Needs and Options for Transformative Policy Support Programme

In the housing sector, where expected emission reduction quantities are small and transaction costs high, the implementation of mitigation action requires support from targeted policies in order to lower serious barriers to investment. A comprehensive policy package may help to overcome the identified barriers and create incentives that promote direct investment into miti-gation actions in the sector.

Barriers to emission reductions in the building sector are diverse and include the following:

► Knowledge: lack of understanding of energy efficiency options and opportunities across relevant stakeholders in the industry, government and wider population

► Institutional: lack of coordination between different involved ministries and absence of a central coordinating body within government

► Capacity: lack of expertise and resources to implement and enforce policies

► Information: lack of high quality and disaggregated data on energy consumption

► Market: limited commercialisation of energy efficiency equipment and services including ESCOs

► Financial: higher perceived upfront costs for some energy efficiency measures coupled with a lack of further incentives to go beyond minimum standards set out by the Sustainable Building Guide

International donors and technical assistance efforts have actively supported Colombian efforts to alleviate these barriers in the sector. According to the Climate Finance MRV Portal of the DNP, Colombia has received 438,027,706 USD in international climate finance for energy related ef-forts since 2011. This includes 23,078,233 USD for energy efficiency measures and 316,810,185 USD for the electricity generation and improving access to electricity (DNP, 2018). Specifically, the World Bank Group and the International Finance Corporation were particularly involved in the development of Resolution 549 and the measures included in the Sustainable Building Guide.

The housing ministry however has limited implementation and enforcement capacity, which is generally left to local governments who in turn lack necessary insights. A clear pathway towards implementation of the resolution is only apparent in Bogota and to a certain extent in Medellin, although detailed information about awareness, implementation, and enforcement in other mu-nicipalities is lacking.

There is therefore an urgent need for further support for a comprehensive policy package that not only includes refinement of national level policies and building capacities for implementa-tion and enforcement at all levels of governance, but most importantly serve a vision-setting role for a Paris compatible action pathway. Such support can take the form of a ‘transformative sec-toral programme’ supported by ambitious donors (similar to the pre-Paris approach of NAMAs) to draw a roadmap to advance energy efficiency, electrification, and distributed generation of renewable electricity in a comprehensive manner towards the goal of sectoral decarbonisation.

It should target all energy consumption of residential buildings including heating/cooling, cook-ing, electric appliances including refrigeration and hot water generation. Construction related emissions are excluded but could be considered in complementary programmes. The measures under such transformative policy support programme would build on existing and planned poli-cies by the government of Colombia and ongoing initiatives and cater to the gaps in capacity, fi-nance and general awareness.

126

Based on the detailed sectoral analysis in the preceding sections, we outline the key components of such a transformative programme. Such an approach could adapt and build on global and re-gional experiences discussed in section 5 and chart a pathway towards long-term sectoral trans-formation by maximising climate and development benefits. A programme of such a scale can take the shape of a multi-donor blended finance program, merging technical support compo-nents with climate finance and potentially a carbon finance nested within (described in the next section). In a way, this approach invokes complementarities between ‚transformative coalitions‘

of donor countries wanting to advance a particular mitigation technology with those wanting to build experiences on the ambition raising role of future carbon markets.

We outline three thematic components of the policy programme below:

Component 1: Technical support for development of energy use benchmarks and a system-atic MRV(E) framework for net-zero energy social housing

Benchmarking done under resolution 549 to establish the baseline energy consumption (KWh/m²) was the first concerted exercise in Colombia for a sector wide data collection. How-ever, it has had several issues with sampling and data representativeness. The need for an im-proved regularly updated and tightened energy efficiency benchmarks for different categoreies of buildings through time that are recognised by local stakeholders, including the housing minis-try. Considering local capacity limitations, technical support to facilitate development of a repre-sentative benchmark for social housing is a necessary starting point for supporting transforma-tional change in Colombia. Such support could include, for instance, in baseline surveys and sim-ulations for defining representative buildings as discussed in section 4. Simulation tools can also be used to generate benchmarks for expected performance improvement (what we refer as re-formed resolution 549 in chapter 5) based on use of improved design characteristics and active measures then what is current practice (what we call the crediting baseline benchmark in sec-tion 4). Such a BAU benchmark and expected performance improvement benchmark can be used to determine a methodological approach to estimate the reductions achieved by individual hous-ing units by achievhous-ing the NZEB status. The support should build local technical capacities di-rectly, for instance as a competition among architectural students with technical support from international technical institutes.

Technical support can also facilitate development of an approach for monitoring, reporting, veri-fication and enforcement framework for use of these benchmarks at the level of individual houses and as part of a policy implementation.

While we recommend social housing as the starting point for such a programme considering its developmental benefits and relative ease of execution due to regulatory control on this segment, it can be expanded to other housing types and existing building stock once adequate experience and capacities have been developed.

Component 2: Facilitate regulatory reform for enhanced uptake and effective implementa-tion of net-zero energy approaches in housing development

Colombia has taken ambitious steps towards systematically addressing energy efficiency in the building sector. International support can support activities to incorporate a decarbonisation vision in existing policy processes. These could for instance include:

► facilitating inclusion of the benchmarks in amendments of the sustainable construction guide;

► following and aligning policy development on distributed generation, electrification, and appli-ance energy efficiency with a net-zero energy objective; and

127

► exploring the role of net-zero energy target setting for all new buildings in long-term planning.

Colombia is already discussing a sectoral target setting for new buildings (for 2030) under the re-cently released CONPES. It could also include an analytical support element to develop a long-term trajectory for uptake of highly efficient buildings towards a net-zero target under for e.g.

long-term mitigation strategies. Further research on linking this sectoral effort to NDC implemen-tation, ambition raising, and sectoral targets could also be supported under such a programme.

In addition, Both the transformational policy approach and the complementary market-based NZEB pilot would require significant capacity building for policy makers on the national and lo-cal levels, as well as for architects, engineers, ESCOs, housing associations, and building inspec-tors and verifiers, which would represent an important benefit beyond potential GHG mitigation of the proposed measures. Such capacity building would not only contribute to Colombian im-plementation, but also facilitate future ambition raising.

Component 3: Financial support

International financial support could help finance upfront technical assistance under component 1 and facilitation under component 3. The transformative support programme will cater to ad-dress barriers to accurate and robust GHG quantification which will likely require financing that is not a focus of private climate finance channels, especially given that many of the measures in-cluded are prerequisites for transformation of the sector but cannot directly be linked to a quan-tified mitigation outcome. Financial assistance for trade financing may also be beneficial for im-ports of technologies like highly efficient heat pumps that may not be manufactured in the do-mestic market. Further, international finance, can help provide upfront capital in the form of soft loans to kick-start energy efficient building financing.

Climate finance from international donors has to be complemented with domestic sources. To some extent private capital may be raised through green bond issuances from the Colombian na-tional government itself (sovereign), or through public banks such as Findeter or Bancoldex, as well as through municipalities such as Bogota or Medellin. Sustained political buy and support on a high level in from multiple ministries including the Housing Ministry, the Energy Ministry, as well as the Environment Ministry is essential. There are several points where invested efforts may lose momentum or encounter political challenges that could prevent optimised implemen-tation.

The expected overall emission reduction potential of such a programme is large with major spill-over effects (e.g. in other building segments) but challenging to quantify, especially because of a lack of comprehensive existing MRV data, and questions surrounding current practice, enforce-ment and factoring in an eleenforce-ment of supressed demand according to behavioural shifts in vari-ous climatic zones. However, for such NAMA type programmes, the question of additionality and baselines are less relevant, as they typically build on ongoing and planned measures in the sector with the intention to integrate and scale-up current efforts. Emission reductions can often not be directly attributed to individual measures, in particular regulations or softer measures designed to enhance the enabling framework, but are assessed more broadly through, for exam-ple, log frame-based methods. As these programmes are not designed for crediting, the exact quantification and attribution of the achieved emission reductions is not necessary. Rather, the reductions are accounted for and visible in the GHG pathway of the sector, e.g. under the na-tional inventory system and the domestic MRV system being established to track progress to-wards Colombia’s NDC implementation. The market-based pilot (component 2) can still include a detailed MRV.

128