The World Banks Carbon Finance Business: Joint Implementation Experience Benoît Bosquet, World Bank Carbon Finance Business UNFCCC JI Workshop Moscow,

The World Bank’s Carbon Finance Business:

Joint Implementation Experience

Benoît Bosquet, World Bank Carbon Finance Business

UNFCCC JI Workshop Moscow, May 26-27, 2004

Contents

World Bank and Climate Change World Bank Carbon Finance Products Current JI Projects Lessons Learnt from JI Potential Future JI Projects AAU Greening Next Steps for Russia

World Bank and Climate Change

World Bank’s mission is poverty reduction WB endorses IPCC predictions Climate change, a “global public bad”, affects

the poorest the most Private-public initiatives needed to mitigate

climate change Take advantage of Kyoto flexible mechanisms Develop core CDM/JI market Expand “carbon finance” into small projects Demonstrate implementation of carbon sinks Build capacity of Host Countries

World Bank Carbon Finance Products

Italian Carbon Fund. $35 million (open). Italian Multi-shareholder. Multipurpose.

Netherlands Clean Development Facility. $125-180 million.

Netherlands Ministry of Environment. CDM energy projects.

BioCarbon Fund. $12.5 million (open).

Multi-shareholder. JI and CDM LULUCF projects.

Community Development Carbon Fund. $39.5 million (open).

Multi-shareholder. Small-scale CDM energy projects.

Prototype Carbon Fund. $180 million (closed).

Multi-shareholder. Multi-purpose.

Total funds under management, April 2004: ~ US$410 million

Netherlands JI

Facility

Netherlands JI Facility. $60 million with IFC (under negotiation). Netherlands Ministry of Economic Affairs. JI projects.

Current JI Projects (PCF)

Bulgaria Sofia and Pernik District Heating Bulgaria Svilosa Biomass Czech Energy Efficiency and Renewable Energy Hungary Pannonpower Latvia Liepaja Solid Waste Management Poland Stargard Geothermal Romania Afforestation of Degraded Agr. Land

Bulgaria Sofia and Pernik District Heating

Energy efficiency improvements (pipes, pumps, substations)

1,241,000 t CO2e (2005-2012) Pre-2008 credits under discussion: AAU

greening Baseline study, pre-validation Project submitted for Approval Contract under negotiation

Bulgaria Svilosa Biomass

Switch from heavy fuel oil to wood residue biomass in 13 MW boiler at wood pulp plant

450,000 t CO2e (2004-2012) Pre-2008 credits approved (1 t CO2e = 1

AAU) Baseline study, pre-validation, contract,

initial verification, start of generation

Czech Energy Efficiency and Renewable Energy

Umbrella agreement for several energy efficiency and renewable energy projects

Contracts with intermediaries: CEA, SEF 2 district heating projects in Decin and Rozmital

approved and validated: 212,000 t CO2e (2004-2012)

More projects under preparation, incl. Hydro Pre-2008 credits approved (1 t CO2e = 1 AAU)

Hungary Pécs Heat and Power

Switch from coal to biomass (wood chips) for co-generation (65 MWth and 49 MWe)

Pannonpower will supply heat to the city of Pécs and electricity to the grid

1,193,000 t CO2e (2008-2012)

Baseline study, pre-validation, contract

Latvia Liepaja Solid Waste Management

Recovery of landfill gas for electricity production

388,000 tCO2e (2004-2014)

Pre-2008 credits approved (1 t CO2e = 1 AAU)

Baseline study, pre-validation, contract

Poland Stargard Geothermal

13 MW geothermal project 300,000 tCO2e (2004-2012)

Pre-2008 credits approved (1 t CO2e = 1 AAU)

Baseline study Contract under negotiation

Romania Afforestation

Afforestation of 6,000 ha of degraded state-owned agricultural land

855,000 t CO2e (2003-2017) Pre-2008 credits approved (1 t CO2e = 1

AAU) Baseline study, pre-validation, contract,

initial verification, start of generation, first ER delivery

Lessons Learnt from JI (a)

Competitive market (more than CDM) Fewer projects than anticipated (only 10% of

PCF): Financing constraints in some countries What is the project approval process? Need to be creative for remunerating pre-2008

reductions: hybrid between Art.6 and 17 (“AAU Greening”), but controversial with some governments

Will there be enough headroom?

Lessons Learnt from JI (b)

Apply Track 2: waste of money? “CDM process” is still heavy, especially methodology

approval: too project-specific, not generic enough Focus on additionality not needed: Host Country

could sell ERs as ERUs or AAUs EU accession countries: how will JI coexist with

EU ETS? Move to Track 1 desirable

No need for establishing additionality, but Multiple standards, depending on Host Country

JI (and CDM) window of opportunity is closing due to long lead times

Potential Future JI Projects (BioCF, Netherlands JI, ICF)

Czech Republic: try Track 1 approach on portfolio of projects

Romania: N2O reduction, afforestation

Poland: Biomass, biodiesel, afforestation Russia: Fuel switch, coal bed methane capture,

energy efficiency Ukraine: Coal bed methane capture, forest

management

AAU Greening

“Project-based Art.17”, “early credits” and/or “late credits”

Sale of AAUs by Host, with reinvestment of revenues into climate-friendly projects (energy efficiency, carbon sinks, etc.)

Sale of AAUs to raise capital and service debt Discussed with several Governments More palatable to buyers than straight Art.17 Seller rebuilds its AAUs

Next Steps for Russia to Sell

Ratification of the Kyoto Protocol JI or AAU Greening To deal with the World Bank carbon funds:

Sign Memorandum of Understanding: who represents Russia?

Sign Host Country Agreement (if pre-2008 credits to be sold)

Endorsement/Approval of projects (many proposals received)

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