained over the life of the project? The proposal should include a work plan for project start-up: provide the timeline for starting or completing significant phases or stages of the project, including but not limited to : feasibility studies, development and beginning of operations, and completion of advanced stages of the project. 5. Greenhouse Gas Benefits What methodologies were used to calculate greenhouse gas emissions reductions (avoidance) and carbon sequestration (fixation), and what are the key uncertainties affecting those estimates? Financial Feasibility Financial Additionality Is the financing of the project additional to the financial obligations of Annex II Parties to the UNFCCC, as well as to the current Official Development Assistance flows (ODA)? Cost Estimates and Financial Feasibility Does the project include an accounting of all the costs of operation and economic benefits associated with the project, including organizations or entities, other than official project participants, that may contribute to the project's operation? Does the project address the cost issue (in US$) of the per avoided ton of CO2 equivalent? Does the project developers state the AIJ financial component (in US$)? Does the proposal include the financial projections (cash flow, profitability, rate of return, benefit/cost relationship, etc.) with and without the AIJ additional financial contribution? Does the proposal address the issue of sharing the monetary surplus related with the project GHG abatement benefits? Technical and Institutional Feasibility Institutional Infrastructure and Governmental Role Does the domestic Costa Rican institutional framework (legal, administrative, and technological) exist to adequately implement and administer the project? Reliability and Credibility of the Project Participants What is the prior experience and track record of the project partner(s) and intermediaries? Is each partner's role in the project's development and implementation made explicit in the proposal?

2. Description of program features:

Institutional Framework: Costa Rican Office on Joint Implementation

Trough a executive decree, published on April 1996, the President of Costa Rica and the Ministry of Environment and Energy (MINAE), determined to increase the Costa Rican Office on Joint Implementation (OCIC) to the rank of "technical-administrative highest deconcentration organ" from the MINAE. This permits OCIC to become the national authority to address national policies and lineaments, with technical executable character, for the implementation of AIJ projects to mitigate GHGs. By granting this status, OCIC guarantees that its policies and definitions will be linked to both governmental and private national interests, and by increasing it to the status of highest deconcentration, it is allowed to act with the enough technical and administrative autonomy that assure an objective, sustainability on the fringe of political considerations.

Legal Framework for the Execution of Projects to Mitigate Greenhouse Gases through carbon offsets demand:

Through the Forestry Law (Nº 7575), published on April, 1996, Costa Rica created the legal framework to proceed with the offsets demand at international level. In article 3, the concept of "payment for environmental service" was defined as a mean to internalize the costs for greenhouse gases (GHG) mitigation (offset, reduction, sequestration, storage and absorption). The others environmental benefits given by the forest and consider by the law are: the protection of the bidiversity, the scenic beauty for the promotion of the ecotourism industry, and the protection of aquifers and watershed for respectively water consumption and electricity generation.

In this way, Costa Rica establishes a double contribution to GHG mitigation. In one hand, the State is authorized to internalize the cost of environmental service for GHG mitigation, establishing an effective national financial contribution to the efforts (e.g. reforestation, sustainable management and forest protection) executed by private forest owners to mitigate those gases. On the other hand, the State is authorized to claim the costs of environmental service at international level. This guarantees to the AIJ foreign investors, that the State has enough faculties, within the legal framework, to facilitate the financing and execution of AIJ projects.

Financial Framework: Establishment of the "National Specific Fund for Greenhouse Gases Sinks and Deposits":

Under the aforementioned legal framework, which guarantees transparency in the AIJ process, Costa Rica established an efficient mechanism to direct and manage AIJ foreign investments. For these effects, the Executive Decree published on April, 1996, created the "National Specific Fund for Greenhouse Gases Sinks and Deposits." The motivation for this Fund is only and exclusively to facilitate the financing and the execution of national scope AIJ projects of strategic value to the country and to reduce transaction costs, opening in this way, AIJ to a large number of Costa Rican participants. This fund is administrated under a trusteeship, with management regulations to guarantee the best use of the economic resources.

National Contribution to Greenhouse Gases Mitigation

As it was indicated, Costa Rica also has recognized the need to give national support to GHG mitigation through the development of two items. First, through the interiorization of environmental services costs, specifically for GHG mitigation, and second, through the promotion of no-regret measures. In this regard, Costa Rica has developed two specific items:

1. Established a selective consumption tax on fossil fuel to finance the Forestry Environment Services Payment (FESP) program for forestry. By means of a tax revenue on fossil fuel, which mostly contributes to GHG emissions, the government is financing this program not only to compensate, but also to stimulate the development of the reforestation and forest conservation and management activities that can act as GHG sinks and deposits. Hydroelectric generation facilities in Costa Rica might also contribute with additional money to this program, in exchange for related watershed protection. This effort, that can be called "AIJ at national scope level", will allow the government to designate the amount of US$7.5 million per year, during the next 5 years, as a national contribution, independently from the potential for additional AIJ foreign financial contribution to the FESP program.
2. National normative promulgation for rational utilization and alternative use of energy sources. As a first step, Costa Rica promulgated, on September 1990, the Law 7200 which authorizes autonomous or parallel electric generation, reformed later on May, 1995, through Law 7508. This law allows the private sector to participate in electricity generation, by using renewable sources such as: hydropower, wind, geothermal, biomass, waste, etc. Later, on June, 1994, an Executive Decree established the National Commission of Energy Efficiency, body ascribed to the

Ministry of Environment and Energy, with the objective to prepare and to execute a national program for energy efficiency.

Trying to emphasize the national efforts for energetic saving, Costa Rican Congress on October, 1994, promulgated the Energy Rational Use Law (Nº 7447), through which it is established the obligation to execute programs of rational use of energy in Companies with high consumption levels.

Costa Rican National Scope Projects

Within this framework, OCIC designed three national scope carbon offset projects to facilitate and attract foreign AIJ investments, two integrated forestry projects and a renewable energy project.

The "National Proposal for Territorial and Financial Consolidation of Costa Rican National Parks and Biological Reserves", to be endorsed by the USIJI during its 4^th round, will provide protection for about 600,000 hectares (ha) within National Parks already established by Law. The objective is the financial and territorial consolidation of the National Parks and Biological Reserves in Costa Rica. The acronym for this project is PAP, that stands for Protected Area Project"

The "Private Forestry Project" (PFP) will provide annually environmental services payments for about 7,000 ha of natural forest protection, 50,000 ha for sustainable management of the secondary forest and the plantation of 15 millions trees.

The Costa Rica / Norway Reforestation and Forest Conservation AIJ Pilot Project was the first international financing contribution to the FESP program. The FESP program is one of the financial mechanisms of the PFP.

The "Renewable Energy Project" bundles a group of small energy projects to export energy to neighboring countries in Central America, which might otherwise use electricity generated by fossil fuels.

The Commodity Approach:

The financial mechanism to be used in the implementation of the umbrella projects is the Certified Tradable Offset (CTO). The CTO is defined as a certification of specific number of units of GHG, expressed in carbon equivalent units, reduced/sequestered or to be reduced/sequestered by AIJ actions, in which all project implementation phases have been completed. They are pre-certified by an independent third party and fully transferable.

In return for the AIJ additional financial contribution to abate GHG, the AIJ foreign investors will receive the GHG benefit through the CTO financial mechanism. Therefore, an AIJ investor does not need to get directly tied to a project. The investors simply purchase the offsets.

The baseline (without project reference case) is certified by a third party verificator for the project lifetime and the CTOs are issued only when all project implementation phases are completed. Therefore, CTOs are implementation and baseline risk free. Each CTO is guaranteed by the Government for a period of years, according with the lifetime of the project. During the guarantee period, any CTO that may be declared invalid as a result of the monitoring and/or external verification, will be replaced.

The CTO would include all the categories of AIJ projects, and only those projects that have been approved by the parties. It is important to note that CTO derived from different forestry/energy projects will be traded in the international stock market with a commodity approach. Authorizing brokers to match AIJ GHG benefits and investors, have advantages over a system where all deals were negotiated bilaterally. Brokerage could add an aura of credibility to the AIJ regime, promoting greater numbers and greater diversity of players. In addition, external offsets traded in an open market could achieve high levels of reductions and transfer of resources, without involving developing countries in international agreements.

1. Summary of Activities:

List of Activities Implemented Jointly in Costa Rica

Type of Project	Title of Activity	Status	GHG (mt CO2 )
Plantas Eólicas	Renewable Energy: Wind	Operation	62,333
Tierras Morenas	Renewable Energy: Wind	Implementation	311,666
Aeroenergía	Renewable Energy: Wind	Implementation	36,842
Doña Julia	Hydroelectric	Implementation	311,666
National Proposal For Territorial and Financial Consolidation of Costa Rican National Parks and Biogical Reserves (PAP) (1)	Forestry: Conservation and Regeneration	Approval to be announced by the USIJI (4th round)	55,817,248
Ecoland	Conservation	Implemented	1,267,124
Carfix	Forestry: Conservation, Regeneration/ Reforestation	Partially Financed	21,778,313
Biodiversifix	Forestry: Regeneration	Not Financed	18,481,680
Klinki	Forestry: Reforestation	Partially Financed	7,216,656
Costa Rica/Norway AIJ Pilot Project (2)	Forestry: Conservation Regeneration/ Reforestation	Implementation	1,150,139

Notes:

1. The official approval for this national scope project (PAP) will be announced soon

by the USIJI (4^th round). Therefore, this AIJ (Costa Rica/USA) has not still been reported

to the UNFCCC Secretariat

1. This project is the first application of the national scope Private Forestry Project (PFP)