World Bank Carbon Finance Bangladesh April, 2008 Chris Warner & Arun Banerjee World Bank

World Bank CarbonFinance

Bangladesh

April, 2008

Chris Warner & Arun Banerjee World Bank

Outline of Presentation

• Bank carbon finance project cycle

• Bank carbon program

• Bangladesh and Bank carbon finance

Bank Carbon Finance Project Cycle

PIN Development and Letter of Intent

1. PIN developed and reviewed by Bank and approved

2. Bank and project sponsor sign a Letter of Intent which releases project prep funds

Negotiation of Project Agreements

Periodic verification & certification

Construction and start up

Project completion

3 months

PIN development, approval and signing of

Letter of Intent

Preparation and review of the Project

Project Design Document and Bank review

1. Project Design Document prepared (a. Determine whether existing methodology is applicable

b. may require baseline study)

2. Monitoring Plan prepared3. Bank begins technical,

financial, environmental and social due diligence

Periodic verification & certification

Construction and start up

Project completion

3 - 4 months

Prepare the Project Design Document and Bank due

diligence

Preparation and review of the Project

Carbon Asset Due Diligence

Validation process1. Bank contracts the

Independent Validator 2. Validator studies project

design document, including baseline study and monitoring plan where applicable

3. Documents are posted for 30-day comment period

4. Validator issues a report and opinion

5. Registration request is submitted to the Executive Board (can be after the ERPA signature)

Negotiation of Project Agreements

Periodic verification & certification

Construction and start up

Project completion

3 months

3 - 4 months

3-4

mon

ths

Validation Process

Preparation and review of the Project

Carbon Asset Due Diligence

Validation process

Negotiation of Project Agreement

Periodic verification & certification

Construction and start up

1. Bank prepares term sheets and draft ERPA and negotiations initiated.

2. Project Due Diligence is completed and World Bank internal approvals are secured.

3. Letter of Approval obtained from Host Country4. ERPA is signed

Project completion

3

2

1-2 months

Negotiation of Project Agreement (ERPA)

Project Registration

Preparation and review of the Project

Carbon Asset Due Diligence

Validation process

Negotiation of Project Agreements

Periodic verification & certification

Project Registration1. Executive Board reviews the Validation Report2. Executive Board registers the project

Project completion

1-3 years

Project registration by Executive Board

Preparation and review of the Project

Carbon Asset Due Diligence

Validation process

Negotiation of Project Agreements

Periodic verification & certification

Project Construction and ER generation

1. At construction completion, Bank contracts Independent Verifier

2. Verifier checks that specifications of the monitoring plan are met (“Initial Verification”)

3. Project implementation starts4. Project entity monitors in accordance to the monitoring

plan

Project completion

1-3 years

Project Construction and ER Generation

Preparation and review of the Project

Baseline Study and Monitoring Plan (MP)

Validation process

Negotiation of Project Agreements

Periodic verification & certification

Construction and start up

1. Verifier issues periodic verification report2. Bank pays project sponsor for ERs 3. Certified ERs are issued by the CDM Exec.

Board 4. Verification undertaken annually or as

deemed appropriate

Project completion

3

Up

to 2

1 ye

ars

Verification and Certification

Preparation and review of the Project

Carbon Asset Due Diligence

Validation process

Negotiation of Project Agreements

Periodic verification & certification

Construction and start up

Project completion

Up

to 2

1 ye

ars

Crediting period either• 10 years fixed or• 7 year renewable (maximum 21 years)

Project Completion

Questions, What problems and issues do you forsee ?

World Bank Carbon Program

Bank is the Trustee of carbon funds

Industrialized Governments

and Companies

Developing Countries/

Economies in Transition

Bank Managed Bank Managed Carbon FundsCarbon Funds(Trust funds)(Trust funds)

Bank Managed Bank Managed Carbon FundsCarbon Funds(Trust funds)(Trust funds)

$$Technology

Finance $$Technology

Finance

CO Equivalent22

Emission Reductions

CO Equivalent22

Emission Reductions

World Bank Carbon Funds & FacilitiesTotal funds pledged: US$ 2.19 billion (16 governments, 66 firms)

Prototype Carbon Fund: $180 million (closed). Multi-shareholder. Multi-purpose.

Netherlands Clean Development Mechanism Facility: € 220 (closed). Netherlands Ministry of Environment. CDM energy, infrastructure and industry projects.

Community Development Carbon Fund: $128.6 million (closed). Multi-shareholder. Small-scale CDM energy projects.

BioCarbon Fund: $91.9 million (Tranche One closed totaling $53.8 million). Multi-shareholder. CDM and JI LULUCF projects.

Italian Carbon Fund: $155.6 million (closed). Multi-shareholder (from Italy only). Multipurpose.

Netherlands European Carbon Facility: € 51.6 (closed). Netherlands Ministry of Economic affairs. JI projects.

Spanish Carbon Fund: € 220 million (closed). Multi-shareholder (from Spain only). Multipurpose.

Danish Carbon Fund: € 58 million (closed). Multi-shareholder (from Denmark only). Multipurpose.

Umbrella Carbon Facility: $737.6 million (Tranche One closed). 2 HFC-23 projects in China.

Carbon Fund for Europe: € 50.00 million. Multi-shareholder. Multi-purpose.

The Bank and carbon finance

• 75 projects registered with the Executive Board. This is the third largest number of registered projects of any organization

• 102 emission reduction purchase agreements signed

• 207 million tCO2e committed in signed emission reduction purchase agreements with options on several million tons

• Another 90 projects under active preparation

• 29 ERPAs signed in East Asia and South East Asia

• Executive Board has approved 24 Bank methodologies (over 27% of all methodologies)

Regional Distribution(by number of projects)

Latin America &

the Caribbean

33%

Europe & Central Asia

16%East Asia &

Pacific22%

Africa19%

South Asia8%

Middle East & North Africa

2%

Technology Distribution(by number of projects)

Transport 1%

SF-6 Recovery1%

Waste Management

19%Coalmine Methane 

2%Energy

Efficiency13%

HFC23 Destruction 

2%

Land use, land-use change & forestry

20%

Renewables42%

New Initiatives

•Carbon Partnership Facility: First Tranche = € 350 million

Estimated date of operation: September 2008

•Forest Carbon Partnership Facility: $300 million

Estimated date of operation: June 2008

Existing Carbon Funds

Investible Capital: $2.2 bill.

Committed Capital: $1.6 bill.

#

Volume

Purchased(mill. tons CO2)

Value(US$ mill.)

WBG financed Projects

28 31 $246

Non-WBG financed Projects

74 176 $1,395

Total 102 207 $1,641

Leverage*: 11.28 *(Total Investment Cost divided by Total ERPA Value)

Pipeline 94 62 $617

Bank’s Carbon Funds’ Portfolio

Market share (project based): 17% (2002-06) 5% (2006)

Bangladesh carbon finance opportunities

Bangladesh: carbon finance setting

• Carbon Finance opportunities reflect the size, and structure the economy, infrastructure status and household incomes – 150 million inhabitants (75% rural)– 6 municipal corporations (18 million inhabitants)– 63% of population employed in agriculture– Per capita GDP: $1400 (purchasing power parity) – Main resources are arable land, natural gas (some

coal), timber, – Power (± 5,000MW installed): mostly gas; major

power shortages

Bangladesh: key carbon finance opportunities

• Rural household power: – solar home systems*, biogas and cooking stoves

• Rural power: rice husk

• Urban: demand side management (energy efficient lighting*)

• Brick making: more energy efficient technologies*

• Gas leakage avoidance ?

• Municipal solid waste: composting and landfill gas methane capture

Most carbon finance opportunities will be small and need to be bundled together or developed through programs

Bangladesh Solar Home Systems program

• Install 1 million solar home systems

• IDCOL (192,000 CERs) and Grameen (372,000 CERs) are the lead implementing agents

• Purchase period 2008 to 2013

• ERPA signed, December 2007

• Projects under validation

End

WWW.carbonfinance.org

http://unfccc.int/2860.php

Industrialized country with an emissions cap

Baselin

e em

issions

Baseline Scenario

Developing country/economy in

transition with no emissions cap

EmissionReductions (ERs)

Project em

issions

Project Scenario

Carbon trade

Emissions target

Purchase of allowances

Developing country/economy

in transition benefits

from technology and financial flows

$$

ER

Purchase of ERs

Domestic action

PoADevelop an overall program framework which the Executive Board approves

CPA

CPA

CPA

CPA

Develop subsequent mini projects or program activities with streamlined approval by the executive Board

Program of activitiesOne POA & Many CPAs : One Methodology