Work and Activities of the Executive Committee Relating to the Establishment of a

1. Work and Activities of the Executive Committee Relating to the Establishment of a Special Funding Facility to Support ODS Destruction and the Achievement of Enhanced Environmental Benefits Not Directly Related to Compliance with the Montreal Protocol

2. The Executive Committee (ExCom) began its consideration of the uses of a Special Funding Facility, at its 57th Meeting, as a result of decision 55/2 that had set aside US$1.2 million from funds returned from the Thai chiller concessional loan project. ExCom subsequently considered papers on the Facility at its 58th to 60th Meetings. A report on the Special Funding Facility, in response to decision XXI/2, has been submitted to the 30th Meeting of the OEWG. Background

3. The document presented to the 57th Meeting (UNEP/OzL.Pro/ExCom/57/64) addressed four optional uses of the Facility: resource mobilization for co-financing arrangements, to obtain additional resources from public and private sources, to build on establishing relations with other funding entities; to house and manage carbon credits for climate change benefits or ODS destruction, received from global carbon markets. Work at the 57th Meeting

4. The implementing agencies (IAs) submitted resource mobilization requests at each meeting since the 57th Meeting. ExCom has deferred these requests pending a decision on the Special Funding Facility. Resource mobilization involves establishing methodologies that can be accepted by carbon markets and iance markets such as CDM. The four implementing agencies and Italy have submitted resource mobilization requests to the 61st Meeting. Resource Mobilization

5. The document for the 58th Meeting focused on issues related to possible legal, structural and administrative matters related to the Facility (see UNEP/OzL.Pro/ExCom/58/49). ExCom decided to include in its report to the 21st Meeting of the Parties, a detailed account of its discussion on the establishment of a Special Funding Facility(UNEP/OzL.Pro.21/6, paragraphs 13-21). Work at the 58th Meeting

6. The document for the 59th Meeting (UNEP/OzL.Pro/ExCom/59/54) provided a definition for the Facility, a discussion on its possible added value, and an annex from UNDP on the role of carbon markets as a financing source. Work at the 59th Meeting

7. The document for the 60th Meeting (UNEP/OzL.Pro/ExCom/60/50) contained inter alia a summary of work, comments from received from Members, a Swedish proposal presented at the 59th Meeting,and an excerpt from the detailed discussion at the 59th Meeting. A case study on ODS collection and destruction in Russia (UNEP/OzL.Pro/ExCom/60/Inf.2) was also submitted to the 60th Meeting. ExCom decided to forward the excerpt from the detailed discussion at the 59th Meeting to the 30th OEWG. The following slides address the contents of the Report of ExCom on a Special Funding Facility(UNEP/OzL.Pro.WG.1/30/3). Work at the 60th Meeting

8. The ODS Climate Facility concept. Short-term objective: to learn by doing through demonstration projects in the voluntary carbon markets (Pilot stage). Long-term objective: to link ODS direct emissions to compliance carbon markets using the experience of the pilot stage. Components of ODS Climate Facility concept include: A donor-led Fund; An oversight framework; and A registry function through the Ozone Secretariat. Report of the Executive Committee on a Special Funding Facility (UNDP Presentation)

9. Use producer responsibility programmes to get private sector support. A national approach was being developed to meet the needs of Small and Medium-sized Enterprises to maximize climate benefits. Use of approved pilot projects to develop resource mobilization modalities for maximizing climate benefits. Report of the Executive Committee on a Special Funding Facility (UNIDO Presentation)

10. The “Scaling-up” concept. Receive more contributions earlier rather than later. This would result in earlier, and therefore, greater cumulative climate benefits. Issue bonds. Bonds would be based on legally binding commitments of donors over a longer period to provide immediate access to future donor funding. Use World Bank loans to translate carbon credits into immediate resources. Since carbon credits are not encashable until the benefits have been verified, the World Bank would provide upfront funding based on future benefits. Report of the Executive Committee on a Special Funding Facility (World Bank Treasury Presentation)

11. Concluded that a significant opportunity existed for ODS destruction projects under carbon markets. It further concluded that ODS destruction credits are unlikely to have a negative impact on compliance markets. It also noted however that some ODS destruction would not be economically viable due to the level of effort to extract the ODS, the project size, and the value of the credit per tonne. Report of the Executive Committee on a Special Funding Facility (ODS Study)

12. One member expressed broad support for the Facility stating that it could access capital with a return on investment, absorb risks in accessing climate markets, and provide environmental benefits beyond that required by Article X. Others felt that the role of the Facility vis-à-vis the MLF to maximize climate benefits had to be clarified, that the creation of the Facility was a matter for the Parties to decide, and that additional study was needed. Members expressed caution that the Facility would fundamentally change the work of the MLF and carbon markets would introduce a level of risk and uncertainty. Report of the Executive Committee on a Special Funding Facility (Comments of Members)

13. ExCom has considered uses of a Special Funding Facility at 4 meetings, commissioned a study on ODS disposal funding options, received a proposal and a case study, and heard alternatives from the IAs. US $1.2 million returned from the Thai concessional loan project has not been allocated for use to-date. Requests for resource mobilization have been submitted to the 61st ExCom Meeting in bilateral and IA work programme requests (UNEP/OzL.Pro/ExCom/61/22-26). The final World Bank report on the Study on Financing the Destruction of Unwanted ODS through the Voluntary Carbon Market has been submitted to the 61st Meeting as UNEP/OzL.Pro/ExCom/61/Inf.2. Conclusion and Current Status