70745 REVIEW OF ECA PROJECT PIPELINE FOR CARBON FINANCING OPPORTUNITIES Final Report Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized
48
Embed
REVIEW OF ECA PROJECT PIPELINE FOR CARBON FINANCING ... fileREVIEW OF ECA PROJECT PIPELINE FOR CARBON FINANCING OPPORTUNITIES ... The projects which are already ... It includes descriptions
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
70745
REVIEW OF ECA PROJECT PIPELINE FOR CARBON FINANCING OPPORTUNITIES
Final Report
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
Pub
lic D
iscl
osur
e A
utho
rized
2
ABBREVIATIONS
CCGT: Combined Cycle Gas Turbine
CDM: Clean Development Mechanism
CHP: Combined Heat and Power
DPL: Development Policy Lending
DSM: Demand Side Management
ER: Emission Reductions
ESCO: Energy Service Company
GEF: Global Environment Facility
JI: Joint Implementation
LULUCF: Land Use, Land Use Change and Forestry
PAD: Project Appraisal Document
PID: Project Information Document
PIN: Project Idea Note
SCADA: Supervisory Control and Data Acquisition
TTL: Task Team Leader
UNFCCC: United Nations Framework Convention on Climate Change
3
Table of Contents
Page #
Introduction………………………………………… 5
Methodology……………………………………….. 5
Selection Criteria…………………………………… 5
Key Findings……………………………………….. 7
Early Project Screening…………………………….. 11
Annex A. List of projects reviewed ………………... 12
Annex B. Projects Suitable for Carbon Finance……. 16
Annex C: Guidelines for Early Project Screening…. 41
4
A. Amar
V. Atur
J. Bure
A. Capcelea
S. Haitov
P. Johansen
O. Leber
V. Loksha
J. Melitauri
N. Nikolov
K. Nyman
K. Oppermann
D. Ostojic
D. Papathanasiou
P. Salminen
G. Sargsyan
S. Sarkar
H. Schreiber
R. Sharma
5
1. Introduction
The purpose of this report is to provide the results of a review of the ECA project pipeline
(active projects including those under supervision) and identify carbon overlay opportunities.
To accomplish this, the Consultant reviewed the projects in ECA’s (ECSIE, ECSSD, ECSHD)
lending pipeline and loans under supervision and the projects that are expected to be presented
to the Board of Executive Directors of the World Bank and IDA in FY07 and FY08, or that have
been approved by the Board in FY06 and the first half of FY07. Sectors in this review include
infrastructure (transport, urban, health and education projects), energy, rural development, and
environment. The industrial/mining restructuring projects (coal, steel, aluminum, fertilizer,
cement, petroleum refining, gas flaring) under Development Policy Lending (DPL) operations
are also included. The projects which are already funded by carbon funds are not included in
this report.
The key findings of the review and the recommendations are provided as a guideline for future
project screening.
The review includes 3 Annex:
Annex A: It shows all of the 123 projects which were reviewed.
Annex B: It includes descriptions of the ECA projects with high relevance to carbon finance.
Annex C: It provides the Guidelines for early project screening
2. Methodology
The following steps were followed for the review:
Identification of all the projects which may result in emission reductions directly or
indirectly, and obtain the Project Information Document (PID).
Review of the PIDs based on which the projects with higher probability for generating
emission reductions were screened (see criteria below). For most projects this was
adequate to determine the potential for emission reduction and suitability to carbon
finance requirements.
For some projects, it was also necessary to review the Project Appraisal Document
(PAD).
Finally, meetings were held with Task Team Leaders and the Carbon Finance Unit to
clarify outstanding questions.
3. Selection Criteria
In order to identify the most suitable projects for carbon financing, following criteria were
applied:
I. Country Eligibility:
It is mainly linked to Kyoto Protocol ratification. The ECA countries fall into one of the
following four categories:
6
a) Eligible Joint Implementation (JI) Countries: Bulgaria, Czech Republic, Estonia,
Hungary, Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia, Russia and
Ukraine.
b) Prospective JI Countries: Belarus and Croatia.
c) Eligible Clean Development Mechanism (CDM ) Countries : Albania, Armenia,
Azerbaijan, Georgia, Kyrgyz Republic, Macedonia, Moldova, Turkmenistan, and
Uzbekistan.
d) Prospective CDM Countries: Bosnia-Herzegovina, Kazakhstan, Serbia &
Montenegro and Tajikistan.
II. Suitability of Projects for Carbon Finance Fund Requirements:
The following funds are available within the World Bank and will be considered for eligible
projects:
a) Netherlands CDM Fund (CDM Countries Eligible Only) – CDM energy,
infrastructure and industry projects
b) Community Development Carbon Fund (CDM Countries Eligible Only) – small
scale CDM energy projects
c) BioCarbon Fund (JI and CDM Countries Eligible) – LULUCF projects1
d) Italian Carbon Fund (JI and CDM Countries Eligible) – multi purpose fund
e) Netherlands European Carbon Facility (JI Countries Eligible Only)
f) Spanish Carbon Fund (JI and CDM countries eligible) – multi purpose
g) Danish Carbon Fund (JI and CDM countries eligible) – multi purpose
h) Umbrella Carbon Facility (JI and CDM countries eligible)
III. Risk Level:
This will involve a preliminary risk assessment considering factors such as: the likelihood that
the projected emission reductions will be delivered, baseline risks, additionality issues, etc. New
methodologies should be avoided unless there is a high potential for ERs (>1 million tons) and
replication. Projects which have already commenced are likely to be more difficult to prove
additionality than projects which have not been approved yet or have not started specific project
activities.
IV. Project Size:
All project opportunities must meet the minimum size of 50,000 tCO2e per year. Projects that
annually reduce emissions at volumes lower than 50,000 tCO2e may be suitable, if such smaller
projects can be bundled into a minimum 50,000 ton/yr. Identification of larger scale projects is
preferable.
The expected amount of ERs is characterized as “low” (less than 200,000 tons of CO2 over a
10-yr period), “medium” (200-500,000 tons of CO2 over a 10-yr period) and “High” (above
500,000 tons of CO2 over a 10-yr period). These ranges are arbitrary, but the requirements for
contracted amounts by the various funds were taken into account. Also, the estimates of the
emission reduction potential are based on the type of technology utilized and previous
1 Tranche 1 of the BIOCF fund is closed to further proposals. Tranche 2 is now open to a call for projects.
7
experience from similar projects. More detail assessment of the emission reductions is required
considering project-specific factors for both the baseline and “with the project” scenarios.
Hydropower projects must have a maximum installed capacity threshold of 20MW. Bundles of
mini-hydros, which in aggregate exceed the 20MW threshold, are also acceptable as long as
each single plant in the bundle is within the 20MW limit.
4. Key Findings
The following tables shows the projects identified as most suitable candidates for carbon
financing. Table I shows the counties which have ratified the Kyoto Protocol and are eligible,
while the second the counties which have not, but are expected to do so. For the latter, project
preparation may commence if agreed by the World Bank Carbon Finance Unit.
Table I. Suitable Projects in Eligible ECA Countries
Country Project
ID Sector
Potential ER
Suitable Funds
Board Approval
Task Team Leader
Albania P090656 ECSEE APL2 Energy Medium CDM 6/28/2005 Papathanasiou
Albania P101806 ECSEE APL5 Energy High CDM 1/28/2008 Papathanasiou
Armenia P083352 RENEW ENERGY Energy Medium CDM 1/30/2006 SARGSYAN
Armenia P057880 URBAN HEAT Energy Medium CDM
Small 7/7/2005 SARGSYAN
Azerbaijan P083341 ENERGY Energy High CDM 2/2005 HAMSO
Bulgaria P084831 Energy Efficiency (GEF) Energy High JI 12/21/2004 DOBOZI
Macedonia P089656 Sustainable Energy (GEF) Energy High CDM 5/11/2006 JOHANSEN
Poland P078170 Road Maintenance Transport Medium JI 3/30/2004 Audige
Poland P088824 2nd Road Maintenance Transport Medium JI 3/31/2005 Dumitrescu
Poland P102731 Transport Rehab Transport Medium JI 4/25/2007 Czapski
Poland P096214 Road Maintenance 3 Transport Medium JI 3/23/2006 Queiroz
Romania P068062 ENERGY EFF Energy High JI 9/19/2002 ATUR
Russia P079033 Renewables Energy High JI 5/2007 Schreiber
Ukraine P083702 ENERGY SECTOR REFORM
(APL) Energy High JI 9/15/2005 OSTOJIC
Ukraine P096207 Power Transmission Energy Medium JI 5/15/2005 OSTOJIC
8
Comments on the Projects in Table I:
a) The APL Projects in Albania: They have good potential to generate ERs. Examples
include: 1) Rehabilitation of existing hydro projects; 2) Loss reduction in
transmission and distribution system; and 3) Energy efficiency in schools. The
possibility of CDCF/CDM project associated with energy efficiency in schools has
been discussed already between the Bank and the Ministry of Education. While
most of electricity is produced by hydro, smaller facilities (commercial, industrial
and residential) use oil (often heavy oil with high concentration of sulfur). Also,
imported electricity is generated mostly by lignite-fired plants. For this reasons,
emission reduction projects in Albania could be still attractive and deserve a more
detailed assessment.
b) The Armenia Renewable Project: It is in the process of preparing PINs. An
assessment should be made (in consultation with the TTL) whether the Urban Heat
project has components which can be bundled together with the Renewable. By
itself, the Urban Heat project is not expected to generate enough ERs to justify the
preparation costs for carbon
c) Azerbaijan Energy: It is already in the Bank’s Carbon Finance pipeline; two new
methodologies are being considered. The railway project in Azerbaijan (P083108)
deserves a more detailed assessment in terms of their ER potential.
d) Bulgaria Energy Efficiency Fund: It is likely that the fund will support projects
which are suitable for carbon finance. However, an issue which needs to be
addressed is the impact of the recent (Jan 1, 2007) accession of the country into the
EU which implies that all energy facilities will be part of the European Trading
System (ETS) unless of course they decide to opt-out.
e) Macedonia Sustainable Energy: It is recommended that PINs are prepared after
consultation with TTL on some outstanding issues (e.g., ownership of land related to
small hydro projects and concession-related issues).
f) Moldova: Three projects (which are also under Energy II and SIF II projects of the
World Bank) are supported by CDCF. Also, there is a carbon sequestration project
supported by PCF and Biocarbon Fund. As second carbon sequestration project is
being promoted; a PIN has been submitted and accepted by BioCarbon Fund (second
tranche). Finally, Moldova succeeded in getting a PHRD Climate Change grant to
create a Carbon Finance Unit to assist in preparing carbon finance projects.
g) Poland Transport Sector Projects: If the on-going and planned projects of the
transport sector (P078170, P088824, P102731 and P096214) are bundle together, the
ER potential seems substantial, but more detailed assessment is recommended.
Preliminary assessment suggests that these projects taken together are above the
threshold of about 400 km and should generate adequate ERs.
9
h) Romania Energy Efficiency Fund: It is likely that the fund will support projects
which are suitable for carbon finance; it is expected to become more active this year.
However, the same issue with Bulgaria needs to be addressed relating to the impact
of the recent (Jan 1, 2007) accession of the country into the EU which implies that all
energy facilities will be part of the European Trading System (ETS) unless of course
they decide to opt-out.
i) Russia Renewables: A number of projects have been already identified and they are
in the pre-investment stage. The TTL is aware of and is looking to take advantage of
carbon finance opportunities.
j) Ukraine: The APL project (P089244) is being implemented and includes
rehabilitation of a hydro project which has already developed a PIN. The
transmission project (P096207) includes some energy loss reduction, but it is not
substantial and its additionality is questionable. However, the pipeline portfolio is
expected to have numerous project which could generate emission reductions
including:
Two pumped storage projects (one with relatively small secondary storage
area)
Coal bed methane projects
Thermal power plant rehabilitation
Replacement of natural gas pipeline compressors; etc.
Table II. Projects in Countries which have not ratified the Kyoto Protocol yet
Country Project ID
Secto
r Potential ER
Suitable Funds
Date, Board
Approval
Task Team Leader
Bosnia-Herz P09066
6 ECSEE APL3
Energy
High CDM 6/23/2006 Armar
Belarus P09511
5 Post-Chernobyl Recovery
Energy
Medium JI 12/20/2005 Armaly
Croatia P07997
8 ENRGY EFF (GEF)
Energy
Medium JI 6/24/2003 Johansen
Croatia P07146
4 RENEW ENERGY (GEF)
Energy
High JI 4/28/2005 Johansen
Croatia P09538
9 District Heating
Energy
High JI 5/25/2006 Sarkar
Kazakhstan P09515
5 N-S Transmission
Energy
Medium-High CDM 10/27/2005 Dobozi
Serbia & Montenegro
P075343
Energy Efficiency Energ
y High CDM 9/18/2003 Atur
Comments on the Projects in Table II:
k) Bosnia APL3: There is high potential for emission reductions in rehabilitation of
hydro (Rama, Trebinje II, Visegrad, Grabovica and Salakovac) and thermal
(Ugljevic) projects. Feasibility studies are expected to commence later on in 2007
which will assist in determining more accurately the ER potential.
10
l) Belarus: The Post-Chernobyl Recovery project includes activities (energy efficiency
and coal-to-natural gas conversion/switching) with high potential to generate
emission reductions. A more detailed assessment is need to identify the project
activities which have yet to be implemented and estimate their emission reduction
potential. A Carbon Finance outreach workshop is planned for the end of March
(2007) which provides an opportunity to follow-up on project opportunities in
Belarus.
m) Croatia: It is recommended that the District Heating project is reviewed in more
detail to develop a preliminary estimate of the ERs and a PIN be prepared. In
parallel, the implementing agencies of the energy efficiency and renewable projects
should be consulted about opportunities for carbon finance.
n) Kazakhstan: The project may provide opportunities for carbon finance; more detail
assessment in needed and consultation with the TTL.
o) Serbia/Energy Efficiency: The project is expected to include carbon finance
opportunities which will be pursued. The TTL is aware and will take action.
General Comments and Recommendations:
a) Funds which have been established to finance energy efficiency and renewable
projects provide an excellent vehicle to bundle smaller projects, standardize emission
reduction purchase agreements and make it more cost-effective to prepare such
projects. These funds could be used as intermediaries for carbon finance. Countries
with such funds are: Armenia, Bulgaria, Croatia, Macedonia and Romania.
b) The recent accession of Bulgaria and Romania into the EU may impact carbon
finance projects in these two countries as all facilities are subject to ETS rules unless
they opt-out. In consultation with the World Bank Carbon Finance Unit a decision
should be made regarding what type of carbon finance projects (if any) should be
pursued by the World Bank in these two countries.
c) Periodic review of the project pipeline is clearly useful, but if it is not done
frequently enough (e.g., annually) it may miss projects which start and then it is
more difficult to prove additionality. The most effective approach would be to build
into the project cycle the required assessment, so a decision can be made whether
each project provides carbon finance opportunities or not. This way, periodic review
of the project pipeline will not be necessary. For this reason, a brief Guideline is
proposed (see below) to screen projects early in the project cycle.
11
5. Guidelines for Early Project Screening
In this section of the report is simple checklist is provided to determine if the project meets the
basic criteria for carbon financing.
Project Check List:
1. Is the country eligible for carbon finance? Yes No
a. Eligible JI:____[ Eligible JI, which includes Bulgaria, Czech Republic, Estonia, Hungary, Latvia,
Lithuania, Poland, Romania, Slovak Republic, Slovenia, Russia and Ukraine] b. Prospective JI:____[Prospective JI: Belarus and Croatia]
Status/Issues/Remarks: Even though metering could increase energy conservation,
the project is likely to increase energy consumption and it is unlikely that emission
reductions can be estimated. A relevant project, Pamir Hydro, may result in
emission reductions.
26
17) COUNTRY: UKRAINE
Project name: Energy Sector Reform
Location of project: Ukraine
Project ID: P083702
Task Team Leader: Dejan Ostojic
Project scope (brief description): Increase security and reliability of energy supply.
Among others, it includes reduction in thermal power plant operation by increasing
production of hydroelectric power plants
Technology to be employed: Replacement of thermal power plants with hydro.
GHGs targeted: CO2
Project type (e.g. FI): Loan
Board Approval Date: Sept 15, 2005
Implementation timeframe: 5 years
IBRD/IDA Commitment ($ millions): $250 million
Potential ERs/Potential CF opportunity: High
Suitable Funds: All JI Funds
Status/Issues/Remarks: PIN has been developed and carbon finance is already been
pursued.
27
ANNEX C: GUIDELINES FOR EARLY PROJECT SCREENING
The purpose of these guidelines is to identify the key factors which should be considered
in initial screening of projects and identify the most likely to be suitable for carbon
finance.
Early Screening for Carbon Finance Transaction
Date Prepared:
Basic Information
Country: Project ID:
Additional Project ID (if any):
Project Name:
Task Team Leader:
Estimated Appraisal Date: Estimated Board Date:
Managing Unit: ECSSD Lending Instrument:
Sector:
(Theme:)
IBRD Amount (US$m.):
IDA Amount (US$m.):
GEF Amount (US$m.):
PCF Amount (US$m.):
Other financing amounts by source:
Environmental Category:
3. Is the country eligible for carbon finance? Yes No
a. Eligible JI:____[ Eligible JI, which includes Bulgaria, Czech Republic, Estonia, Hungary,
Latvia, Lithuania, Poland, Romania, Slovak Republic, Slovenia, Russia and Ukraine] b. Prospective JI:____[Prospective JI: Belarus and Croatia]
c. Eligible CDM:____[ Eligible CDM: Albania, Armenia, Azerbaijan, Georgia, Kyrgyz
Republic, Macedonia, Moldova, Turkmenistan, and Uzbekistan] d. Prospective CDM:____[Prospective CDM: Bosnia-Herzegovina, Kazakhstan, Serbia
& Montenegro and Tajikistan]
4. Does the Project reduce fossil fuel (coal, oil or natural gas) consumption directly
or indirectly? Yes No
Proposed sector/subsectors for carbon finance transaction that applies:
a. Power sector (specify)______
b. Oil extraction, production and refining
c. Natural gas production, storage, transportation and distribution
d. Coal mining
e. Manufacturing industry (specify)____
f. Municipal services (specify)
28
g. Transport (specify)______
h. Social sector (specify i.e., education, health)_____
i. Agriculture (specify)_____
j. Others: specify________
More specifically: Fossil fuel reduction could be achieved through improvement
of the energy efficiency of a system or substitution of fossil fuel with another
energy resource which does not release as much carbon dioxide or methane
emissions; for example, replacement of fossil fuel with a renewable energy
resource or replacement of coal or oil with natural gas.
For the power sector: Projects which qualify include:
Energy efficiency improvements in generation, transmission, distribution
and end use applications;
Rehabilitation of existing power plants of all types (thermal, hydro, etc.)
provided that the efficiency is improved and the additional energy
generated replaces a more polluting source or reduces consumption of
fossil fuel by the plant itself.
Use of cleaner fuels such as natural gas
Renewable projects including hydro plants, biomass, wind etc.
Projects requiring further consultation:
Cases where the storage of hydro projects is increasing due to the project;
under certain circumstances, increasing of hydro storage is not affecting
adversely the ER potential, but if new storage is developed, more detail
assessment is needed taking into account the potential for methane release
from the flora being covered with water.
Project types that are ineligible:
Nuclear power
For oil extraction, production and refining: Projects which qualify include:
Introduction of more efficient technologies
Reduction of gas flaring and use of associated gas
Energy efficiency (demand-side management)/conservation.
For gas production, storage, transportation and distribution: Projects which
qualify include:
Reduction of leaks in pipelines and compressor stations
Reduction in energy used for transporting the gas (e.g., efficiency
improvements and loss reduction)
Energy efficiency (demand-side management)/conservation.
For mining: Projects which qualify include:
Reduction and/or utilization of methane emissions (Coal-Mine Methane)
Introduction of energy efficient technologies.
29
For Municipal Services: Projects which qualify include:
Improvement of efficiency of heat generation, transmission and use of
heating
Reduction or capture of methane from landfills, composting and
wastewater treatment
Improvement of energy efficiency of water supply and municipal services
Promotion of energy efficiency in public sector buildings, as well as the
residential and commercial sectors.
For industry: Projects which qualify include:
Improvement of the efficiency in chemical, petrochemical, metallurgical,
cement, and pulp and paper plants
Reduction in energy demand/conservation
Elimination of N2O gas emissions.
For Transport Sector: Fuel savings could result from introduction of more
efficient transport fleets (public transport, truck fleets) and/or traffic
management;; rules of thumb to be used for CO2 emissions per road-kilometer: 750 tCO2 p.a. for a frequency of 5,000 car trips per day 3,000 tCO2 p.a. for 5,000 truck trips per day
If the answers to the above questions are affirmative, more detail assessment is needed
including:
Determination of project additionality.
Whether the applicable methodology is approved, which makes planning of the
project, as a carbon finance candidate, easier.
Estimation of emission reductions.
The TTL may obtain support from the World Bank Carbon Finance Unit or the
designated carbon finance support staff within ECA. A few general guidelines on the
additionality and methodology follow:
Is the project additional (i.e. does it result in real emission reductions)?
Additionality requires a detailed assessment but the following simple rules should
be kept in mind:
The project could be economically and financially viable, but it should not
be the least cost option or faces significant barriers to investment;
It is much easier to prove additionality before the project is approved than
after. In case the project components which may generate emission
reductions has commenced, carbon finance may be considered for
enhancing the project or ensuring the implementation or sustainability of
certain components.
30
Is the methodology used to determine the emission reductions approved?
This is not an essential requirement, but if the methodology which applies to the
project is already approved by the international body regulating the use of the
CDM (i.e. the Executive Board) or if the method has been successfully used in a
JI project (i.e. the project has been determined/validated), it is much easier to get
verification and certification of the emission reductions; hence, it is easier to sign
an agreement to sell the emission reductions. Approved CDM methodologies and
progress on methodologies under review can be found on the UNFCCC website2.
Additional information on the methodology itself is also provided on the World