1. T HE W ORLD B ANK C ARBON F INANCE U NIT CDM Programmes of Activities : O PPORTUNITIES TO IMPROVE IMPLEMENTATION P RESENTATION AT HCC M EETING, M AY 31, 2011 BY M ONALI R ANADE (M RANADE @ WORLDBANK. ORG )M RANADE @ WORLDBANK. ORG [W ITH F ELICITY S PORS AND K LAUS O PPERMANN ]

2. T HE W ORLD B ANK C ARBON F INANCE U NIT Current situation versus the vision? PoA Vision: a)Reduce transaction costs and facilitate dispersed projects. b)Small projects targeted particularly from under-represented or LDC countries to participate in CDM c)Scale-up and accelerate emission reduction activities Actual situation 1.Limited private sector involvement in PoAs due to market and regulatory barriers. 2.Regulatory uncertainty (regulations, procedures, eligibility criteria, liability etc) 3.Complexity in applying methodologies and tools 4.PoA implementation largely with public finance and capacity building support.

3. T HE W ORLD B ANK C ARBON F INANCE U NIT PoA potential – Regional distribution Number Crunching 30% PoAs v/s 73% CDM projects in BIC (Brazil, India and China) 11% PoAs v/s 1.7% CDM projects in LDCs/SIDs Source: UNEP Risoe CDM/JI Pipeline Analysis and Database, March 1st 2011

4. T HE W ORLD B ANK C ARBON F INANCE U NIT PoA potential – supporting sustainable development by supporting small dispersed HH/SME projects EE demand side29 Waste23 Solar12 Hydro5 EE supply side4 Forestry & Agriculture2 Fossil fuel switch2 Biomass energy2 Agriculture1 CMM1 Transport 1 Total PoAs 82 But PoAs have not yet achieved scale up of GHG mitigation in number of PoAs nor in size of PoAs.

5. T HE W ORLD B ANK C ARBON F INANCE U NIT 10 small scale – Household RE in Bangladesh (ASM I.A) – Household EE in Senegal, Bangladesh (AMS II.C) – Supply side EE in China, Yemen, India, (AMS II.A) – Waste in Uganda, Phillipines, Thailand (AMS III.F & III.D) – Transport in Egypt (AMS III.C) 4 large scale – LFG in Brazil, Phillipines, Morocco (ACM0001) – Hydro in Vietnam (ACM0002) CME categories – Financial Institutions (e.g., Bangladesh, Brazil, Phillipines) – Government agencies (e.g., Uganda, Vietnam, Senegal) – Power companies (China, India, Yemen) World Banks PoA Portfolio 2 registered; 12 Under validation

6. T HE W ORLD B ANK C ARBON F INANCE U NIT Additionality of PoA – Justifying programs supported by public funds – Assessing PoAs that support mandatory laws Defining eligibility criteria for additionality of CPA – DOEs requiring very precise criteria – Too many criteria so restrictive that only 1st CPA may be eligible Setting baseline and monitoring – Survey methods – Sample size Monitoring systems – Building appropriate monitoring structure and database without over-burdening the CME and at a rational cost – Yet unknown verification challenges A few Challenges (among many others)

7. T HE W ORLD B ANK C ARBON F INANCE U NIT Structuring program – Upfront cost of structuring programs (seed funds) – Building capacity of CME – Designing programs to incorporate future sources of revenue Procedural issues – Start date of PoA and CPA (partly resolved by the 31 Dec 09 rule) – Focal point designation in MOC (partly resolved) – Other minor issues DOE Liability – Trustees‘ dilemma – Buyers‘ dilemma – CME financial capacity and credit-worthiness A few Challenges (among many others)

8. T HE W ORLD B ANK C ARBON F INANCE U NIT Challenges: Complex and varied business structures Hands-off Hands-on Whole-seller PoA Coordinating entity is the CPA entity controls all CPAs finances all projects prepares all CPA-DDs covers all monitoring costs PoA retains 100% revenue PoA Coordinating entity can influence CPAs finances some projects CPA entity leads preparation of CPA-DD covers own monitoring costs PoA retains major part of revenue PoA Coordinating entity communicates with EB Support CPA development CPA entity finances project directly leads preparation of CPA-DD covers own monitoring costs PoA retains minor part of revenue PoA Coordinating entity supports identification of CPAs part finances all projects covers monitoring costs CPA entity prepares own CPA-DD covers own monitoring costs PoA shares revenue Retailer

9. T HE W ORLD B ANK C ARBON F INANCE U NIT “ We can't solve problems by using the same kind of thinking we used when we created them." – Albert Einstein Based on experience it is possible to identify two kinds of PoAs in general : – PoA type A – individual units for each CPA (poss. different owners of CPAs). – PoA type B - small/micro activities or technologies e.g. lighting, cooking stoves often located in LDCs or countries with less than 10 CDM projects. Recommendation to increase scale up – Different procedures and regulations required to support PoA types A and B, critical for ensuring regional representation addressed, and SD projects scaled up to achieve potential GHG reductions. Challenges are plenty – how to find a solution?

10. T HE W ORLD B ANK C ARBON F INANCE U NIT Key barriers in existing rules 1 Additionality i) Lack of clarity on key criteria for additionality demonstration and ii) proving CPA would not occur without PoA is asking for counterfactual. 2 DOE liability and definition of erroneous CPA inclusion 3 PoA start date definition. CPA cannot start prior to publication of PoA on the UNFCCC website. Institutional structuring of PoA can require more time than is needed to prepare the first CPA. 4 Methodology combinations. No clear process for approving combinations and each combination has to be assessed. EB60 – Secretariat to define procedure. 5 Baseline identification: Guidance on how to define baseline emissions when PoA supports law enforcement. E.g. Egypt Vehicle Scrapping PoA 6 Guidance on sampling. Can DOEs verify CPAs according to sample assessed? Not applied yet (due to liability concerns)

11. T HE W ORLD B ANK C ARBON F INANCE U NIT Recommendations to address regulatory barriers facilitate larger CPAs What is “good enough” for eligibility criteria Type B PoA – PoA not CPAs assessed at registration. DOE verifies conformation to eligibility criteria at verification Additionality Allow notification of PoA start with letter, do not require publication of final PoA-DD on website. PoA start date Define procedures for submissions from PP Top down definition of combinations key sectors e.g. housing in consultation with stakeholders Methodology combinations Standard approach to determining baseline i.e. reg = x% enforced as identified by x,y,z. Consultation with DNAs Baseline Identification Provide guidance on sampling of CPAs Clarify standardized approach for SD assessment by DNAs Sampling guidance

12. T HE W ORLD B ANK C ARBON F INANCE U NIT Simplified additionality for micro RE projects

13. T HE W ORLD B ANK C ARBON F INANCE U NIT Simplified additionality for micro EE projects

14. T HE W ORLD B ANK C ARBON F INANCE U NIT Simplified additionality for Type III projects

15. In conclusion General experience with CDM PoA? Programs are complex CDM-specific regulatory complexities pose additional challenge Need highly capable coordinating agency Even the simplest POAs can be tough to monitor Each PoA is unique in its combination of national circumstances, technology, beneficiary and financing However, rules are getting better defined and knowledge is being generated through the experience of a wide-range of PoA developers in different sectors and countries.

16. T HE W ORLD B ANK C ARBON F INANCE U NIT Thank you