Carbon Finance at the World Bank Present and Future

1. Carbon Finance at the World BankPresent and Future Host Country Committee Meeting Barcelona, May 30, 2011 Eduardo Dopazo The World Bank

2. World Bank Carbon Funds and Portfolio

3. Capital KP Funds

4. The Carbon Finance Unit’s first generation of carbon funds April 2000 May 2002 March 2003 March 2004 May 2004 Prototype Carbon Netherlands Clean Community Italian Carbon BioCarbon Fund Fund Development Development Fund Tranches I & II Mechanism Facility Carbon Fund World’s First Global Pioneer purchaser of Poorest country focused Government & private Afforestation, Carbon Fund CDM sector Reforestation, REDD+ & soil carbon $220,000,000 ** $128,600,000 $155,600,000 $90,400,000 August 2004 January 2005 March 2005 August 2006 March 2007 Netherlands Danish Carbon Spanish Carbon Umbrella Carbon Carbon Fund for European Carbon Fund Fund Facility Tranches Europe Facility I & II Purchasing JI Government & private Government & private Adding liquidity to Governments & private sector sector market at key moments sector ** € 90,000,000 € 220,000,000 € 904,100,000 € 50,000,000 ** Unpublished

5. Geographic Distribution

6. Technology Distribution

7. Production of 10 Years of Experience in Carbon Finance report – May 2010 • The World Bank’s 10 Years of Experience in Carbon Finance: Insights from working with the Kyoto mechanisms can be found on the website of the World Bank Carbon Finance Unit under Publications and reports: www.carbonfinance.org • Report release and plenary discussion on Thursday, May 27 at 14:00

8. Post-Kyoto Initiatives

9. Priorities going forward • Integrate carbon finance into public and private investment decisions for low-carbon development through strategic programs of investment • Support the establishment of a long-term regulatory framework that provides certainty of a carbon price signal • Create incentives for reducing deforestation • Build capacity for “market readiness” • Pursue pioneering work of BioCF and CDCF to bring benefits of carbon finance to the poorest • Satisfy immediate needs of buyers and sellers (UCF T2)

10. Responding to the challenges in the market – the Carbon Finance Unit’s latest generation of product offerings • Guiding readiness and carbon finance for REDD+ • Forging partnerships between developed and developing countries and private companies • Enhancing capacity building and technical assistance Launch COP 17 Durban April 2011 Open Open Open Carbon Partnership Facility Tranche I Forest Carbon Partnership Facility Partnership for Market Readiness Next Generation BioCarbon Fund Carbon Pioneering and Financing Facility CPaFF # Scaling-up carbon finance National & sub-national REDD+ pioneer Capacity building to support market based tools for GHG reduction Scale up of A/R, project REDD+ and soil carbon Support low-income countries to benefit from carbon finance €147,100,000 $370,000,000+ $100,000,000* $75,000,000^ $200,000,000^ • Transformative and forward-looking • Pioneering PoAs – innovating to broaden and deepen reach of CDM • Utilizing carbon finance to scale up systematic approaches to low carbon growth • Learning and experience gained by public & private participants • Supporting countries’ development of readiness component for market instruments • Helping developing countries explore, pilot and test emissions trading • Building on country priorities for low-carbon growth • Scaling up afforestation and reforestation • Piloting soil carbon sequestration including rice paddies, wetlands, grasslands and pastureland mgt. • Supporting with BioCF+ analytical capacity building • Exploring landscape accounting approach and valuation of ecosystem services • Carbon Asset Pioneering Fund – supporting capacity building, methodology development & innovation • Carbon Financing Fund – providing up-front financing through revolving grant mechanism • Pioneering Buyer Mechanism – supporting project development and provide off take + Current ^ Preliminary target * Target, current $68 million raised # Working title

11. The Carbon Partnership Facility A fund to scale up investment in clean technology through programmatic and sector-based approaches Mission Participation • Support systematic approaches to low carbon growth by countries to catalyze investment in clean technologies • The governance of the CPF is based on a partnership of buyers and sellers of carbon credits • CPF will utilize programmatic approaches to scale up emission reduction programs • Carbon finance included in integrated financing packages linked to World Bank operations • Develop innovative methodologies in areas such as energy efficiency, urban transport and city-wide programs; and promote the introduction of new technologies • € 132.5 million in buyer commitments to Carbon Fund; 1st tranche is closed • Agreements signed with Seller Participants for six programs • Morocco Solid Waste Management • Vietnam Renewable Energy • Brazil Solid Waste Management • Thailand Clean Energy Program • China Regional Biogas Program • Jordan Amman Green Growth Program • € 14.6 million in donor contributions in Carbon Asset Development Fund (for program prep.) • The CPF provides Buyer Participants with access to large volume of carbon credits & information about investment opportunities in related projects Contact: Richard Zechter, CPF Coordinator rzechter@worldbank.org

12. The Forest Carbon Partnership Facility Has established collaborative partnership & transparent platform for meaningful exchanges on REDD plus issues Mission Participation • Operational since June 2008 • Readiness fund – $215+ million pledged ($5 million minimum contribution) to • Prepare developing forest countries for REDD+ (national monitoring, reference scenarios, strategies, management arrangements) • Inform UNFCCC negotiations on REDD plus • Carbon Fund – $155+ million raised to date ($5 million minimum contribution) • Guide REDD+* readiness preparation process • Due to high demand, REDD Country participation increased from 0 to 20 to 37 • 12 Donor Participants • 7 Carbon Fund Participants • Balanced governance structure; role of the Bank is facilitator • 6 Observers • Other partners • Brazil (South-South cooperation) • Global Environment Facility • World Bank Institute • Technical assistance service providers Contact: Benoît Bosquet, FCPF Coordinatorhttp://www.forestcarbonpartnership.org/fcp/ *Reducing emissions from deforestation and forest degradation, forest conservation, the sustainable management of forests and the enhancement of forest carbon stocks in developing countries.

13. Partnership for Market Readiness (PMR) A grant-based capacity-building fund providing a platform for collective innovation on new market instruments Mission Participation • Contribute to enhancement of global mitigation efforts post-2012 via market instruments • Provide a platform for technical discussions, South-South exchange and collective innovation on new market instruments in developing countries • Capacity building and piloting that is country-led and builds on country priorities • Share lessons learned • Participants will include: • Developing countries/emerging economies • Countries that donate financially • A Partnership Assembly consisting of balanced representatives of both developed and developing country Participants form the decision making body • The Partnership will engage private entities and relevant organizations • The World Bank will provide secretariat and technical support • No requirement for minimum donor contribution, but US$5 million to be eligible for a Participant Committee (possible subset of the Partnership Assembly) Supported activities • Support countries’ development of readiness for market instruments • Explore, piloting and testing domestic emissions trading and non-GHG based schemes such as renewable energy & energy efficiency trading • Explore and testing international market instruments such as reformed CDM, sectoral and NAMA crediting – as well as new instruments not yet envisioned Contact: Xueman Wang xwang5@worldbank.org

14. Next generation BioCarbon Fund – A/R, project REDD+ and agriculture carbon The World Bank is continuing the groundbreaking work done by its BioCarbon Fund to bring carbon markets to rural communities because of the significant role this has in alleviating poverty. The fund will continue testing and piloting while scaling up the work that it has started… Donor supported BioCF+ BioCarbon Fund Buyer Windows • Help support sellers develop and bring assets to market • Design and test of innovative financing approaches • Continue to work on novel approaches to land-based carbon accounting, simplify processes • New, revolutionary methodological advances at the landscape level • Use BioCF lessons learned to promote changes in land-based rules • Create value for additional co-benefits • Work on potential NAMA crediting • Donor supported A/R scale up Landscape approach • Provide sellers guaranteed buyers • Opportunities for scaling up existing afforestation/reforestation projects • Upfront financing through advanced payments • Could have dedicated country-windows • Break free of fragmentation of accounting for each project activity separately • Allow for any land-based activities that reduce emissions within a project boundary, to be credited • Include carbon accounted for by other means like cookstoves TBD tCER/VER Soil sequestration Pilot project REDD+ • Pilot areas not yet tested to include • croplands, grasslands, rice paddies, wetlands and biochar • Will create VERs and VCUs • Dedicated agriculture window • Funding comes from public and private sectors • Develop model for testing the quantification and monetization of co-benefits in a REDD+ project beyond the carbon component • Test concept of wildlife premium • Creating VER with bundled co-benefits VER/VCU VER/VCU Contact: Ellysar Baroudy, BioCarbon Fund Managerebaroudy@worldbank.org

15. CPaFF Expanding carbon finance in low-income countries – Carbon Pioneering and Financing Facility The Carbon Pioneering and Financing Facility (CPaFF) Build readiness and capacity to access carbon markets and support a pipeline of low-carbon investment opportunities in the poorest countries with a focus on fighting energy poverty. This initiative will work through three complementary components… Carbon Asset Pioneering Fund Carbon Financing Fund Pioneering Buyer Mechanism • Promote reforms in carbon market rules to benefit low income countries: • Suppressed energy demand and avoided emissions • Standardized baselines • Support the definition of and transition towards the next generation of market mechanisms • Build capacity & lend technical assistance to carbon finance project entities • Support African and LDC climate negotiators • Research and Develop innovative carbon financing • Allowing carbon finance to contribute to closing the critical investment financing gap • Initially donor supported then self sustaining • Allows monetization of carbon revenues to provide up-front financing • Revolving Grant Facility • Well adapted to micro / community level investments w/ high capital cost • Offers a portfolio of mostly energy and energy efficiency projects in low-income countries (including cookstoves, household energy, etc.) • Public and private sector buyers • Supports sellers with project development assistance and provides conduit to market • Up-front fee followed by right of first refusal to sign Primary ERPA Contact: Brice Quesnel, Fund Managerbquesnel@worldbank.org

16. A decade after their establishment, the maturing carbon markets have originated the largest and least risky offset projects – leaving the World Bank and its partners poised to continue pioneering. Contacts

17. Thank you! www.carbonfinance.org edopazo@worldbank.org