Carbon Finance Assist Update of Activities Host Country

Carbon Finance Assist Update of Activities Host Country Committee Steering Committee meeting 4 -5 October 2005

Strategic Objectives ü Mission: Enable full engagement of participating countries in the carbon market/ building liquidity in the market ü Key for CFB delivery on Carbon Funds: CF-Assist should feature as a key tool to enable CFB to implement programmatic approach > deliver on commitment to purchase >$900 million ü High demand from client countries: client countries expect Bank to go beyond bringing a few deals to closure > expect Bank to build capacity at national / local levels ü Status: Operational as of April 2005 ü Currently working on disbursement procedures

Program Description CF-Assist: A single-purpose multi-donor trust fund for all WB carbon finance capacity building and technical assistance Features: • Modular: program design based on needs assessment of national conditions; • Key Players: targeted at government institutions, private sector entities, and the financial sector; • Phased Approach: Divided in three phases to be completed in 3 -5 years, with measurable performance indicators; • Learning-by-doing: one to three projects per participating country will be brought to market; where the Bank is the buyer of last resort; • Timing: March 2005 – 2012

Sources of Funding CF Assist Umbrella Experience Exchange (Coordination of all Technical Assistance and Capacity Building) Direct Donor “Plus TA Contributions Funds $8. 5 M (in-hand as of 2/05) PCF + Bio. C + CDCF + Carbon Finance Business (Carbon Asset Purchases) PHRD (Implemented By Countries & Regions w/CF-A Assistance) • CFB buyer of last resort for PDDs developed under CFAssist • CFB potential buyer of other projects in portfolio $ Interest Earnings on CFB Funds

Phase I: Bank execution Indicators for Phase I Completion: • CDM Governance: DNA has been established with criteria and procedures / timelines for project approval • Private Sector Engagement: Key experts in financial sector / industry have been trained on design of carbon finance projects • Deal Flow: Key sectors identified and potential volumes of ERs quantified; information widely disseminated • At least one PDD has been completed • Knowledge Management: Private sector and public sector agencies are fully aware of the CDM/JI potential and have put systems in place to assess projects at their institutions

Phase II: Recipient and/or Bank Executed Indicators Phase II Completion: • CDM Governance: supportive regulatory and policy frameworks for carbon finance projects developed • Private Sector Engagement: Financial industry trained on in synergies of carbon finance with lending/ grant instruments • Deal Flow: At least one project validated [and registered] and marketed to carbon buyers (three for middle income countries) • One industry association or intermediary fully engaged in carbon finance (intermediary has signed an agreement) • Existence of a healthy and dynamic deal flow • Participation at Carbon Expo • Knowledge Management: knowledge sustained through distance learning/ web-based instruments • National and regional networks of experts cultivated

Phase III: Recipient Executed Indicators for Phase III completion • CDM Governance: Procedures refined/ validated by objective, external evaluation • Private Sector Engagement: Carbon Finance is fully integrated in investment promotion strategies / concessional lending decisions • Deal Flow: • Intermediaries/ project developers access the carbon market • JI countries: First Track/Art 17 participation. Establishment of green investment scheme, traded volume • Ongoing participation at Carbon Expo • Knowledge Management: South / south knowledge transfer • nationa/ regional community of practitioners

Measurable Indicators during First Year • Goal was to initiate CF-Assist programs in fourteen to sixteen countries; complete phase two in eight to ten • Status: initiated programs in sixteen countries • Argentina, Bolivia, Brazil, Cambodia, Cameroon, Central America, Ghana, Kenya, Mali, Mexico, Mozambique, Senegal, Sri Lanka, South Africa, Uganda , Zambia • Challenge: monitor results, disseminate lessons learned • Carbon Market Study: issued at Carbon Expo in May 2005; translated to Spanish

Example of Program: Mexico Mexican CF-Assist Program: enabling energy sector to bring projects to market for the first commitment period before closing window of opportunity Period: three years Sector-focused program, first year on energy sector; Executed by local implementing agency, in close collaboration with Energy Ministry (SENER), and Environment and Natural Resources (SEMARNAT), PEMEX, CFE, and the World Bank. Launch date: end of November 2005

Argentina Argentine Carbon Facility: first of kind facility managed by host country to overcome significant financial barriers Objectives: to promote new investments in climate friendly technologies, enhance Argentina’s potential in the carbon market, promote partnership between public and private sector. Status: design: evaluating proposals, discussion paper should be done by end of 2005 • • identification of portfolio of projects

Focus on Africa Without special focus, possibility that Africa is being by-passed by the carbon market • • PHRD grants in: Uganda Kenya, Senegal, South Africa, CDCF/ UNEP Partnership in Zambia, Mozambique, Mali, Ghana, and Cameroon • Activities: • PIN/ CFD development • Training on project formulation and baseline methodologies • DNA/ institutional capacity building • Status: on track; seeking additional funding •

Green Investment Schemes n n n Key to bridging OECD compliance gap in Kyoto Protocols Greening necessary to increase comfort level of many buyers to ensure that proceeds from sale of AAU s > result in real and measurable emission reductions Need more funding Demand from Bulgaria, Russian Federation, Latvia, Czech Republic, Slovak Republic Other likely countries: Romania, Ukraine, Poland

Carbon Expo: May 10 -12, 2006 Preparations Under Way • Building on Last Year’s Success è 1. 385 participants from 85 countries in 2005 (50 % increase from previous year) è 134 exhibitors (168 % increase from previous year) • First Platinum Sponsor: TFS Brokers • Gold Sponsors: Government of Canada, DNV Bank support for Host Countries: priority to CF-Assist countries; those with large portfolios, well prepared

Training/Market Development Activities • Integral part of CF-Assist country programs: • Project identification and design • Baseline Methodologies • Contracting and Risk Management • Exploratory Workshops in countries with high potential: Georgia, India, Pakistan, Russian Federation • GHG Forum: in India • Carbon Expo Asia • Fellows: from China and Morocco

Challenges/ Opportunities ü Demand far exceeds our capacity to deliver ü Some unfunded activities in work program: transportation sector, more countries, small grants ü Early success needed to build confidence ü First Commitment Period

Issues for Discussion • Is program meeting needs of Host Countries? • How to make CF-Assist more effective? HCC members to take lead in some activities: newsletter; pricing sub-committee; • • Comments on report