The World Bank’s Carbon Finance Business: Joint Implementation Experience

1. The World Bank’s Carbon Finance Business: Joint Implementation Experience UNFCCC JI Workshop Moscow, May 26-27, 2004 Benoît Bosquet, World Bank Carbon Finance Business

2. Contents • World Bank and Climate Change • World Bank Carbon Finance Products • Current JI Projects • Lessons Learnt from JI • Potential Future JI Projects • AAU Greening • Next Steps for Russia

3. World Bank and Climate Change • World Bank’s mission is poverty reduction • WB endorses IPCC predictions • Climate change, a “global public bad”, affects the poorest the most • Private-public initiatives needed to mitigate climate change • Take advantage of Kyoto flexible mechanisms • Develop core CDM/JI market • Expand “carbon finance” into small projects • Demonstrate implementation of carbon sinks • Build capacity of Host Countries

4. World Bank Carbon Finance Products Total funds under management, April 2004: ~ US$410 million Prototype Carbon Fund. $180 million (closed). Multi-shareholder. Multi-purpose. Community Development Carbon Fund. $39.5 million (open). Multi-shareholder. Small-scale CDM energy projects. BioCarbon Fund. $12.5 million (open). Multi-shareholder. JI and CDM LULUCF projects. Netherlands Clean Development Facility. $125-180 million. Netherlands Ministry of Environment. CDM energy projects. Italian Carbon Fund. $35 million (open). Italian Multi-shareholder. Multipurpose. Netherlands JI Facility Netherlands JI Facility. $60 million with IFC (under negotiation). Netherlands Ministry of Economic Affairs. JI projects.

5. Current JI Projects (PCF) • Bulgaria Sofia and Pernik District Heating • Bulgaria Svilosa Biomass • Czech Energy Efficiency and Renewable Energy • Hungary Pannonpower • Latvia Liepaja Solid Waste Management • Poland Stargard Geothermal • Romania Afforestation of Degraded Agr. Land

6. Bulgaria Sofia and Pernik District Heating • Energy efficiency improvements (pipes, pumps, substations) • 1,241,000 t CO2e (2005-2012) • Pre-2008 credits under discussion: AAU greening • Baseline study, pre-validation • Project submitted for Approval • Contract under negotiation

7. Bulgaria Svilosa Biomass • Switch from heavy fuel oil to wood residue biomass in 13 MW boiler at wood pulp plant • 450,000 t CO2e (2004-2012) • Pre-2008 credits approved (1 t CO2e = 1 AAU) • Baseline study, pre-validation, contract, initial verification, start of generation

8. Czech Energy Efficiency and Renewable Energy • Umbrella agreement for several energy efficiency and renewable energy projects • Contracts with intermediaries: CEA, SEF • 2 district heating projects in Decin and Rozmital approved and validated: 212,000 t CO2e (2004-2012) • More projects under preparation, incl. Hydro • Pre-2008 credits approved (1 t CO2e = 1 AAU)

9. Hungary Pécs Heat and Power • Switch from coal to biomass (wood chips) for co-generation (65 MWth and 49 MWe) • Pannonpower will supply heat to the city of Pécs and electricity to the grid • 1,193,000 t CO2e (2008-2012) • Baseline study, pre-validation, contract

10. Latvia Liepaja Solid Waste Management • Recovery of landfill gas for electricity production • 388,000 tCO2e (2004-2014) • Pre-2008 credits approved (1 t CO2e = 1 AAU) • Baseline study, pre-validation, contract

11. Poland Stargard Geothermal • 13 MW geothermal project • 300,000 tCO2e (2004-2012) • Pre-2008 credits approved (1 t CO2e = 1 AAU) • Baseline study • Contract under negotiation

12. Romania Afforestation • Afforestation of 6,000 ha of degraded state-owned agricultural land • 855,000 t CO2e (2003-2017) • Pre-2008 credits approved (1 t CO2e = 1 AAU) • Baseline study, pre-validation, contract, initial verification, start of generation, first ER delivery

13. Lessons Learnt from JI (a) • Competitive market (more than CDM) • Fewer projects than anticipated (only 10% of PCF): • Financing constraints in some countries • What is the project approval process? • Need to be creative for remunerating pre-2008 reductions: hybrid between Art.6 and 17 (“AAU Greening”), but controversial with some governments • Will there be enough headroom?

14. Lessons Learnt from JI (b) • Apply Track 2: waste of money? • “CDM process” is still heavy, especially methodology approval: too project-specific, not generic enough • Focus on additionality not needed: Host Country could sell ERs as ERUs or AAUs • EU accession countries: how will JI coexist with EU ETS? • Move to Track 1 desirable • No need for establishing additionality, but • Multiple standards, depending on Host Country • JI (and CDM) window of opportunity is closing due to long lead times

15. Potential Future JI Projects (BioCF, Netherlands JI, ICF) • Czech Republic: try Track 1 approach on portfolio of projects • Romania: N2O reduction, afforestation • Poland: Biomass, biodiesel, afforestation • Russia: Fuel switch, coal bed methane capture, energy efficiency • Ukraine: Coal bed methane capture, forest management

16. AAU Greening • “Project-based Art.17”, “early credits” and/or “late credits” • Sale of AAUs by Host, with reinvestment of revenues into climate-friendly projects (energy efficiency, carbon sinks, etc.) • Sale of AAUs to raise capital and service debt • Discussed with several Governments • More palatable to buyers than straight Art.17 • Seller rebuilds its AAUs

17. Next Steps for Russia to Sell • Ratification of the Kyoto Protocol • JI or AAU Greening • To deal with the World Bank carbon funds: • Sign Memorandum of Understanding: who represents Russia? • Sign Host Country Agreement (if pre-2008 credits to be sold) • Endorsement/Approval of projects (many proposals received)

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