The World Banks Carbon Finance Business: Joint Implementation Experience

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The World Banks Carbon Finance Business Joint
Implementation Experience
UNFCCC JI Workshop Moscow, May 26-27, 2004
Benoît Bosquet, World Bank Carbon Finance Business
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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

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World Bank and Climate Change

• World Banks 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

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World Bank Carbon Finance Products
Total funds under management, April 2004
US410 million
Prototype Carbon Fund. 180 million (closed).
Multi-shareholder. Multi-purpose.
Community Development Carbon Fund. 39.5 million
(open). Multi-shareholder. Small-scale CDM
energy projects.
BioCarbon Fund. 12.5 million (open).
Multi-shareholder. JI and CDM LULUCF projects.
Netherlands Clean Development Facility. 125-180
million. Netherlands Ministry of Environment. CDM
energy projects.
Italian Carbon Fund. 35 million (open). Italian
Multi-shareholder. Multipurpose.
Netherlands JI Facility
Netherlands JI Facility. 60 million with IFC
(under negotiation). Netherlands Ministry of
Economic Affairs. JI projects.
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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

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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

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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

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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)

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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

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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

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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

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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

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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?

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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

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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

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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

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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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