PLENARY 1 – “Visioning the Strategic Role of DFIs” Takashi Hongo Special Advisor and Head of Environment Finance Engineering Department Japan Bank for International Cooperation 34th ADFIAP Annual Meeting April 20 to 23, 2011  Acapulco Beach Club & Resort Hotel, Kyrenia, North Cyprus Green Finance ~ Business Opportunities and Role of Financial Institutions

2 Reduction Potential After 2020, the share of energy efficiency in total abatement declines, while more costly options like biofuels and CCS increase their share Gt 450 Scenario Current Policies Scenario World energy-related CO 2 emissions savings in the 450 Scenario compared with the Current Policies Scenario, by measure Source: IEA WEO 2010

Source: IEEJ CO 2 emission reduction potential by using Japanese BAT (‘000 ton/Y ) Reduction Potential of Proven Technology （ Commercially Viable Best Available Technology) 1.5 Billion ton CO2 saving per year > 1.3 billion ton CO2 emission a year in Japan

4 Energy saving and CO2 reduction 18,410Kwh 120,000 ton/y (China, 5000ton X2 units) Cooling Tower PH Boiler Demineralizer building AQC Boiler Turbine / Generator Building Source Kawasaki Heat Recovery System of Cement Plant

Billion dollars (2008) Other Countries Other Major Economies OECD+ Low Carbon Investment

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

Risk Mitigation Improve economic return Improve investment climate Role of Public Finance for Climate Change Mobilizing private funding is a key role Guarantee/Insurance Co-financing Low cost funding for co-financing Mezzanine Interest subsidies Policy dialogue for incentive/regulation Information service/business matching

8 Green Growth and Technology Cycle Green Growth R&D Investment CommercializationEconomic Return Diffusion

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

ＬＩＦＥＧＲＥＥＮ DateMarch 2009March 2010 AmountUSD 5 billion (2years)USD 4 billion (3years) Eligible area ・ Clean Energy ・ Energy Efficiency ・ Water Infrastructure ・ Urban transportation JBIC reviews the followings 1. Climate change policy of the host country 2. Technology to be used 3. Reduction amount by J- MRV Remarks Japanese involvement is a precondition Government or financial institutions shall be borrower Green and ＬＩＦＥ

・ 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: ・ investment climate such as economy, energy, technology, regulation. ・ availability and reliability of data Sampling and theoretical value may be applicable J-MRV

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 - Rehabilitation of Coal Fired Power Plant (J-MRV002) -

Reductions National Average New Plant CO2 emission National Average J-MRV Methodology - New Coal Fire Power Plant (J-MRV004) - Principle National Average New Plant Principle Under Constraint Under Regulation National Average (Coal) Regulation, De facto standard Reductions Taking into account constraints, such as energy security, supply and investment economics Accepting and endorsing establishment of global de facto standard and regulation

Project Preparation Construction Project Implementation JBIC Retained Consultant Advisory Committee J-MRV For Financial Due Diligence Operation phase ( 1 year after commissioning) At Commissioning J-MRV Process

15 Structure of Green Credit Line J-MRV Advisory Committee JBIC Retained Consultant Bank Project Finance Data ( Planned and actual, Energy consumption, Power generation) Data CO2 reductions Opinion Share of J-MRV CO2 reductions

Benefit of MRV for Financial Institutions Reputational benefit (CSR) Preparation for regulatory framework Better Funding Investment on the opportunities Future Carbon Market

Green Finance Alliance Voluntary Participation Sharing Good Practice MRV and Disclosure Message to Industry and Regulators New Market Mechanism

18 MRV as International Public Goods Finance Carbon Market Stake Holder Rating Industry Policy May, 2010 Cologne, Germany Dec, 2010 Cancun, Mexico June, 2010 Tokyo, Japan Nov, 2010 Siam Reap, Cambodia

19 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