Enabling Paradigm Shift Towards Low-carbon Transport in Montenegro | Montenegro UNDP 7 December 2019 Enabling Paradigm Shift Towards Low-carbon Transport in Project/Programme Title: Montenegro Country(ies): Montenegro National Designated Ministry of Sustainable Development and Tourism Authority(ies) (NDA): Accredited Entity(ies) (AE): UNDP Date of first submission/ 2019-12-06 version number: Date of current submission/ 2019-12-06 version number Please submit the completed form to [email protected], using the following name convention in the subject line and file name: “CN-[Accredited Entity or Country]-YYYYMMDD” PROJECT / PROGRAMME CONCEPT NOTE Template V.2.2 Notes • The maximum number of pages should not exceed 12 pages, excluding annexes. Proposals exceeding the prescribed length will not be assessed within the indicative service standard time of 30 days. • As per the Information Disclosure Policy, the concept note, and additional documents provided to the Secretariat can be disclosed unless marked by the Accredited Entity(ies) (or NDAs) as confidential. • The relevant National Designated Authority(ies) will be informed by the Secretariat of the concept note upon receipt. • NDA can also submit the concept note directly with or without an identified accredited entity at this stage. In this case, they can leave blank the section related to the accredited entity. The Secretariat will inform the accredited entity(ies) nominated by the NDA, if any. • Accredited Entities and/or NDAs are encouraged to submit a Concept Note before making a request for project preparation support from the Project Preparation Facility (PPF). • Further information on GCF concept note preparation can be found on GCF website Funding Projects Fine Print. PROJECT / PROGRAMME CONCEPT NOTE Template V.2.2 GREEN CLIMATE FUND | PAGE 1 OF 13 A. Project/Programme Summary (max. 1 page) ☒ Project A.2. Public or ☒ Public sector A.1. Project or programme ☐ Programme private sector ☐ Private sector Yes ☐ No ☒ A.3. Is the CN submitted in ☐ Confidential A.4. Confidentiality1 response to an RFP? If yes, specify the RFP: ☒ Not confidential ______________ Mitigation: Reduced emissions from: ☐ Energy access and power generation ☒ Low emission transport ☐ Buildings, cities and industries and appliances A.5. Indicate the result ☐ Forestry and land use areas for the Adaptation: Increased resilience of: project/programme ☐ Most vulnerable people and communities ☐ Health and well-being, and food and water security ☐ Infrastructure and built environment ☐ Ecosystem and ecosystem services A.7. Estimated A.6. Estimated mitigation adaptation impact 77,000 t CO direct impact (tCO2eq over 2e (number of direct NA 468,000 tCO indirect lifespan) 2e beneficiaries and % of population) A.8. Indicative total project Amount: USD 50.5 million A.9. Indicative GCF Amount: USD 12.4 cost (GCF + co-finance) funding requested million A.10. Mark the type of financial instrument ☒ Grant ☐ Reimbursable grant ☐ Guarantees ☐ Equity requested for the GCF ☐ Subordinated loan ☐ Senior Loan ☐ Other: specify___________________ funding A.12. Estimated A.11. Estimated duration a) disbursement period: 6 years project/ Programme 20 years of project/ programme: b) repayment period: n/a lifespan A.13. Is funding from the Yes ☐ No ☒ ☐ A or I-1 Project Preparation Other support received ☐ If so, by A.14. ESS category3 ☒ B or I-2 Facility requested?2 who: ☐ C or I-3 A.15. Is the CN aligned A.16. Has the CN been with your accreditation Yes ☒ No ☐ Yes ☒ No ☐ shared with the NDA? standard? Yes ☒ No ☐ A.18. Is the CN A.17. AMA signed (if If no, specify the status of AMA included in the Entity Yes ☒ No ☐ submitted by AE) negotiations and expected date of Work Programme? signing: Montenegro’s transport sector is a significant source of GHG emissions, estimated at 563,000 tCO2e in 2015 and forecasted to grow to 993,000 tCO2e (30% of the national GHG emissions) by 2030. Building on the recently-approved National Transport Strategy, A.19. Project/Programme the project aims at creating an enabling environment and facilitating investment in low- rationale, objectives and carbon passenger transport that will reduce at least 30,000 tCO2e over the project approach of duration, 77,000 t CO2e of direct emissions (in the 10-year lifetime of project assets) and programme/project (max 468,000 tCO2e of indirect emissions (over a 20-year period if the effort is sustained after 100 words) project termination). It will do so by increasing the use of the public transport system, and supporting public and private investment in electric vehicles, as well as and mainstreaming climate change considerations in transport sector policies. 1 Concept notes (or sections of) not marked as confidential may be published in accordance with the Information Disclosure Policy (Decision B.12/35) and the Review of the Initial Proposal Approval Process (Decision B.17/18). 2 See here for access to project preparation support request template and guidelines 3 Refer to the Fund’s environmental and social safeguards (Decision B.07/02) PROJECT / PROGRAMME CONCEPT NOTE Template V.2.2 GREEN CLIMATE FUND | PAGE 2 OF 13 B. Project/Programme Information (max. 8 pages) B.1. Context and baseline (max. 2 pages) 1. Context. Montenegro is one of the smallest and youngest countries in the world. It has approximately 620,000 inhabitants and is located in the western part of the Balkan peninsula. In accordance with the Biennal Update Report (BUR), submitted in 2019, GHG emissions in Montenegro have decreased by 40% in 2015, to 3.49 million tCO2e compared to 1990 levels. Transport in Montenegro’s is the only sector with growing GHG emissions, reaching 0.573 million tCO2e or 20% of the national GHG emissions in 2015, and forecasted to reach 0.993 million tCO2e or 30% of the national GHG emissions in 20304. 2. The Nationally Determined Contribution (NDC) aims at a 30% reduction of GHG emissions by 2030, compared to the 1990 levels. NDC is being implemented through Montenegro’s National Climate Change Strategy (NCCS), adopted in 2015. NCCS puts a strong focus on harmonization with the EU’s climate change legislative framework. It identifies transport as a top priority sector for climate change action, sets up a quantified target of 30% of personal mobility to be made by public transport in 2030, and calls for measures to promote the uptake of more efficient vehicles, e-mobility, public, non-motorized and other sustainable transport modes. This approach has been integrated in the National Transport Strategy (NTS), adopted in July 2019. 3. Scope of the project (climate mitigation solution).The project focuses on reducing road passenger transport emissions through two actions: improvement of public transport services, and electrification of the public and private passenger vehicle fleets (buses and cars, which will be jointly referred to as “vehicles” in this note). The former would provide a change in the transport mode used by a substantial part of the population from private cars and taxis to urban and interurban public transport, as well as to waterborne services, contributing to the NCCS target of a modal share for public transport of 30% by 2030; the latter provides a direct reduction of GHG emissions and the introduction of electric vehicles in a bus and car market dominated by highly-emiting second-hand vehicles. 4. Two root causes explain GHG emissions growth from road passenger transport: neglected public transport services and a fast-growing car fleet with high emission patterns. Specifically: • Public transport by bus provides low quality services, with old buses, unreliable schedules and low frequency; furthermore, the lack of integration among operators results in inconvenient transfers, need of various tickets and lack of adequate coverage of the territory. The deterioration of public transport services is explained by the weakness of the public institutions in charge of it, an outdated regulatory framework, and defensive management practices focusing on short-term financial stability at the expense of the social and environmental benefits of public transport. As a consequence, the mobility gap between those with and without a car is growing, increasing the vulnerability of already socially-disadvantaged groups and women. • The growing car fleet and its high emissions levels are the consequence of (i) this inadequacy of public transport; (ii) increasing car affordability (motorization rate growth slightly above 2% in the last 5 years), despite low population growth and a sluggish economy, based on the importation of high-emiting second-hand cars from the EU; and (iii) low awareness among the population of the climate impact of car transport. 5. Barriers to the climate mitigation solution fall in two categories: 6. Barriers to the improvement of public transport: • Inadequate regulatory framework of public transport services. Concession contracts are outdated (in Podgorica they expired and have been informally extended) and do not adequately incentivize bus companies to improve service quality. This barrier is addressed by activity 1.1 (see section B.3), building upon current actions efforts undertaken by the GoME (in the context of its NTS) and the city of Podgorica (in the context of its Sustainable Urban Mobility Plan) with the support of EIB and EBRD tp establish an integrated policy approach to passenger mobility. • Lack of integration of public transport services. Public transport authorities lack the resources and technical competences to effectively enforce concession contracts and integrate the services provided by different companies into a consistent system with unified fares, convenient transfers, wide geographical coverage and high customer satisfaction. Although revised in 2018 for interurban services, public transport regulation does not encourage cooperation among operators, does not include key tools such as e-ticketing and does not envisage the adaptation of mobility services to vulnerable users’ needs. Users’ perception of public transport is very negative, which explains the strong growth of taxi services (966 licenses in Podgorica alone), as they provide reliability, privacy and comfort with reasonable fares.