Operation of the Facility

8/16/2019 Operation of the Facility

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WORLD BANK CARBON FINANCE U NIT

C ARBON P ARTNERSHIP F ACILITY 1



Buildin a solid ortfolio

Growth of carbon funds Global diverse ex erience

Growing from an early trailblazer, the World Bank Carbon Finance Unit has built a

mature portfolio while continuing to pioneer new products.

The World Bank’s carbon funds are developing

projects in 57 countries – for many their first

carbon finance ro ect.

“Crowding-in” of the private sector – the World Bank

catalyzes markets and pioneers new products.

The World Bank is also a leader in forest carbon

development and active in many cutting-edge CDM

technology types and programs of activities.

The World Bank’s extended carbon finance family is

large – 82 governments and private sector companies

– together account for 28% of all CDM projects.+

World Bank active projects

Value of CDM & JI Transactions (per year)

(US$ billion)**

8$6.9

billion

$7.9

billion

$5.9

4

6

WB

World

BankOther

$3.0

billion

billion

$2.6

billion

0

2

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

market

share39%15%14%31% 5% 3% 4% 1%

$0.5

billion$0.2

billion


+Source: UNEP RISØ

Country with active project

**Source: State and Trends of the Carbon Market, 2010;Up-to 2012 vintages only



The Carbon Finance Unit’s first eneration of carbon funds

April 2000 March 2003 May 2004May 2002 March 2004

Prototype Carbon

Fund

Community

Development

BioCarbon Fund

Tranches I & II

Netherlands Clean

Development

Italian Carbon

Fund

$220 000 000

World’s First Global

Carbon Fund

ar on un

$128 600 000

Poorest country focused

$90 400 000

Afforestation,

Reforestation, REDD+& soil carbon

ec an sm ac ty

**

Pioneer purchaser of

CDM

$155 600 000

Government & private

sector

January 2005 March 2005 August 2006 March 2007August 2004

Danish Carbon

Fund

Spanish Carbon

Fund

Umbrella Carbon

Facility TranchesI & II

Carbon Fund for

Europe

Netherlands

European CarbonFacility

€90,000,000


sector

€220,000,000


sector

€904,100,000

Adding liquidity to

market at key moments

€50,000,000

Governments & private

sector

**

Purchasing JI


** Unpublished



The World Bank has established public-private partnerships

to pioneer carbon markets

Public sector partners Private sector partners




The Carbon Partnershi Facilit A fund to scale up investment in clean technology through programmatic and sector-

based approaches

Mission Partici ation

Support systematic approaches to low carbon

growth by countries to catalyze investment in

clean technologies

€ 132 million in buyer commitments to Carbon

Fund; 1st tranche is closed

The governance of the CPF is based on a

partnership of buyers and sellers of carbon credits

seven programs

Morocco Solid Waste Management

Vietnam Renewable Energy

CPF utilizes programmatic modalities to scale up

emission reduction

programs

beyond

project

by

project approach

Amman Green

Growth

(City

‐wide

approach)

Thailand Clean Energy

China Hebei Regional Farm Biogas

Carbon finance included in integrated financing

packages linked to Bank operations

Develop innovative methodologies in areas such as

anzan a enewa e nergy rogram

Under negotiation: Egypt Wind Program

€ 11 million

in

donor

contributions

in

Carbon

Asset

energy efficiency and city‐wide programs; and

promote the introduction of new technologies

implementation; methodology development)




Governance/Partici ants

Governance Participants

The CPF is a artnershi of Bu er and Seller

Participants, also includes Donors and Host

Country Partners

Partnership Committee is comprised of an equal

,

Norway and Sweden; Endesa SA, E.ON

Seller Participants: Caixa Economica (Brazil),

Min. of Industry and Trade (Vietnam), Fonds’

on key policies

All Participants are entitled to attend and to

participate in Partnership Committee meetings

,

Amman Municipality; Provincial Electricity

Authority (Thailand), Hebei Green Agriculture Co.

China), Rural Electricity Agency (Tanzania)

Decisions on programs to include in the First

Tranche portfolio are made by Buyers

, ,

European Commission Host Country Partner: NDRC (China)

Buyers

Public & private sector

Program Development

Carbon Asset Development Fund

(CADF)

Sellers

Public & private sector

Willingness to develop specific

Purchase emission reductions

over the long termER Sale & Purchase

CPF Carbon Fund

emission reduction programs and

sell ERs


ar ners os overnmen s, ers onors



The CPF Pricin /Deliver A roachFixed prices for the first five years of ERPA then opt ion for floating price with cap + floor

Pricing Delivery

Fixed pricing for at least first five years of ERPA;

variable pricing an option for out years

Price in ERPA based on post-2012 primary CER

ERPA includes delivery plan based on identified

CPAs, with volumes and timing for delivery – basis

for volume term in ERPA

market benchmark adjusted for operational and

regulatory risks (a.k.a. “reference price”)

Trustee proposes risk adjustment to reference price

Contractual delivery schedule (and default

provisions) to be based on sub-ERPAs, with two

years for CME to aggregate CPAs to meet ERPA

volume

Benchmark reference price adjusted periodically --

CPAs entering program are priced at prevailing

benchmark + / - risk adjustment

If EPA volume/maximum value not met in twoyears, can be re-allocated to another program

CPF will normally contract for 50% of PDD

Variable price based on weighting of reference

price and spot CER price in market at delivery

Variable price available for delivery >5

volume from CPAs

Front-loading of delivery is envisioned if CPA has

volume available (seniority & sweeping clauses)

Buyer and sellers agree on % weights fixed

vs. floating w/ max 50% floating

Variable price cap & floor at a maximum of

ERPA may include options for additional volumes




CPF Pi eline – ro rams under develo ment

Programs with Seller Participation Agreements

raz – o as e anagemen rogram

Vietnam – Renewable Energy Program

–

Jordan – Amman Green Growth Program (City-wide Approach)

Thailand – Clean Energy Program

China – Hebei Regional Biogas Program

Tanzania – Renewable Energy Program

Under Negotiation: Egypt – Wind Program

variety of situations




Brazil Solid Waste Mana ement Pro ram

Objective: Enable public entities to access carbon markets through innovative

Program Highlights

.

and GHG emissions from the solid waste management sector.

Strategic Relevance: The program is linked to a World Bank loan to Brazil to

support the implementation of a law on national solid waste policy that was enacted in2010 to upgrade landfill practices.

Program Overview:

PoA Type: Land Fill gas Methane capture and use (flaring, electricity generation)

Contract Volume: 3 million tCO2e in ER Volume + 2 million tCO2e in Options

Methodology: ACM0001: Consolidated baseline and monitoring methodology for landfill

gas project activities --- Version 11.0

World Bank Operations/Safeguards: World Bank loan to Caixa to finance landfill

upgrading; Caixa lending to landfill operators collateralized with carbon finance revenues.

Pilot program for use of Country Systems for safeguards assessment.

throughout Brazil.

Coordinating and Managing Entity (CME): Caixa Economica Federal , a major

ublic sector develo ment bank.




Vietnam Renewable Ener Develo ment Pro ram REDP

Program Highlights

Objective: The objective of the Program is to increase the supply of electricity to the

national rid from renewable ener sources on a commerciall environmentall and

socially sustainable basis

Strategic Relevance: The Program is strategically aligned with Vietnam Socio-Economic

Development Plans (SEDP) 2006 – 2010 and 2011 - 2015, Renewable Energy Action Plan(REAP), as well as the World Bank Group Country Partnership Strategy for Vietnam

Program Overview:

Development of 20 – 25 small hydropower projects (CPAs) with total installed

REDP World Bank Credits (US$ 202 mil) are available through financial

intermediaries

Carbon Finance has been an inte ral art of the Pro ram desi n.

Contract volume of two million tCO2e from 2012-2020

Scaling up potential: The project represents around 9 % of total potential smallhydropower in Vietnam which is estimated to be around 2,900 MW which could generate

more than 6 million tCO2e of GHG emission reductions, annually

Coordinating and Managing Entity (C/ME): Ministry of Industry and Trade is the main

counterpart of the Bank loan and also serves as C/ME




Morocco Munici al Solid Waste Mana ement Pro ram

Program Highlights

Objective: The objective of the Program of Activities is to reduce greenhouse gas

emissions (methane and carbon dioxide) through flaring and/or use of landfill gas for

energy generation.

Strategic Relevance: The Program is strategically linked to two development policy loans

modernize the sector. The two loans are well aligned with the World Bank Group Country

Partnership Strategy for Morocco.

Pro ram Overview:

Development of 8-10 landfill gas management projects (CPAs) for flaring of CH4 oruse for energy generation

CPAs are implemented and financed by private sector operators, and are included in

t e contracts w t mun c pa t es

Carbon Finance has been an integral part of the Program design.

Contract volume of two million tCO2e from 2012-2018

,

areas of Morocco. It could be scale up to include most medium-size cities as well.

Coordinating and Managing Entity (C/ME): Fonds d’Equipement Communal, the main

Moroccan local develo ment bank ublic entit




Amman Green Growth Pro ram

Objective:

Program Highlights

innovative city-wide approach

Pioneer and demonstrate the efficacy of the city-wide approach to carbon finance,

being used for the first time by combining approved methodologies in a single PoA, toestablish a model that can be replicated in cities throughout the developing world.

Strategic Relevance: GAM is developing a Green Growth Program based on the Amman

master plan 2025. The Program is intended to leverage the capacity of the Amman

government to catalyze investments and emission reduction activities across a range of

sectors within GAM’s administrative purview.

Program Overview:

PoA coverage: The Amman Green Growth Program includes potential opportunitiesin municipal waste, urban transport, sustainable energy and urban forestry.

Methodology: Multi-methodology framework approved by CDM EB in Sept. 2011

Financing: Donor contributions from AFD and KfW; possible World Bank lending

Scaling up Potential: 500,000 ton Co2e / year from multi sectors




Thailand - Renewable Ener /Ener Efficienc Pro rams

Program Highlights

Objective: Increase the supply of renewable electricity to the national grid and reduce

ener consum tion for Hi hwa Street li htin nationwide.

Strategic Relevance: The Program is strategically aligned with Thailand National

Economic and Social Development Plan 2007-2011, Alternative Energy Development Plan

2008-2022, as well as the World Bank Group Country Partnership Strategy for Thailand Program Overview:

Renewable Energy (RE) Program: Development of up to 100 x 1 MW (CPAs)

biomass gasification power plants with total installed capacity of around 100 MW

nergy c ency o a ona g way ree g ng rogram : ep acemen o

up to 500,000 High Pressure Lamps with LED lamps

Carbon Finance has been an integral part of the Program design

Contract volume of one million tCO2e from 2013-2020

Scaling up potential: The project represents only 2.5 % of total potential biomass in

Thailand which is estimated to be around 4000 MW which could generate more than 14million tCO2e of GHG emission reductions, annually.

Coordinating and Managing Entity (C/ME): Provincial Electricity Authority Energy

Company (PEA-ENCOM)




China Hebei Re ional Farm Bio as Pro ram

Objective: To improve the local environment and human health through upgrading animalProgram Highlights

.

Strategic Relevance: Through providing carbon finance incentive and applying the PoA

approach, the program will support Ministry of Agriculture to establish provincial platforms in

order to facilitate application of biogas digester technology among medium- large farms. Program Overview:

By replacing the current practice of anaerobic open lagoons with biogas digesters, the

program aims to improve manure management systems in about 40 livestock farms in

Hebei province. The generated biogas will be used to provide power and thermal

energy for the farms and households nearby.

Finance: Each participating farm will receive partial subsidy from provincial government

cover ng ess an o o a nves men cos an no more an m on, e res

will be financed by the participants’ own savings and equity.

Estimated Emission Reductions: 3.37 million tCO2e over a 10-year crediting period

Scaling up Potential: na targets nsta at on o , ogas p ants at s ng e arm eve y

2015.

Coordinating and Managing Entity (CME): Hebei Green Agriculture Co, Ltd, a bundling




Tanzania Renewable Ener Pro ram

Program Highlights

Objective: Expand coverage of rural electrification in Tanzania, by promoting both off-grid

and on-grid renewable energy projects

Strategic Relevance: The Program is strategically aligned with Tanzania’s Energy Sector

Policy. The Government has set up Rural Energy Agency (REA) to promote rural

Program Overview:

Development of 10-12 small hydropower projects (CPAs) with total installed capacity

IDA Line of Credit – long term financing through local banks Preparation Grant – financing upfront project preparation cost

Connection grant – a form of capital subsidy (depending upon the number of rural

connections provided)

Carbon Finance - bridging part of equity gap

Contract volume of about 2.0 million tCO2e from 2012-2020

Scaling up potential: Tanzania has abundant renewable resources. There ore, the

scaling up potential is huge

Coordinating and Managing Entity (C/ME): The Rural Energy Agency (REA), the main




E t Wind Develo ment Pro ram

Objective: The carbon finance program will provide revenues to the Egyptian Electricity

Program Highlights

encourage wind power development.

Strategic Relevance: The Government of Egypt is planning a wind power development

program in the Gulf of Suez. The Bank and other agencies are providing loan financing fortransmission infrastructure to evacuate power from the wind farms to be built by the private

sector under a Build-Own-Operate framework.

Program Overview:

- - ,

US$ 148.25 million CTF, US$ 70million EIB and US$ 54 million GOE) Component B - Technical Assistance (US$ 2.9 million)

Component C - Gulf of Suez 250 MW BOO project (US$ 450 million): developmentan cons ruc on o a w n arm s n u o uez y a pr va e sec oroperator under a BOO approach

Contract volume of about 2.0 million tCO2e from 2012-2020 PoA ro ect activities CPAs will be aid from sellin electricit to the EETC.

Scaling up Potential: Up to 3000MW by 2020

Coordinating and Managing Entity (CME): Egyptian Electricity Transmission Company

EETC




Future Directions for CPF

Key objective of CPF is to innovate in developingprogramma c car on mar e mec an sms

But the future market is uncertain:

only LDCs will have access to EU ETS for CDM projects registeredafter 2012

,approaches that bridge to new market mechanisms


Documents

Operation of the Facility