1. A partnership for low-carbon growth A partnership for low-carbon growth April 29, 2008, Moscow Taisei Matsuki Senior Operations Officer The World Bank

2. Addressing Climate Change: A Key Development Priority for the World Bank   External expectations for the Bank to: – –Support increased financial flows and technology transfer – –Scale up investment towards climate-friendly development and technologies   In response and as part of its strategic framework: – –Scaling up of World Bank Group lending/investment and analytical work – –New initiatives   Carbon Finance – Carbon Partnership Facility (CPF)

3. Objectives and Features of CPF  Objectives –Target long-term emissions –Scaling up –Strategic, demonstrational activities in sectors  Features –Programs, away from individual projects –Partnership between buyers and sellers –Fostering both demand and supply in uncertain market

4. P1 Project by project: higher transaction costs, lower predictability for project owners ERs Time CDM P2 ERs Time CDMP3 ERs Time

5. P3 P1 P2 ER Program Programmatic: larger scale, better planning environment for project owners P4 P5 Pn Program ERs Time

6. CPF benefits to a seller   Carbon Partnership Facility (CPF) provides sellers with: – –The certainty of significant and long term revenues from emission reductions (ERs), which could help finance investments and implement of the energy/environment policy of the host country – –A forum to meet buyers and other partners to further explore cooperation including other investment opportunities – –An opportunity to learn from each other including management experiences

7. CPF benefits to a buyer  Cost-effective and long-term delivery of large volumes of emission reductions as part of a buyer’s compliance and risk-hedging strategy  Access to carbon assets in developing and transition economy countries  A platform for collaboration and business dialogue with sellers  Learning by doing and contributing to new approaches to carbon finance  Experienced World Bank carbon finance team and strong methodology expertise

8. CPF - Buyers and Sellers in a Partnership SELLERS (governments, companies) ER contribution Willingness to develop and implement specified emission reduction programs and sell ERs BUYERS (governments, companies) Minimum financial contributions Willingness to purchase emission reductions when generated over the long term Program development Carbon Asset Development Fund (CADF) ER sale and purchase Carbon Fund ER : Emission Reduction

9. Governance: Equal Representation of Seller and Buyer Participants Annual Participants’ Meeting Partnership Committee [6] Sellers, [6] Buyers, [3] Partners (1 Donor + 2 other Partners) Broad guidance to Trustee Forum for information exchange Elects Partnership Committee Endorses the pricing approach on the basis of proposals from the Trustee Endorses form of ERPA, including general conditions Advises Trustee on carbon asset creation priorities and operational issues, e.g.: portfolio balance on technology, regions/countries Program eligibility criteria

10. Consultative Groups Interim Consultative Group [10] Partners Ad-hoc groups for Basic Portfolio and Special Windows Advice for an interim period of [18] months on how to develop the Facility, and facilitate ER Programs Established to advise on how to develop specific types of ER Programs Forum for partnership among interested Participants

11. Carbon Asset Development Fund   Provides Sellers and host countries with resources for: – –Emission Reduction program development, including work on the enabling environment – –Carbon-related elements of feasibility studies – –Methodology work   Funded by – –Contributions from Buyers and Sellers – –Donor contributions

12. Carbon Fund   To purchase emission reductions generated by programs proposed by Seller Participants   To be funded by: – –Contributions from Buyer Participants   Target size: – –Could reach € 5,000 million over 5 years – –First tranche: €350 million

13. Participation   Buyer Participants – –Public or private entities – –Commitment of contribution to the Carbon Fund   Seller Participants – –Public or private entities – –Commitment to develop emission reduction (ER) Program and sell ERs to the Carbon Fund – –Acceptable by the Bank in accordance with established criteria   Partners – –Donors – –Host country governments of countries where programs are being, or expected, to be developed

14. Participation process and operational features

15. Participation Process for Sellers 1. 1. Program sponsor submits a Program Idea Note (PIN) for review 2. 2. Upon approval of PIN by Trustee, becomes a Carbon Partnership Facility Participant by signing a Participation Agreement   Includes basic terms for emission reduction (ER) purchase 3. 3. Seller prepares the ER Program consistent with the Russian national legislation/policy 4. 4. Negotiation and signing of Emission Reductions Purchase Agreement

16. Basic Portfolio & Special Windows Energy Generation Energy Efficiency Waste Management Oil and Gas Transportation Basic Portfolio Criteria to be defined in consultations Special Windows proposed by Trustee based on Participants interest Carbon Capture and Storage ? Green Investment Scheme? Separate/ Additional € contributions Others? Buyer 1 Buyer 2 Participation

17. Pricing approach to be developed by the partnership   The pricing approach will be developed in consultation with the Participants and endorsed by the Partnership Committee   Objective to agree to an approach that is transparent, coherent, and able to adjust to changing market conditions   It may use, as appropriate: – –both fixed and/or variable pricing elements – –indexation and inflation/currency devaluation-based corrections

18. Significant methodology development needed   May use CDM/JI methodologies, CDM Program of Activities approach   Other programmatic/sectoral approaches would be explored, e.g., – –A common baseline e.g., a carbon intensity/emission per unit of production – –“Deemed savings” approach (pre-determined emission credit per activity) in lieu of tracking over time – –Agreed “automatic” eligibility of certain technologies/ activities to claim credits (in a country and timeframe)

19. Emission Reduction program ideas under discussion

20. Process for identifying illustrative, potential pilot programs   Identification of potential programs under way through discussions with: – –host country governments and their agencies – –public and private companies – –The World Bank regional/sector specialists   Focus on strategic context and alignment with – –the priorities of the host country – –World Bank country and sector dialogue and lending & other operations   Strong early pipeline of potential programs for first tranche (and beyond) emerging

21. Example of Emission Reduction program ideas under discussion Example of the programMtCO2e/yr Renewable energy Development Program 0.4 Efficient Coal Technology for Power Generation 0.6 High Capacity Transmission 9.7 Low Carbon Expansion of Electricity Grid (Renewable) 6.0 National Program for Waste Management 0.7-1.0 Energy Program (gas to power) 2.0

22. Carbon Partnership Facility Opportunities in Russia ?

23. CPF Opportunities for Russia ? (1)   The selection criteria for programs under the CPF is still under discussion. The program would be consistent with: for example – –sustainable development objectives, relevant sector policy, and climate change strategy of Russia – –operational strategies, policies and procedures of the World Bank Group (e.g. the Country Partnership Strategy)

24. CPF Opportunities for Russia? (2) – –UNFCCC and/or the Kyoto Protocol, and/or any future agreement under the UNFCCC, and/or any other regime as deemed appropriate by the Trustee in consultation with participants – –Expected to have a significant demonstration or scaling up impact and to make a contribution to lowering of greenhouse gas emissions or limiting their growth in the relevant geographic region or sector

25. CPF Opportunities for Russia? (3) – –Manageable technological risk – –Projected Emission Reductions over the life of the Program should be predictable and should involve an acceptable level of uncertainty

26. CPF Opportunities for Russia? (4) Sector Geographical Scope Mitigation Opportunities Key players/partners Energy Services (Supply side) sub-national, national and regional grids Optimization of renewable energy resources in grids; energy efficiency through rehabilitation and replacement of the power generation technology, fuel switch Power companies, regional power consortiums Urban / Municipal Services urban centers, cities, towns Energy Efficiency and Cleaner technologies in water, wastewater, solid waste, public lighting, buildings, urban transport and other services Municipalities Oil and gas production, transport and distribution sub-national, national and regional Gas flaring reduction, cross-sector activities (infrastructure, gas-to- power), energy efficiency, untapped regions Oil and gas companies CMM/CBM sub-national, national and regional grids Methane recovery Coal mining companies CMM: Coal Mine Methane, CBM: Coal Bed Methane

27. Expected Timeline

28.  A series of bilateral consultations were held in February- March  Consultation workshops/events: –Bangkok 3 April, selected host governments –Paris 17 April, potential seller participants –Paris 18 April, potential buyer participants –Cologne, during week of 6 May (in conjunction with Carbon Expo)  Carbon Asset Development Fund operational end of June  Capitalization of the Carbon Fund from end of June onwards  Organizational meeting and full operationalization, once at least 6 Seller Participant Agreements signed

29. Thank you Taisei Matsuki Carbon Finance Unit The World Bank Office Phone: +1-301-273-6789 Fax: +1-202-522-7432 E-mail: tmatsuki@worldbank.org tmatsuki@worldbank.org www.carbonfinance.org