Green Banking and MRV 17 November 2010 Takashi Hongo Special Advisor and Head of Environment Finance Engineering Department Japan Bank for International Cooperation

11 Green Finance and MRV

2 Green Pressure Financial Institutions Green company Green Projects Stake HoldersRegulator Non Green Company/Projects X What is “Green” ? How to evaluate the outcome of “Green” ? Measurement of CO2 reduction

3 Financial Institutions Investors Investment Projects Affluent society Mission of Financial Institutions Mission of Financial institutions Financial Institutions should support economic growth to realize affluent society under environment constraint. Balancing economy and environment is crucial

4 “Emission” or “Reduction”? Reductions Emission from invested projects Emission from invested projects Emission from Existent facilities

55 J-MRV

6 JBIC “GREEN” Future carbon market Finance J-MRV Commercially viable BAT (best available technology) Deployment Possibility ・ Industries ・ Carbon Players ・ Host Government Dialogue Share GHG emission reduction projects GHG emission reductions JBIC will review the followings 1. Climate change policy of the host country 2. Technology to be used 3. Reduction amount by J-MRV J-MRV ・ Scaling up low carbon investment ・ “simple, practical and internationally acceptable” guideline ・ Following investor’s decision making process (MRV: Measurement, reporting and verification) Reduction amount Ownership New Financial Program (GREEN) and J-MRV (Global action for reconciling economic growth and environmental preservation)

Procedure of J-MRV and GREEN Project JBIC Request for Finance (with emission data ) Financial consideration External Expert Advisory Committee Loan Agreement Disburse Project construction Emission monitoring After investment Monitoring External Expert Advisory Committee ・ Project completion ・ 1 year after completion Calculation of Reductions Calculation of Reductions Third party opinion Third party opinion Procedure of GREEN and J-MRV

・ Scaling up low carbon investment ・ “simple, practical and internationally acceptable” guideline ・ Following investor’s decision making process Baseline amounts = Emissions in the case without investment Option of Baseline a/ Actual emissions before investment, b/ Emissions from similar installations in operation in the country or in the region c/ Emissions from similar installations recently invested in the country or in the region Reduction amounts = Baseline emissions - Emissions from projects Taking into account of ・ investment climate such as economy, energy, technology, regulation. ・ availability and reliability of data Sampling and theoretical value may be applicable J-MRV

Energy Efficiency (Renovation) Reductions Before InvestmentAfter Investment Taking into account of the capacity increase of the facility by the investment In case of new facility, CO2 emission amount of new facility will be compared with the national average of the same type of facility CO2 emission amount J-MRV Methodology

Renewable Energy Reductions National TotalInvested Facility Renewable energy is Zero emission energy, in principle. Average CO2 emission (CO2 emission factor) J-MRV Methodology

Fossil Fuel Energy Reductions National Total Invested Facility National energy security, economic is cosidered Average CO2 emission (CO2 emission factor) In Principle Reductions Availability of low carbon energy is limited Average CO2 emission of the same fuel National Average Investment J-MRV Methodology (under preparation)

Higher Energy Efficiency Appliance Reductions National Average New Alliance Theoretical value and estimated value is acceptable Availability of data is considered Average CO2 emission An unit Reductions National Total Estimated National Total emission By the appliance National Average After Investment Estimated National Total emission By the appliance Estimation of program Total J-MRV Methodology (under preparation)

13 “EXIT” of MRV Demonstration Purpose Carbon Market Risk Mitigation We can clearly introduce our contribution for climate change to the stakeholders under low carbon pressure. Carbon is cost and banks have responsibility to curve emission increase. Credit Rating including carbon is considered. CDM or Bilateral Credit Scheme will generate additional cash flow.

Bilateral Credit

Bilateral Scheme : F/S Support Program Project typesProject site METIAdvanced Coal Fired PowerIndonesia, Viet Nam, India Geothermal PowerIndonesia×2, Philippine Transmission ImprovementViet Nam Energy Intensity Industry ( Steel, Cement)Philippine, India, Lao, Indonesia, Malaysia Energy management of industryIndonesia, Thailand, China, Malaysia New Air-Conditioning Systems (Office, Hotel, etc.)Maldives CHPThailand DSM (Home Appliances)Mexico, Viet Nam REDD+Peru, Indonesia, Lao, Brazil Eco Drive, Eco HouseThailand, China, Asia CCSIndonesia Nuclear PowerViet Nam Efficient use of FertilizerMalaysia, Indonesia MOEWaste ManagementThailand Peat Fire ManagementIndonesia Modal ShiftLao

F/S Project Construction Project Operation Finance (GREEN, LIFE) Standardized MRV J-MRV Bilateral Agreement “Demand” International acceptance Management Capacity F/S Support Program Bilateral Scheme : “J-MRV and GREEN” and F/S Support Program Project Cycle

17 Public Sector (Improvement of investment climate) Private Sector (Driving force) Financial Sector (Push last one mile) Capacity of Our Planet Change of Lifestyle Better investment climate, More investment Use of Technology Public Private Financial Partnership