1. Development + Carbon = Carbon with a human face

2. Overview
Developed with International Emissions Trading Association (IETA)
Objective: Purchase ERs + create community development benefits
Small-scale projects in small countries and poor, rural areas in all developing countries
US$ 100 m funding target
Private & public sector participants
Managed as a World Bank Trust Fund

3. Rationale Carbon finance now bypasses small countries:
Small projects = high transaction costs, high risks
Market for high value “development + carbon” ERs
UNFCCC’s drive to cut costs through streamlining procedures and bundling projects

4. How the Fund Works $ $ Industrialized Governments and Companies
Technology $
Technology
Finance $
Finance
Industrialized Governments and Companies
Developing Countries and Communities
Community Development
Carbon Fund
CO Equivalent 2
Emission Reductions
CO Equivalent 2
Emission Reductions

5. Benefits to CDCF Participants
All Participants
High value ERs: buy at $3-6/t/CO2e, outcome price $7/t/CO2e
Risk mitigation via diversification
Knowledge of carbon market and asset creation
Companies
Governments
Catalyze private investment in clean technologies
Support sustainable development objectives of UNFCCC
Meet regulations or for trading
Demonstrate social responsibility
Gain competitive advantage

6. Design Challenge: Lowering Cost of Delivering Small Projects to CDCF
applying CDM streamlined procedures
Using Bank “umbrella” legal agreements and project appraisal documents for financial intermediaries (SMEs, micro-finance credits, development banks, NGOs)
Grooming financial and other intermediaries to deliver carbon finance to lines of business (small/micro power supply, crop processors, rural industry)
Taking costs off the balance sheet for upstream costs:
raising pools of Bilateral ODA and Foundation funds for TA
Optional up-front payment of Fund shares to generate net income for

7. CDCF Portfolio Criteria
Compatibility with UNFCCC definition of “small scale”
Only CDM
No more than 10%-20% of capital in one country
A minimum of 25% of portfolio in LDCs and other poor smaller developing countries
Up to 25% of capital for small-scale agroforestry
Local+Global environmental benefits + improve local livelihoods

8. CDCF Deal Flow Examples
Methane: agri & waste mgt
Mini hydro & windmills
Community Agroforestry
Energy efficiency

9. Scale of Energy Service Typical Total Project Financing
Project Type
(examples only, many other options are feasible)
Scale of Energy Service
Typical Total Project Financing
Typical Carbon Purchases over years, nominal terms
Mini-Hydropower
1-15MW
$1-30 million
$100,000-$2.0 million
Micro-Hydropower
100W-1MW
$100,000 - $2 mm
$10,000 - $150,000
Wind Power
400W – 15 MW
$ 200,000 - $15 mm
$ $2.0 mm
WoodWaste Heat and Power in Wood Processing
1-15 MW
$ 500,000 - $10 mm
$100,000 - $5.0mm
MSW to Energy
500W-15MW
$500,000 – $20 mm
$100,000 - $10 mm
Sugar Cane Bagasse Power and Heat
5MW-15MW
$2mm - $15 mm
$ 200,000 - $5mm
Crop Res. Power
1MW – 15MW
$1mm - $10 mm
$100,000 - $5m
Agroforestry
1000 – 5000 ha
$100,000 - $1 mm
Reforestation
500 – 5000ha
$ 50,000 - $5 mm
$ 50,000 - $5mm

10. Parallel Grant Resources for CDCF and BioCF Implementation
Implementation Partnership Concept
Need grant assistance, especially for the smaller, poorer countries, for:
Project/portfolio identification and preparation
Training and capacity building for financial intermediaries, local private sector, NGOs, regulatory agencies, Government line agencies
Carbon asset creation: sectoral and standardized baselines, monitoring protocols
Sources:
Donors (govts, foundations);
Participants net income from advance payments

11. Planned Implementation Partnerships
Global Village Energy Partnership (GVEP): internal Bank Partnership with Energy Sector – a public private partnership to provide grant resources for TA for rural energy development
Several OECD Governments in discussion to link bilateral aid agency programs with CDCF through a CDCF TA TF and jointly prepared work program
CF-Assist Link: new Bank umbrella TA program to support carbon finance flows under CDM/JI

12. $ Terms (Both Funds) $ 100 million $ 50 million
Ongoing fund – Open-ended nature
Additional tranches possible once 1st tranche is placed in projects
Minimum contributions
Private sector $ 2.5 million
Governments $ 5 million
Payment Streams
Optional upfront payment
Otherwise drawn down over years: 1st years not larger than 7% of total/year
Target Fund Size
$ 100 million $
$ 50 million
Minimum Fund Size

13. CDCF Development Steps
April + July 2002: CDCF Advisory Group Meetings
May-Dec, 2002: Marketing, Design fund
September 2: Public Launch at WSSD in Joburg
Nov 12-13th: Meeting of MOU signatories in Washington
Dec 12th: Bank Board approval
Mid-January, 2003: Open for subscriptions
2nd Quarter 2003: Minimum fund size achieved, Operations begin

14. BioCarbon Fund
Harnessing the carbon market to sustain ecosystems and alleviate poverty

15. BioCarbon Fund Overview
Three equally important goals
Atmospheric benefit through carbon sequestration or conservation assessed by strict standards
Environmental benefit through landscape restoration and biodiversity conservation
Social benefit through poverty reduction and improved livelihoods
Additionality
Permanence
Adequate metrics
Community participation

16. BioCarbon Fund Overview
Basic structure
First Window : Projects under Art 6 (JI) and Art 12 (CDM): Kyoto eligible
Second window : Projects that meet the three goals but are not Kyoto eligible in the First Commitment Period
Private & public sector participants
Target size US$ 100 million
Managed as World Bank Trust Fund with guidance from contributors and host nations
See

17. BioCF Rationale
Extend carbon finance to agriculture and forestry sectors – including many countries with otherwise limited opportunities under the CDM
Provide a source of funds for appropriate land management/rehabilitation, and adaptation practices
Demonstrate technical and policy issues of Land use, land-use change and forestry (LULUCF) activities
Meet the demand for cost-effective ERs from mandatory and voluntary markets

18. BioCarbon Asset Classes A Continuum of Activities
Afforestation,
Reforestation
Forest Management
Wetland Restoration
Land Degradation Prevention
Mostly Carbon
Sequestration
Mostly Carbon
Conservation
Agroforestry
Improved Agricultural Practices
Watershed Management
Reduced-impact Logging

19. Outcome of Technical Advisory Group (TAG), July 17
Preferred Portfolio
Outcome of Technical Advisory Group (TAG), July 17
Activity JI
CDM
Over Horizon
Production forestry: plantations in landscape mosaics Y -
Agroforestry: replicable models in major ecosystems y
Restoration forestry: connecting fragments/corridors
Forest management: including fire management? n
Forest protection: eg reduce losses to fuel wood ?
Biofuels: sequestration as part of fuel cycle Y*
Agricultural management: eg reduced till
Grazing land management: drylands; large areas
Wetland management: must assess net reductions

20. Plantations Agenda
Consensus of Forest Trends Working Group, July 18 – all stakeholder groups:
Benchmark plantation development in BioCF
Can agree minimum practical standards, more work..
Examples of minimum standard requirements include:
all plantations must be in a landscape mosaic with positive biological and social contribution and no single monoculture land use pattern
and model contracts to protect interests of communities and indigenous peoples

21. BioCF 1st Window Kyoto-Eligible Examples
JI Countries only
Sustainable Forest Management
JI Countries only
Afforestration/ Reforestration
CDM & JI Countries
Reduced tillage

22. BioCF 2nd Window “Over-the-Horizon” Examples
CDM Host countries
Revegetation
Soil Carbon Management
Landscape Management

23. Biofuels
Projects where new trees or crops are established to provide biofuels as part of a wider social and landscape management goal.

24. Rehabilitation of degraded lands?
Viable Assets?
Rehabilitation of degraded lands?
Fire management?
Agroforestry

25. Agroforestry

26. Avoided deforestation?

27. Fund Development Steps
Design: Techncial Advisory Group Formed and met July 17th to review project and portfolio criteria
BioCarbon Fund Launch: Nov 5th in Tokyo
Nov, Feb: Meeting of MOU signatories
March: Bank Board approval, Issue Information Memorandum, Open for subscriptions
Mid 2003: Minimum fund size achieved, Operations begin