LEGAL ISSUES FOR HOST COUNTRY CONSIDERATION CDM Workshop Kampala, June 6 to 8, 2001

Basic Approach Emission Reductions (Host Country + Project Entity) Payments (PCF)

CDM Projects – Art. 12 KP 12 (2) The purpose of the clean development mechanism shall be to assist developing countries In achieving sustainable development In contributing –to the ultimate objective to the UNFCCC –to assists developed countries in achieving compliance with their quantified emission reduction commitments. 12 (9) Participation under the clean development mechanism, including in activities resulting in certified emission reductions and in the acquisition of certified emission reductions may involve private and/or public entities.

World Bank /PCF UNFCCC rules Host government (transferring country) Project entity PCF : Actors involved Annex 1 Government (acquiring country) – PCF Participants (Gov. + Priv.)

PCF Governance Structure World Bank –Fund Management Unit –Fund Management Committee Participants –Participants’ Meeting –Participants’ Committee Hosts –Host Country Committee

Host Country Role –Host Country Committee Composed of those countries either signing a letter of endorsement for a PCF project or a Memorandum of Understanding Provide advice and strategic guidance to the Fund Management Annual meetings, prior to Participants’ Meeting to provide effective input –Observer status in Participants committee and Participants’ meetings

16 Project Endorsement Letter Host Country endorses further development of the project for the purposes of the UNFCCC/KP Host Country: Signals Commitment to render aid and assistance (e.g. registration of the ERs in any international or national regulatory regime) Approves projects for KP purposes Allows access to information

PCF KEY LEGAL AGREEMENTS Letter of Endorsement Host Country Agreement Emission Reductions Purchase Agreement

Host Country PCF Trustee Project Entity 1. Letter of Project Endorsement 3. National Legislative Framework / Agreement / Authorization 2. Host Country Agreement 2. Emission Reductions Purchase Agreement Legal Agreements for PCF Projects

Host Country PCF Trustee Project Entity 1. Letter of Project Endorsement 2. Host Country Agreement and Emission Reductions Purchase Agreement Legal Agreements for PCF Projects

Host Country Agreement PCF Trustee Host Country Obligation to buy ERs Obligation to transfer ERs

Main Elements of Host Country Agreement (HCA) PCF commits to –buy ERs Host Country commits to –authorize the transfer of ERs by the Project Entity to the PCF or –transfer ERs to the PCF

Emission Reductions Purchase Agreement PCF Trustee Project Entity Purchase Price (net of costs) Exclusive Right of Certification and Verification of purchased ERs (ERs) Transfer of ERs

Main Elements of Emission Reductions Purchase Agreement (ERPA) Purchase of ERs from the Project Entity / Payment for achieving ERs PCF commits to arrange for initial and periodical verification, validation and certification. Transfer of ERs