World Bank Carbon Finance Program Dr Venkata R

World Bank Carbon Finance Program Dr. Venkata R. Putti Team Leader, CF-Assist Program West Africa Carbon Finance Investment Forum February 12 -14, Dakar, Senegal 1

World Bank Pioneer in Carbon Finance ¢ ¢ ¢ Develop the market through business transactions (honest broker) Build stakeholder capacities to enable their effective participation in the market Promote market policies and instruments through dialog and partnership 2

CF Business Evolution FCPF, December 2007 Umbrella Carbon Fund ‘ 07 Italian, Spanish carbon funds, March 2004 ‘ 05 ‘ 04 ‘ 03 Prototype Carbon Fund, April 2000 ‘ 99 ‘ 02 Community Development Carbon Fund (CDCF), March 2003 2000 July 1999. Board approves PCF ‘ 97 ‘ 96 Feb 1997 Approval of $3. 5 m PCF development funds 3

WB Carbon Funds/Facilities $2 billion Prototype Carbon Fund. Netherlands Clean Development Mechanism Facility Community Development Carbon Fund. Bio. Carbon Fund Italian Carbon Fund. Netherlands European Carbon Facility Spanish Carbon Fund. • Danish Carbon Fund. Umbrella Carbon Facility. CFE Carbon Fund for Europe 4

WB Funds How They Work Technology $ Finance Industrialized Governments and Companies CO Equivalent 2 Emission Reductions Finance EITs and Developing Countries 5 CO Equivalent 2 Emission Reductions

SS Africa Project Portfolio January‘ 08 Nigeria, SF 6 red /T&D loss red Cogen Ethiopia, Humbo Assisted regeneration Ethiopia, Elec Interconnect+Meth capt Nigeria Lagos LFG Uganda, 2 LFG / Compost projects 1 Ghana, Energy Efficiency 4 16 ERPAs+ 30 in pipeline Kenya, 3 Hydro 1 South Africa, Tshwane LFG Swaziland, Bagasse Cogen Kenya, 2 geotherm/1 Comb Cycle 2 Rwanda, Lake Kivu + DSM South Africa, Durban LFG Uganda, 1 Cogen project 4 6 Nigeria, Transmission loss Mali Acacia Plantations Niger Acacia Plantations 3 1 2 Madagascar 6 Biodiversity Corridor Kenya, Greenbelt 1 Mauritius, Bagasse Cogen Uganda, Nile Basin Reforestation Mozambique, Distrib system extension

Africa Assist Capacity Building ¢ ¢ ¢ Launched in 2006 as part of CF-Assist program Goal: Stronger Participation of AFR in CDM Market with Greater Sustainable Development Benefits Focus: l l ¢ Strengthen Institutional Capacity Engage Financial and Private Sector Scale Up Project Pipeline and Deal Flow Create Knowledge and Awareness Approach: Country, Regional, Sector 7

Capacity Building National/Regional Egypt, Morocco, Syria, Tunisia. Yemen Albania, Armenia, Azerbaijan, Belarus, Georgia, Macedonia, Kyrgyzstan, Uzbekistan. GIS Studies: Bulgaria, Latvia, Russian Federation, Ukraine. Cambodia, China, Indonesia, Mongolia, Philippines, VIetnam. Bangladesh, India, Nepal, Pakistan, Sri Lanka. Argentina, Bolivia, Brazil, Ecuador, Mexico, Paraguay, Peru, Uruguay, Central America region Benin, Botswana, Burkina Faso, Gambia, Kenya, Madagascar, Mali, Mozambique, Rwanda, Senegal, West African Region, Southern African Region 8

Africa Assist ¢ ¢ ¢ Results Over 1600 people exposed to training programs and events under Africa Assist Baseline mitigation potential assessment done for SSA (to be released in March 2008) Over 40 CDM projects in various stages of development in Sub Saharan Africa Development of Forestry sector in Madagascar and Senegal DNA creation facilitated in Botswana and The Gambia; another five DNAs being provided institutional support 9

New Facilities Post-2012 ¢ Forest Carbon Partnership Facility (FCPF) l To reduce emissions from deforestation and land degradation (REDD; being discussed in the UNFCCC) l To engender additional benefits in water management, biodiversity, poverty reduction, adaptation l To piloting possible approaches to provide incentives ¢ Carbon Partnership Facility (CPF): l To focus on large scale mitigation in a strategic manner l To begin now, and not wait for a new mitigation regime 10

Africa Assist Priorities ¢ Increase coverage and scope of CDM assistance ¢ Develop local collaborations l l ¢ ¢ Nairobi Framework Partners Bi-lateral and regional partners (CEFEB, IEPF, ECOWAS) Launch pilots in Programme of Activities (POA) and sector-specific market development Create and nurture Regional Capacity Hubs Develop innovative delivery mechanisms: e. g. emodules, distant learning Key upcoming events in 2008 l l l CDM for Financial Institutions – Dakar (February 12 -14) Lighting Sector Training – Madagascar (March) Africa Carbon Forum – Dakar (September) 11

New Facilities Rationale ¢ Urgent need to take action and scale up mitigation efforts. l Support long-term investments for transition to low-carbon economy; integrate CF into public/private investment decisions Shift away from a project-by-project approach to strategic programs of investments Establish a long-term regulatory framework that provides certainty of a carbon price signal Provide incentives for development of low-carbon l Create incentives for avoiding deforestation l l l technology 12

Forest Carbon Partnership Facility Why? ¢ ¢ “Avoided deforestation” excluded from the CDM WB experience in forestry sector: l l ¢ Request from G 8 Heiligendamm Communiqué to design forest carbon partnership l ¢ Prototype Carbon Fund: global pioneer since 1999 Bio. Carbon Fund: LULUCF pioneer since 2004, including W 2 for avoided deforestation at project level About 20 IBRD and IDA countries have already expressed interest in participating $165 m committed from donors 13

FCPF Features ¢ South-North Partnership l l ¢ Not pre-empt negotiations l ¢ Close cooperation with parties and UNFCCC secretariat Learning by doing l l ¢ Both sellers and buyers represented in the governance structure NGOs, Int’l orgs. and private sector have observer status Pilot different approaches Test different implementation strategies Include all actors and stakeholders l l Seek guidance from private investors Reach out directly to the drivers of deforestation during implementation 14

FCPF Potential Countries Subtropics Limit 15

FCPF Interest from Africa ¢ ¢ ¢ ¢ Central African Republic Democratic Republic of Congo Gabon Ghana Kenya Liberia Republic of Congo 16

Carbon Partnership Facility Features § § § Series of same and/or associated activities for which a common approach can be developed, l e. g. , elimination of gas flaring with same or different uses of the gas. Undertaken through a program implementing agent, l e. g. , government, national utility, financial intermediary. One purchase agreement with the implementing agent or several purchase agreements, l i. e. , one for each activity under the program. Scale-up through replication and “mass-production”, as opposed to the current project-by-project approach. May use POA approach or new methodological approach (to be developed). 17

Carbon Partnership Facility Examples § Promotion of clean energy generation and transmission l l l § Technology leapfrogging, supporting near-commercial technologies l l § IGCC technology for cleaner coal (Southern Africa) Carbon capture & storage (Botswana) Energy efficiency scale-up l § Rift Valley Geothermal Development (building on ARGeo) Southern Africa Power Pool Ethiopia –Sudan interconnect/Ethiopia/Kenya Interconnect Industrial energy efficiency – process improvements / energy management systems Climate-friendly urban development: a city-wide approach l l waste management and waste water treatment Transport public lighting building codes for energy efficiency / material use / energy use etc 18

CPF Broad Partnership Window-approach The Carbon Partnership Facility Commitments from buyers ($$) and sellers (ERs) Both Buyers and Sellers are CPF Participants Window 1: Wind Preparation & Transaction Buyers x, y, z Sellers / programs a, b, c All buyers in window buy from all sellers in window. Window 2: Window 3: Power rehabilitation Africa Window 4 Carbon capture & storage Rationale for windows: Lower transaction costs. Packaged programs are relatively homogenous (methodology, risk, delivery schedule, etc). Buyers can participate in 19 their choice of windows with different risk profiles.

New Facilities Next Steps Expres sions of Interest Receiv ed Carbon Partnership Facility ¢ Forest Carbon Partnership Facility October-November 2007 l Identification of programs in consultation with Regions ¢ Early November: Release of Information Memorandum l Bilateral consultations with potential participants from developed and developing countries ¢ November (8 – 9) 2007: Additional consultations with NGOs and International organizations ¢ December 2007: Announcement at Co. P 13 (Bali) ¢ ¢ January – March 2008: Joint consultative meetings with potential buyer and seller participants to finalize detailed design and governance of CPF; release of Information Memorandum November (12 - 13) 2007: Final Consultation Round on the Term Sheet and Information Memorandum (potential donors, sellers and buyers) ¢ December 2007: Launch at Co. P 13 (Bali) ¢ March/April 2008: FCPF declared operational ¢ Spring 2008: CPF could start operations, if $500 million in purchase commitments has been reached by then. 20