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Trading Carbon : November 2011
The housing NAMA focuses on the installation of energy efficient technologies in new houses in Mexico. It aims to expand and improve on current initiatives. They are the so- called "Esta es tu casa" -- a subsidy provided by the national housing commission for the installation of energy efficient devices -- and a green mortgage scheme that provides additional revenue to the borrower, conditional to the installation of certain package of "green technologies". One particular characteristic of the Mexican housing market is that the grant or loan is not provided directly to the house owner, but to the housing developer (constr uction company). The company is, therefore, responsible for incorporating the efficient technologies in the constr uction of the new house. Both programmes are considered a success in Mexico, but their coverage is limited because of the restricted public resources available. Therefore, the aim of the NAMA is to enhance and expand the current initiatives to all new houses built in Mexico. For example, it incorporates additional efficient technologies, such as efficient air-conditioning, to the package of green technologies installed by the housing developers. The housing NAMA is being developed as a supported NAMA, but with the possibility for it to "evolve" into a crediting NAMA -- if an agreement on crediting is achieved at the international level. In this context, the proposed financing str ucture engages both international donors -- in the case of a supported NAMA -- as well as the private sector for a credited NAMA. The financial str ucture involves several actors with different interests. In order to combine the different financing mechanisms and engage all the participants, a NAMA fund was proposed to centralise all the financial resources received from donors, the private sector and the Mexican government. Once all the revenue is collected, the fund would allocate the resources to the Mexican financing institutions that are responsible for the distribution of the loans to the housing developers. This model builds on the current structure, which is already in place between financing institutions, the housing developers and the house owners. The NAMA fund can be a public-private entity established to coordinate the financial flow for mitigation activities at national level. It will receive resources from different actors: donors, private investors and the government and it will return payments (principal plus interest) or credits to each actor accordingly. There are some encouraging aspects for the private sector in this str ucture. The private sector can play a role in the NAMA fund by providing loans that are guaranteed by the government and allow lower interest rates for borrowers as the lender is protected against default. Such guaranteed loans would lower the risk for private investors and provide access to untapped resources that could increase the number of loans provided. International donors could also participate towards the NAMA fund as part of the contribution to the $100 billion annual support for mitigation actions. If the NAMA is converted into a crediting version, donors could receive credits in return for payments to the fund. The fund also combines public and private finance, with the government's role to reduce risks and leverage investments from the private sector. It should be independently managed by an investment body and accountable internationally. The NAMA fund offers the opportunity to manage different funding sources at the national level, while the NAMA registry is responsible for matching developed countries' funding and NAMA proposals at the international level. The registry will also publicise information on how much funding is allocated to each NAMA initiative and host countries' progress towards implementing mitigation actions and achieving emission reductions. Both mechanisms are important for the implementation of NAMAs and will give confidence to the business community that NAMAs are a credible instrument to finance emission reductions. While the NAMA fund is responsible for engaging the private sector at national level, the NAMA registry will provide the international accountability tool to ensure emissions reductions are achieved. By offering the possibility of financing large-scale emission reductions in a transparent manner, NAMAs offer a new opportunity for the private sector to engage in climate financing. l Nelson Sam is global managing director advisory services, commodities and energy and Fernanda Gusmao is a senior associate, commodities and energy at Thomson Reuters in London Email: email@example.com and firstname.lastname@example.org 33 SPECIAL REPORT LATIN AMERICA November 2011 REUTERS/HENRY ROMERO
December - January 2011