The World Bank s Carbon Finance Business Joint Implementation

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

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 Total funds under management, April 2004: ~ US$410 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. Bio. Carbon 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. $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 CO 2 e (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 CO 2 e (2004 -2012) § Pre-2008 credits approved (1 t CO 2 e = 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 CO 2 e (20042012) § More projects under preparation, incl. Hydro § Pre-2008 credits approved (1 t CO 2 e = 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 CO 2 e (2008 -2012) § Baseline study, pre-validation, contract

Latvia Liepaja Solid Waste Management § Recovery of landfill gas for electricity production § 388, 000 t. CO 2 e (2004 -2014) § Pre-2008 credits approved (1 t CO 2 e = 1 AAU) § Baseline study, pre-validation, contract

Poland Stargard Geothermal § 13 MW geothermal project § 300, 000 t. CO 2 e (2004 -2012) § Pre-2008 credits approved (1 t CO 2 e = 1 AAU) § Baseline study § Contract under negotiation

Romania Afforestation § Afforestation of 6, 000 ha of degraded state -owned agricultural land § 855, 000 t CO 2 e (2003 -2017) § Pre-2008 credits approved (1 t CO 2 e = 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 (Bio. CF, Netherlands JI, ICF) § Czech Republic: try Track 1 approach on portfolio of projects § Romania: N 2 O 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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