1. Financing Global Climate Change Mitigation The Prototype Carbon Fund György Lázi World Bank

2. Basics Operation Portfolio Financials Lessons Outline

3. Closed-end Mutual Fund structure with diverse portfolio to: Minimize Project Risks Reduce Transactions Costs Enhance the Learning Experience Shareholding: Governments, $10 m; Companies, $5 m Total Capital: US$145 million; (expanded to US$180 m) To be used in ~30 projects PCF Products: Competitively priced, high quality ERs Target deal price: $3.0-4.0/tCO2 Target portfolio wide outcome price: ~$5/tCO2 High value knowledge asset Features of the PCF

4. Deutsche Bank Electrabel Fortum Gaz de France Kyushu Electric Power Co. Mitsui Mitsubishi Corp. Norsk Hydro Companies RaboBank British Petroleum – Amoco RWE Chugoku Electric Power Co. Shikoku Electric Power Co. Chubu Electric Power Co. Statoil Tokyo Electric Power Co. Tohoku Electric Power Co. PCF Shareholders Governments Government of Canada Government of Finland Government of the Netherlands Government of Norway Government of Sweden Japan Bank for International Cooperation

5. Joined Honduras Swaziland Argentina Kazakhstan Togo Benin Kenya Uganda Bulgaria Latvia Uruguay Burkina Faso Mexico Uzbekistan Chile Moldova Zimbabwe Colombia Morocco Costa Rica Nicaragua Cote d’Ivoire Poland Czech Republic Peru El Salvador Romania Ghana Senegal Guatemala South Africa Reviewing Bangladesh Belarus Bhutan Egypt Philipines Sri Lanka Host Country Committee

6. 3 months 2 months 3 months 1-3 years Up to 21 years Preparation and review of the Project ($25k) Project Idea Note Project Concept Note Project Concept Document (or equivalent) Baseline Study & Monitoring & Verification Plan ($55k) Project Design Document Baseline study & ER projections Monitoring and Verification Plan Validation process ($25k) Validation protocol and report Negotiation of Project Agreements ($160k) Project Appraisal and related documentation Term sheet Emission Reduction Purchase Agreement Construction and start up Initial verification report Periodic verification & certification Verification report Supervision report Project completion PCF Project Cycle Timing, Costs and Documentation Total costs through negotiations: $265k

7. PCF Deal Facts Preparation PCF can organize the “creation” of the carbon asset PCF can provide support with deal structuring PCF commissions validation Minimum amount 1 million tons of CO2e minimum for standalone projects Smaller amounts possible in umbrella projects Purchase period Pre-2008 ERs: YES, if backed by AAUs Commitment period ERs: YES Post-commitment ERs: YES, based on ERPA Pre-payment Offered under limited circumstances upon commissioning only Value is discounted at a risk-adjusted rate

8. Legal Agreements for PCF Projects PCF TRUSTEE PROJECT ENTITY HOST COUNTRY Letter of Project Endorsement Letter of Intent Umbrella Host Country Agreement Letter of Project Approval Emission Reductions Purchase Agreement

9. Project selection and Portfolio development criteria Bank and UNFCCC standards Focus on renewables and energy efficiency Pipeline development strategy Latin America: $35 million East Asia and the Pacific: $25 million Central and South Asia: $25 million Africa: $20 million JI Projects: $75 million Portfolio Development

10. Portfolio of Approved Projects Total of US$106 million TECHNOLOGY DISTRIBUTION Biomass Energy Efficiency Geothermal Small hydro Wind Waste management LULUCF REGIONAL DISTRIBUTION Latin America Africa Eastern Europe Central and South Asia East Asia

11. Pricing in PCF Transactions General PCF price policy … Consistency with evolving market prices Equitable benefit sharing Participant’s willingness to pay Coherence across the PCF portfolio … in individual transactions Structure and size Risk assumed by PCF Social and environmental benefits Romania Afforestation Uganda small hydro Chile 25 MW hydro Brazil charcoal replacing coal/coke Poland biomass/geothermal Colombia wind Czech Republic energy efficiency Costa Rica small hydro/wind $3.60 $3.00 $3.50 $4.00$3.50 - $4.00 $3.50 -

12. Impact of Carbon Finance on Project Financing and IRR Boosts IRR Makes some marginal deals bankable Increases profitability and reduces investor risk Often reduces Government subsidy required Improves project’s access to capital markets Sponsor can borrow against contract Payment of CF in dollars to lender mitigates country risk @ $3/t CO2e TechnologyProject d-IRR Energy Eff.-District Heating2 - 4 Wind0.9 - 1.3 Hydro1.2 - 2.6 Biomass with methane kickUp to 5.0 Municipal Solid Waste with methane kick>5.0

13. Complexity Complex carbon asset creation Complex financial closure of deals Uniqueness of Baseline/Monitoring plans Regulatory uncertainty Transaction costs on small projects (<$3 million of CF) will limit market access for small countries and small projects Government preparedness is limited for CDM/JI operations (Host country agreements/letters of approval, pricing, responsibilities, status of ratification, internal processes) The first CDM or JI transaction is a powerful capacity and awareness building tool for Government and Private Sector “Learning by doing” works PCF Lessons Learned

14. Thank You !