A partnership for A partnership for low-carbon low-carbon growthgrowth

April 29, 2008, MoscowApril 29, 2008, MoscowTaisei MatsukiTaisei MatsukiSenior Operations OfficerSenior Operations OfficerThe World BankThe World Bank

Addressing Climate Change: A Key Addressing Climate Change: A Key Development Priority for the World BankDevelopment Priority for the World Bank

External expectations for the Bank to:

– Support increased financial flows and technology transfer

– Scale up investment towards climate-friendly development and technologies

In response and as part of its strategic framework:– Scaling up of World Bank Group lending/investment

and analytical work

– New initiatives Carbon Finance – Carbon Partnership Facility (CPF)

Objectives and Features of CPF ObjectivesObjectives

– Target long-term emissionsTarget long-term emissions– Scaling upScaling up– Strategic, demonstrational activities in sectorsStrategic, demonstrational activities in sectors

FeaturesFeatures– Programs, away Programs, away from from individual projects individual projects – Partnership between buyers and sellersPartnership between buyers and sellers– Fostering both demand and supply in uncertain Fostering both demand and supply in uncertain

marketmarket

P1

Project by project: higher transaction costs, lowerpredictability for project owners

ERs

Time

CDM

CDMP2

ERs

Time

CDMP3

ERs

Time

P3

P1

P2

ER Program

Programmatic: larger scale, better planning environment for project owners

P4

P5

Pn

Program

ERs

Time

CPF benefits to a sellerCPF benefits to a seller Carbon Partnership Facility (CPF) provides sellers

with:– The certainty of significant and long term

revenues from emission reductions (ERs), which could help finance investments and implement of the energy/environment policy of the host country

– A forum to meet buyers and other partners to further explore cooperation including other investment opportunities

– An opportunity to learn from each other including management experiences

CPF - Buyers and Sellers in a CPF - Buyers and Sellers in a PartnershipPartnership

SELLERS(governments, companies)

ER contribution

Willingness to develop and implement

specified emission reduction programs

and sell ERs

BUYERS(governments, companies)

Minimum financial contributions

Willingness to purchase emission reductions when generated over

the long term

Program development

Carbon Asset Development Fund (CADF)

ER sale and purchase

Carbon Fund

ER : Emission Reduction

Carbon Asset Development Fund Provides Sellers and host countries with

resources for:– Emission Reduction program development,

including work on the enabling environment– Carbon-related elements of feasibility studies – Methodology work

Funded by– Contributions from Buyers and Sellers– Donor contributions

Carbon Fund

To purchase emission reductions generated by programs proposed by Seller Participants

To be funded by: – Contributions from Buyer Participants

Target size: – Could reach € 5,000 million over 5 years – First tranche: €350 million

ParticipationParticipation Buyer Participants

– Public or private entities– Commitment of contribution to the Carbon Fund

Seller Participants– Public or private entities – Commitment to develop emission reduction (ER)

Program and sell ERs to the Carbon Fund – Acceptable by the Bank in accordance with established

criteria

Partners– Donors – Host country governments of countries where programs

are being, or expected, to be developed

Participation process and operational features

Participation Process for SellersParticipation Process for Sellers

1. Program sponsor submits a Program Idea Note (PIN) for review

2. Upon approval of PIN by Trustee, becomes a Carbon Partnership Facility Participant by signing a Participation Agreement Includes basic terms for emission reduction (ER)

purchase3. Seller prepares the ER Program consistent with

the Russian national legislation/policy 4. Negotiation and signing of Emission Reductions

Purchase Agreement

Basic Portfolio & Special WindowsBasic Portfolio & Special Windows

Energy Generation

Energy Efficiency

Waste Management

Oil and Gas

Transportation

Basic Portfolio Criteria• to be defined in consultations

Special Windows• proposed by Trustee based on Participants interest

Carbon Capture and Storage ?

Green Investment Scheme? Separate/Additional € contributions

Others?

Buyer 1

Buyer 2

Participation

Pricing approach to be developed by the Pricing approach to be developed by the partnershippartnership

The pricing approach will be developed in consultation with the Participants and endorsed by the Partnership Committee

Objective to agree to an approach that is transparent, coherent, and able to adjust to changing market conditions

It may use, as appropriate:– both fixed and/or variable pricing elements– indexation and inflation/currency devaluation-based

corrections

Significant methodology development Significant methodology development neededneeded

May use CDM/JI methodologies, CDM Program of Activities approach

Other programmatic/sectoral approaches would be explored, e.g.,– A common baseline e.g., a carbon intensity/emission

per unit of production

– “Deemed savings” approach (pre-determined emission credit per activity) in lieu of tracking over time

– Agreed “automatic” eligibility of certain technologies/ activities to claim credits (in a country and timeframe)

Emission Reduction program ideas under discussion

Process for identifying illustrative, Process for identifying illustrative, potential pilot programspotential pilot programs

Identification of potential programs under way through discussions with:– host country governments and their agencies– public and private companies– The World Bank regional/sector specialists

Focus on strategic context and alignment with – the priorities of the host country – World Bank country and sector dialogue and lending &

other operations Strong early pipeline of potential programs for

first tranche (and beyond) emerging

Example of Emission Reduction Example of Emission Reduction program ideas under discussionprogram ideas under discussion

Example of the program MtCO2e/yr

Renewable energy Development Program 0.4

Efficient Coal Technology for Power Generation

0.6

High Capacity Transmission 9.7 Low Carbon Expansion of Electricity Grid (Renewable)

6.0

National Program for Waste Management 0.7-1.0 Energy Program (gas to power) 2.0

Carbon Partnership Facility Carbon Partnership Facility Opportunities in Russia ?Opportunities in Russia ?

CPF Opportunities for Russia ? (1)CPF Opportunities for Russia ? (1) The selection criteria for programs under the CPF

is still under discussion. The program would be consistent with: for example

– sustainable development objectives, relevant sector policy, and climate change strategy of Russia

– operational strategies, policies and procedures of the World Bank Group (e.g. the Country Partnership Strategy)

CPF Opportunities for Russia? (2)CPF Opportunities for Russia? (2)

– UNFCCC and/or the Kyoto Protocol, and/or any future agreement under the UNFCCC, and/or any other regime as deemed appropriate by the Trustee in consultation with participants

– Expected to have a significant demonstration or scaling up impact and to make a contribution to lowering of greenhouse gas emissions or limiting their growth in the relevant geographic region or sector

CPF Opportunities for Russia? (3)CPF Opportunities for Russia? (3)

– Manageable technological risk

– Projected Emission Reductions over the life of the Program should be predictable and should involve an acceptable level of uncertainty

CPF Opportunities for Russia? (4)CPF Opportunities for Russia? (4)Sector

Geographical Scope

Mitigation OpportunitiesKey

players/partners

Energy Services (Supply side)

sub-national, national and regional grids

Optimization of renewable energy resources in grids; energy efficiency through rehabilitation and replacement of the power generation technology, fuel switch

Power companies, regional power consortiums

Urban / Municipal Services

urban centers, cities, towns

Energy Efficiency and Cleaner technologies in water, wastewater, solid waste, public lighting, buildings, urban transport and other services

Municipalities

Oil and gas production, transport and distribution

sub-national, national and regional

Gas flaring reduction, cross-sector activities (infrastructure, gas-to-power), energy efficiency, untapped regions

Oil and gas companies

CMM/CBMsub-national, national and regional grids

Methane recovery Coal mining companies

CMM: Coal Mine Methane, CBM: Coal Bed Methane

Expected Timeline

Expected Timeline

A series of bilateral consultations were held in February-A series of bilateral consultations were held in February-MarchMarch

Consultation workshops/events:Consultation workshops/events:– Bangkok 3 April, selected host governmentsBangkok 3 April, selected host governments– Paris 17 April, potential seller participantsParis 17 April, potential seller participants– Paris 18 April, potential buyer participantsParis 18 April, potential buyer participants– Cologne, during week of 6 May (in conjunction with Cologne, during week of 6 May (in conjunction with

Carbon Expo)Carbon Expo) Carbon Asset Development Fund operational end of June Carbon Asset Development Fund operational end of June Capitalization of the Carbon Fund from end of June Capitalization of the Carbon Fund from end of June

onwards onwards Organizational meeting and full operationalization, once at Organizational meeting and full operationalization, once at

least 6 Seller Participant Agreements signedleast 6 Seller Participant Agreements signed

Thank youThank you

Taisei MatsukiTaisei MatsukiCarbon Finance Unit Carbon Finance Unit

The World BankThe World Bank

Office Phone: +1-301-273-6789Office Phone: +1-301-273-6789Fax: +1-202-522-7432Fax: +1-202-522-7432E-mail: E-mail: tmatsuki@worldbank.orgtmatsuki@worldbank.org

wwwwww..carbonfinancecarbonfinance..orgorg