1. UNDP - Fortis MDG Carbon Facility
Marcel Alers
Thursday, February 14, 2008
West Africa Carbon Finance Investment Forum for Financial Institutions, Dakar, Senegal

2. MDG Carbon Facility: The Rationale
Geographical Imbalance in the CDM (Projects)
Technological Imbalance in the CDM (Credits)
Renewables
24%
Industrial Gases
43%
CH4 Reduction
18%
Other 3%
Cement & Coalmine 5%
Fuel Switch 3%
Energy Efficiency 7%
Source: UNEP Risoe Centre 1

3. UNDP’s core objectives in carbon finance
Improve access to carbon finance for a broader range of developing countries and project types through creating effective carbon markets (capacity development and one-stop shop service in carbon project development in pre-market situations)
Maximize carbon development dividend through developing an MDG Carbon portfolio that strike a balance between cost-effective projects (e.g. landfill methane recovery projects) and high development impact projects (e.g. small agro-forestry projects)
Develop capacity of programme countries to combine & sequence different funding sources (EFR, ODA, GEF, CDM/JI) to channel direct investment towards climate-friendly technologies

4. MDG Carbon Facility Mission: Market Transformation
MDG Impact
Geographical & Sectoral Diversity
Current CDM Market
Objective for MDG Carbon Facility 3

5. UNDP’s approach to leveraging carbon finance for development
Step 1:
Remove barriers to direct investments in climate-friendly technologies (EFR, GEF, ODA, foundations)
Analysis of key barriers for targeted sectors
Initiation of policy dialogue with regulatory authorities on barrier removal strategies
Development of sector-specific strategies
Implementation of barrier removal activities
Step 2:
Establishment of efficient host-country procedures for CDM & JI review and approval (EFR, ODA)
Assistance in establishing DNA, CER ownership and approval procedures
Identify priority sector to maximize the development dividend
Step 3:
MDG Carbon Facility -project management services to individual project developers (carbon finance)
Project management services to individual project developers to demonstrate the profitability of carbon finance in nascent CDM markets
Compilation, analysis and dissemination of lessons learned and experiences

6. Attractive low-carbon project Infeasible low-carbon project
Combining & sequencing GEF and CDM financing
CDM revenue
Attractive low-carbon project
GEF financing
Financial Return
Infeasible low-carbon project
Risk of Investment

7. UNDP’s Project Development Services
Signing of ERPA
with Fortis
Project registered
with CDM
First Credits Issued
Part 1:
Due Diligence
Part 2:
Project
Documentation
Part 3:
Establish Monitoring System
Five Tools
Carbon Layer
Technical
Finance & Legal
MDGs/Environment
Country risk
Two step process
Initial screening
In depth evaluation
Preparation of documentation
Approval by host country and CDM Board
Review by 3rd party auditors
Implementation and oversight of monitoring system in project’s first year 6

8. MDG Carbon Facility: What it is
CDM Activities
UNDP
Fortis Bank
Purchase of Carbon Credits
Technical Assistance in
Project Development
CDM Projects 7

9. Opportunity for Provision of Underlying Finance
UNDP
Fortis Bank
Carbon Finance
Technical Assistance
Purchase
Of Credits
CDM Projects
Loans
Underlying Finance to Project
3rd Party Bank 8

10. Carbon Projects: MDG Impact
Components by Project Type
Aggregate Portfolio Attributes
GHG Emission Reduction
# 1
e.g. a renewable electricity project with employment effects, rural electrification and local air quality improvement
Carbon component
# 2
e.g. a forest conservation or reforestation project with land rehabilitation benefits
# 3
Poverty Alleviation
e.g. a landfill gas project with small local air benefits, or a clean coal project
MDG component
Biodiversity Protection
# 4
e.g. a series of school building projects with solar power
Other MDG Benefits 9