74647 DIRECTIONS IN URBAN DEVELOPMENT NOVEMBER 2012 The Rio de Janeiro Low Carbon City Development Program A Business Model for Green and Climate-Friendly Growth in Cities The Rio de Janeiro Low Carbon City Development Program is an ISO-certified framework and set of comprehensive requirements to help the city to plan, implement, monitor, and account for low carbon investments and climate change mitigation actions across all sectors in the city over time. The Program will enable the city to plan and implement the mitigation actions needed to achieve its city-wide mitigation goals, as well as credibly and transparently demonstrate the achievement of those goals through diligent monitoring and accounting of the actions taken. These mitigation actions are municipality-driven activities, called interventions, including policies and project developments that reduce greenhouse gas (GHG) emissions. Climate finance is expected to play an essential role in catalyzing future investments in low Photo provided by the City of Rio de Janeiro. carbon city development. This issue of Directions in Urban Development describes The Program is integrated with Rio's climate change the context underlying the development of the Program mitigation goals, Rio's strategic plan, and the expected in Rio, and the key components of such an ISO-certified investments ahead of the World Cup in 2014 and the program including roles and responsibilities, planning Summer Olympics in 2016 (see Box 1). and evaluation, and the program process. The various components of the Program, described The Rio Low Carbon City Development Program below in further detail, aggregate to form a 'carbon goes beyond the approach seen in the past in lens' that enables the city to implement its forthcoming municipalities and other organizations that focused projects and policies in a low-carbon way, as well as on isolated actions, such as individual carbon offset quantify and monitor the reductions in emissions over projects, individual policies, etc. The Program includes time. Accordingly, it is envisaged that the targets and a broader scope starting at the strategic planning level: actions under the Program will be closely aligned and establishing clear objectives and targets that ensure incentivized through the overall municipal management interventions to reduce emissions are integrated with structure that supports the implementation of Rio’s other strategic actions in the city. strategic plan. The Rio Low Carbon City Development Program was jointly developed by the City of Rio de Janeiro and the World Bank. This paper was prepared by Sebastian Scholz and Lorraine Sugar of the World Bank’s Latin America and Caribbean Region Sustainable Development Department with significant editorial input and review by Marcus Lee of the World Bank’s Urban Development Unit, as well as review by Alexandrina Platonova-Oquab of the Carbon Finance Unit and Monali Ranade of the World Bank Institute. The World Bank Institute’s Climate Change Practice supported the development of the Rio Low Carbon City Development Program through the CF-Assist Trust Fund. The authors would like to thank Rodrigo Rosa, Special Advisor to the Mayor and Rio's Low Carbon City Development Program Coordinator. THE WORLD BANK URBANIZATION AND RESILIENCE MANAGEMENT UNIT | NOVEMBER 2012 DIRECTIONS IN URBAN DEVELOPMENT What happens in Rio doesn't stay in Rio . The Rio mitigation actions, they are filling the void created de Janeiro Low Carbon City Development Program by the lack of an international climate change policy was launched in June 2012 at the Rio+20 conference framework. For example, a recent report from the with the presentation of its achievement of multiple Carbon Disclosure Project (2012) surveyed 73 cities International Organization for Standardization (ISO) from around the world, counting nearly 630 activities accreditations (see Box 2). The ISO-certification makes that reduce emissions ranging from tree planting to the Program a prototype for a business model that can energy efficiency measures in buildings. Low Carbon be replicated in cities around the world. City Development Programs would allow these cities to transparently and credibly quantify and monitor the As more and more cities institute programs to plan, emission reductions from their mitigation activities in a implement, monitor, and account for climate change comprehensive manner across sectors, as well as plan and implement more interventions in the future. Box 1. The Broader Context of Rio's Low Carbon City Development Program Rio’s Targets for Reducing GHG Emissions The City of Rio de Janeiro is home to a wealth of natural beauty and cultural richness. Situated among rolling hills The Municipal Law on Climate Change and Sustainable covered in lush Atlantic rainforests, Rio is the city where Development (Law No. 5.248), passed on January the natural and urban environments co-exist harmoni- 27, 2011, set the quantities for Rio’s voluntary GHG ously side-by-side. In this unique setting, Rio was the reduction targets at 8%, 16% and 20% of 2005 emission ideal place to host the international sustainability com- levels for the years 2012, 2016 and 2020, respectively. munity during occasions such as the Earth Summit in 1992 and Rio+20 in 2012. Rio has successfully showcased These targets are for absolute volumes of emission its magnificence and potential to the world, winning bids reductions (expressed in tons of CO2e reduced) to be to host future mega-events, including the 2014 World cumulatively achieved by the end of the respective Cup and the 2016 Olympic Games. Accordingly, the city is reporting year. expecting an almost unprecedented influx of visitors and investments over the coming years from both domestic Rio’s most recent GHG inventory conducted by COPPE, and foreign sources. The city government is tasked with the post-graduate engineering research department ensuring that these investments improve the quality of of the Federal University of Rio de Janeiro, found that life for residents, increase access to services, and address climate change and other environmental issues. With the paramount goal of being a world-class city with a high Box 2. Certifications for the Low-Carbon City quality of life for all residents, Rio de Janeiro is commit- Development Program and Implications for Future ted to sustainable, low-carbon urban development. Climate Finance Mayor Eduardo Paes, the current mayor of the City of Rio The Rio Low Carbon City Development Program was de Janeiro, faced a number of challenges when he first independently certified by Det Norske Veritas (DNV) took office in 2009. During the previous two decades, Rio according to the new Low Carbon City Development had experienced a declining economy, degrading urban Program Protocol (World Bank and DNV forthcoming). infrastructure, and deteriorating environmental quality. The certification process ensured that the Program Compounding these challenges were issues related to complied with international standards for GHG emission municipal governance. Among its many challenges, the reductions accounting and environmental management city government – called Rio Prefeitura – had limited systems. Programs that comply with the Low Carbon City investment capacity and a structure that did not align Development Protocol also achieve certification according with the services provided. to the following standards: To address the many issues facing the city and to • ISO 14064-2: the standard for quantification, monitor- improve its governance, one of the first actions Mayor ing and reporting of greenhouse gas emission reduc- Paes took when he entered office back in 2009 was to tions or removal enhancements; develop a new strategic plan for the city. Consulting with • ISO 14001: the standard for the certification of envi- residents and stakeholders and working with McKinsey & ronmental management systems; and Company, the Prefeitura developed Rio’s 2016 Strategic Plan (Rio Prefeitura 2009). The Prefeitura also developed • The GHG Protocol’s Project Accounting Protocol and a new management structure to support the implemen- Guidelines (WRI and WBCSD 2005). tation and tracking of the specific targets and milestones Through compliance with these standards, the Rio of its strategic plan. In this context, the Rio Low Carbon Program prepares the city to participate in climate finance City Development Program can provide a critical link at both the sub-national and international levels. In this between long-term strategic planning and medium- to sense, the Low Carbon City Development Program builds short-term implementation of mitigation-related inter- upon and expands previous examples of enhancing climate ventions to support the implementation and tracking of finance opportunities for cities, including the City-Wide the specific targets and milestones of its Strategic Plan. Approach to Carbon Finance (World Bank 2010). 2 NOVEMBER 2012 2005 emissions were 11,351.9 ktCO2e in total (COPPE As part of the GHG inventory research work, Rio and Rio Prefeitura 2011 1 ). Therefore, the targets Prefeitura and COPPE also conducted an initial modeling correspond to cumulative emissions reductions of 908 of the future GHG emissions of the city according to ktCO2e to be reduced by end of 2012, 1,816 ktCO2e to three scenarios: be reduced by 2016, and 2,270 ktCO2e to be reduced by 1. a business-as-usual scenario (shown in Figure 1); 2020 (see Figure 1). 2. a scenario based on the planned mitigation actions There are two possible ways through which Rio could in the transport, waste, and energy sectors at the track the achievement of its emission reduction targets. time of the assessment; and The first is a top-down approach in which a GHG 3. a scenario with bolder actions that are feasible inventory is calculated and compared to a projected in the medium and long term (COPPE and Rio business-as-usual case. This approach gives a big- Prefeitura 2011). picture perspective on target achievement; however, the major drawback is that estimating the projected When the second scenario showed that Rio would city-wide business-as-usual case is difficult and varies not reach all of its targets with the existing planned considerably with different input conditions, such as actions alone, city officials realized that more mitigation population growth, economic growth, and growth of interventions would need to be implemented and major emitting industries. quantified in order to reach the targets. Furthermore, different kinds of mitigation interventions would need The second approach is bottom-up mitigation to be considered, such as policies and projects across all action accounting. In this approach, each mitigation urban sectors. intervention is considered individually and emission reductions are calculated compared to what would have In the long term, Rio's Low Carbon City Development occurred in the absence of that intervention. This is the Program will contribute to plans for green, low-carbon approach used under the framework of the Low Carbon economic growth and job creation in the city, while City Development Program. Existing methodologies, upgrading the urban infrastructure and improving standards, and auditing practices ensure the integrity of environmental quality. This will be achieved mainly these calculations. Although the City of Rio will continue through a targeted set of planning and selection to measure its top-down city-wide GHG inventory, the priorities when assessing future investments, supported bottom-up mitigation action accounting approach by the institutional structure, managerial practices, represents a credible and transparent way to quantify and standards put in place through the Low Carbon and achieve its self-set emission reductions goals. City Development Program. In the medium to longer term, Rio aims for a low-carbon environmental goods and services industry2 that would rival London's, which Figure 1. Rio’s greenhouse gas reduction targets are to currently has more than 9,200 companies, more than reduce at least 2.3 million tons of CO2e cumulatively by 160,000 jobs, and more than £24 billion (US$39 billion) the end of 2020, by diverting from a business-as-usual in revenue (BIS 2012). scenario to a low-carbon-development scenario The ISO-Certified Low Carbon City Development 20,000 Program City-Wide Emissions (ktCO2e) Business as Usual Scenario 16,000 The foundation of the Rio Low Carbon City Development Program is its clearly defined municipal institutions and processes, which operate together 12,000 to provide the framework that enables Rio to plan, Low Carbon Development Scenario implement, monitor, and account for its mitigation 8,000 actions. As described in further detail below, there are clearly characterized Program Roles, processes for Program Planning and Evaluation, and each new activity 4,000 2020 Goal: that reduces emissions—called an intervention—goes ERs (-ktCO2e) at least 2.3 MtCO2e of Emission Reductions through the same five-step Program Process (see Figure 0 2). Taken together, these form the organizational structure of the ISO-certified Rio Program and -4,000 constitute the Low Carbon City Development Program 1996 1998 2005 2012 2016 2020 2025 business model that can be implemented in cities Year around the world. 3 DIRECTIONS IN URBAN DEVELOPMENT Program Roles from intervention to intervention, but it will always be coordinated by the CME. The Low Carbon City Development Program has five Program Roles with fixed responsibilities Technical Advisory Entity (TAE): The TAE is an entity or and requirements. Two of the roles require fixed consultant with technical expertise in the quantification assignments linked to the overall Program, and three of emission reductions. It provides the necessary of the roles have assignments that may vary with each technical input to help move an intervention forward intervention that goes through the Program Process. through the Program Process. Fixed Assignments Validation and Verification Entity (VVE): The VVE is an ISO-accredited environmental auditor. It validates Coordinating Management Entity (CME): The CME is and verifies the emission reductions generated by the central body within the municipality that oversees interventions under the Program. The VVE must operate the coordination and management of the Program. It externally and independently of the CME. While an is housed strategically at a sufficiently high level in the entity may have sufficient expertise to act as both a TAE municipal government to have coordinating authority and a VVE, for any given intervention the TAE and the across all municipal departments. Fulfilling this role in VVE must not be the same entity to insure integrity in Rio: The Mayor’s Office (known as ‘Casa Civil’). the audit process and avoid conflict of interest. Information Management Entity (IME) : The IME is the central body that coordinates and manages all Program Planning and Evaluation information and data related to the Program. The IME The CME coordinates Program Planning and Evaluation. must ideally have both coordinating capabilities with all Program Planning helps to define the Program’s municipal departments and experience collecting and objectives, targets, and an implementation strategy. managing large quantities of data. Fulfilling this role in Program Evaluation involves reflecting on the progress Rio: Instituto Pereira Passos (IPP), which is responsible towards the objectives and targets, as well as the for Rio’s urban planning. Among its many duties, IPP is overall Program Roles and Process, to ensure that the the data center of the city, focusing on production of Program continues to meet the needs of the city. As map information, geography, and statistics. the CME, the Mayor’s Office on Rio coordinates the Program’s implementation strategy. Implementation Variable, Intervention-linked Assignments will take place intensively over the next two to four Multi-Sector Municipal Working Group (MWG): The years, and a longer term operational period is expected MWG is a working group consisting of members (e.g., 20 years). Program Evaluation of the Rio Program from across the municipality with multiple areas of will initially occur every year during the intensive relevant expertise. It acts as an advisory committee implementation period. to the CME. The MWG gives opinions based on sector expertise, knowledge of existing municipal activities Program Process and institutional arrangements, and an understanding Every intervention must follow the 5-step Program of the specific situation on the ground in the city. The Process (see Figure 2). The Program Process prescribes composition and attendance of the MWG may vary the procedures and criteria against which interventions Figure 2. The Program Process has five distinct steps: 1. identify interventions 2. quantify emission reductions (ERs) 3. decision-making (retire or sell) 4. validate/verify 5. monitor, report and quality control 4 NOVEMBER 2012 are assessed to be registered in the Program, as well as the process of monitoring, reporting, and verifying Box 4. Methodology Assessment Criteria the emission reductions generated by interventions. To be approved for use by the Program, new methodolo- The Program Process has five general steps: gies must have undergone an assessment and received a recommendation by both the MWG and a VVE. The scope 1. Identify interventions: The CME works with the of assessment of a new methodology is based on the fol- MWG to identify interventions. An intervention lowing set of principles and elements: must meet the intervention eligibility criteria to • Principle of integrity and avoidance of politically and be included in the Program (see Box 3). ethically contentious issues 2. Quantify Emission Reductions: An estimate of the • Applicability of methodology for the specific interven- quantity of emission reductions that the interven- tion type tion will produce is conducted by the TAE. The • Appropriate definition of the intervention’s physical TAE determines the most appropriate method- boundary ology to use for calculations. Any existing car- • Procedure for determining the baseline scenario bon finance methodology approved for use by • Method for calculating the baseline emissions and an ISO-14064 compatible carbon standard (such intervention emissions as the Verified Carbon Standard, or the Clean • Adequacy of the monitoring methodology, data and Development Mechanism) may be used. Should parameters a methodology not exist under any carbon stan- • Relationship to methodologies already in use by inter- dard for the intervention, a new methodology ventions under the program may be suggested that fulfills the methodology assessment criteria (see Box 4). 3. Decision-making (retire or sell): The CME works with the MWG to make a decision about whether to retire the intervention’s emission reductions Box 3. Intervention Eligibility Criteria towards the city’s target (in accordance with its To be eligible for inclusion in the Low Carbon City climate change law) or to sell them to an outside Development Program, each intervention must be: buyer to generate revenue from climate finance. 1. Within the Program’s intervention inclusion Each unit of emission reduction must have only one parameters that are based on existing conditions in final destination to prevent double-counting. the city (for example: in Rio, the intervention inclusion 4. Validate/verify: The intervention and its emission parameters require financial commitment to the intervention on or after January 1, 2007. This is the reductions must undergo validation to ensure qual- year the IPCC Fourth Assessment Report on Climate ity and integrity. The VVE conducts the assessment, Change was published [IPCC 2007], which catalyzed validating the intervention’s compliance with the the first climate change research studies conducted by intervention eligibility criteria and the methodology city secretariats with local researchers); used for calculations. The assessment verifies that 2. Transparent about whether the intervention is regis- the intervention is on track to produce emission tered or seeking registration with the CDM, VCS, Gold reductions as planned. If the intervention seeks to Standard, or any other program/standard for verifying generate carbon assets such as Certified Emission GHG emission reductions; Reductions or Verified Carbon Units3, it must also 3. Located within the city’s geographical boundaries; fulfill all the criteria imposed by the relevant regula- 4. Under the ownership and/or control, even if partially, tory body. of the municipality through either direct implementa- tion or agreement; 5. Monitor, report, and exercise quality control: 5. In a sector governed and/or influenced by municipal Every intervention and its emission reductions must decisions; be monitored over the lifetime of the Program. Monitoring, reporting, and quality control, as well 6. Implemented without a legal mandate from higher levels of government, such as state- or federal-level as all the data collection, analysis, and storage, is governments (as with criteria #4 and #5, this ensures conducted for each intervention, then bundled and that the municipality is driving the implementation of managed by the IME through the Program’s moni- the intervention); toring, reporting, and verification (MRV) system. 7. Resulting in emission reductions, of any quantity, that Different municipal departments feed data about are beyond what would occur in a baseline scenario; interventions and baselines into the MRV system, and which performs the analysis for calculation of emis- 8. In compliance with environmental and legal require- sion reductions. The CME and VVE can access the ments of the city, state and national governments. MRV system to track the implementation of inter- 5 DIRECTIONS IN URBAN DEVELOPMENT ventions and monitor/verify emission reductions transport, construction, energy etc. but with a common purpose - to reduce environmental impact� (BIS 2012). produced by the interventions. 3 Certified Emission Reductions (CERs) are a type of emission Looking Forward: Demonstration Projects reduction unit (or carbon credit) issued by the Clean Development Mechanism (CDM) Executive Board for emission reductions achieved by CDM projects and verified by an independent entity (the so-called An intervention under the Low Carbon City Designated Operational Entity, or DOE) as required under the rules of the Kyoto Protocol. Verified Carbon Units (VCUs) are issued by Development Program may be any activity that the Verified Carbon Standard (VCS). The VCS, formerly called the reduces emissions, including projects as well as Voluntary Carbon Standard, is a standard of the voluntary carbon municipal policies, from any urban sector4. In this offset industry. 4 An intervention must satisfy the eligibility criteria outlined in Box 3. sense, the Program has the potential to expand Examples of interventions include activities such as bus rapid transit horizontally over time to include a wide range of projects, energy efficiency retrofits in buildings, LED street lighting, municipal activities—institutionalizing a ‘carbon lens’ green procurement policies, recycling policies, etc. through which ultimately all municipal activities may be viewed. The first projects that embark on the References Program Process will allow the city to demonstrate C40, ICLEI, and World Resources Institute. 2012. Global Protocol for how the Program works in practice. Community-Scale Greenhouse Gas Emissions. Available: http://live. c40cities.org/community-protocol/ (accessed 08/23/2012) . The City of Rio has selected two demonstration Carbon Disclosure Project. 2012. Measurement for Management: Cities projects in sectors of great significance to 2012 Global Report. Available: https://www.cdproject.net/CDPResults/ CDP-Cities-2012-Global-Report.pdf (accessed 08/23/2012). Rio: urban forestry and non-motorized urban transport (bicycling). In urban forestry, the COPPE and Rio Prefeitura. 2011. Greenhouse Gas Inventory and Emissions Scenario of Rio de Janeiro, Brazil: Technical Summary. Program will quantify the carbon sequestered by Available: http://www.rio.rj.gov.br/web/smac/exibeconteudo?article- Rio’s comprehensive reforestation and urban id=2351770 (accessed 08/23/2012). forest maintenance program, as well as bring Intergovernmental Panel on Climate Change (IPCC). 2007. Fourth awareness to the many co-benefits of Rio’s Assessment Report of the Intergovernmental Panel on Climate Change. Available: http://www.ipcc.ch/publications_and_data/publications_ urban forest ecosystems. In non-motorized and_data_reports.shtml (accessed 08/23/2012). urban transport, the Program will develop a new Intergovernmental Panel on Climate Change (IPCC). 2006. IPCC methodology to quantify the carbon savings of Guidelines for National Greenhouse Gas Inventories. Available: www. Rio’s investments in bicycling infrastructure. These ipcc-nggip.iges.or.jp/public/2006gl/index.html (accessed 08/23/2012). two demonstration projects are only the beginning Rio Prefeitura. 2009. Plano Estratégico da Cidade do Rio de Janeiro - and will lead the way for Rio to plan, implement, Pós Rio2016 [Strategic Plan of the City of Rio de Janeiro - Post Rio2016]. Available: http://www0.rio.rj.gov.br/planoestrategico/ (accessed monitor, and account for low carbon investments 08/23/2012). and climate change mitigation actions across United Kingdom Department for Business, Innovation, and Skills all sectors in the city for many years to come. (BIS). 2012. Low Carbon Environmental Goods and Services: Report for 2010/11. Available: http://www.bis.gov.uk/policies/business-sec- tors/green-economy/market-intelligence/market-data (accessed End Notes 08/23/2012). World Bank. 2010. A City-wide Approach to Carbon Finance. Available: 1 Theinventory methodology, developed by COPPE, was an adapted http://siteresources.worldbank.org/INTCARBONFINANCE/ version of the 2006 IPCC Guidelines for National Greenhouse Gas Resources/A_city-wide_approach_to_carbon_finance.pdf (accessed Inventories (IPCC 2006). Subsequent iterations of the inventory will 08/23/2012). follow the Global Protocol for Community-Scale Greenhouse Gas World Bank and Det Norske Veritas (DNV). Forthcoming. The Low Emissions (C40/ICLEI/WRI 2012). Carbon City Development Program Protocol. Publication forthcoming. 2 The low-carbon environmental goods and services industry is World Resources Institute (WRI) and World Business Council for described as “a flexible construct or ‘umbrella’ term for capturing Sustainable Development (WBCSD). 2005. The Greenhouse Gas a range of activities spread across many existing sectors such as Protocol for Project Accounting. Available: http://www.ghgprotocol. org/standards/project-protocol (accessed 08/23/2012). in Urban Development Copies of this Note are available at: Urbanization and Resilience Management Unit, The World Bank Telephone: 202-473-0409, Fax: 202-522-3232 DIRECTIONS http://www.worldbank.org/urban urbanhelp@worldbank.org If you are interested in submitting an article for consideration, please contact us at the email address above. 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