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Outline of Chapter 3 - Financing the Development Dividend. Introduction Understanding the Challenge Case Studies Existing Support Mechanisms Identifying the Gaps Possible Solutions Recommendations. Introduction. Ways in which more financing can be made available; and

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Outline of chapter 3 financing the development dividend
Outline of Chapter 3 - Financing the Development Dividend

  • Introduction

  • Understanding the Challenge

  • Case Studies

  • Existing Support Mechanisms

  • Identifying the Gaps

  • Possible Solutions

  • Recommendations


Introduction
Introduction

  • Ways in which more financing can be made available; and

  • Ways financing could encourage project stakeholders to include and/or enhance the development dividend.


Financing challenge
Financing Challenge

  • Wide Range of Financing Sources

    What do they all have in common

  • “WIIFM” Factor (What’s In It For Me?)

  • Risk - Reward


  • Country Risk

    • Economic

    • Political

    • Legal

    • Regulatory Framework

    • Commitment to Environment


  • Project Risk

    • Project Technology

    • Project Size (Cost)

    • Project Proponents, developers and stakeholders

    • Project Infrastructure Needs

    • Project Construction

    • Project Operation

    • Project Viability, Creditworthiness of key counterparties

    • Sustainable Development Benefits

    • Community commitment and support, political complexity


Financing challenge1
Financing Challenge

  • Carbon Credit Risk

    • Delivery Risks, including payment for carbon credits up front or on delivery

    • Market Risk, including volume and value to buyer and seller

    • Ownership


Summary of Cases

  • Offshore Financing Vs Local Sources

  • Traditional Vs Non Traditional Sources

  • Project Size Vs Complexity

  • Project Size Vs Transaction Costs

  • Carbon Credits Vs Sustainable Development Benefits


Current sources
Current Sources

  • Not Driven by Sustainable Development

    • MDBs and PS Carbon Funds – Compliant CERs

    • ECAs “export” benefit

    • etc

  • Risk – Reward not in balance

    • Equity ROI

    • Debt Term, Interest Rate and Security

  • Capacity

    • CDM and Carbon Credit Knowledge

    • Staff

    • Volume (“One Offs”)


Identifying the gaps between supply side and demand side needs
Identifying the Gaps BetweenSupply Side and Demand Side Needs

Supply Side Sources of Financing Need:

  • Good “Bankable” Projects

  • Credible, Timely, Cost Effective Approval Processes

  • Risk Sharing

    Demand Side Requirements for Financing Need:

  • More Flexible, Risk Tolerant Debt, Equity Sources

  • Up Front Purchases of Carbon Credits

  • CERs and Offsets (Voluntary)

  • ODA/Grants

  • Budgets

  • Sustainable Development Funds


Possible solutions
Possible Solutions

Are Previously Identified Solutions Still Valid?

Are Voluntary Market Credits More Appropriate Than CERs for Small Scale Projects with a low CC:SD Ratio?

Can SD Be Standardized?

Can SD Projects Be Fast Tracked?

Can SD Projects Be Pooled?

Can SD Projects Receive Premium CER or Voluntary Credit Price?


A solution to bridge supply demand gap
A Solution to Bridge Supply Demand Gap

Process to Select SD Projects

  • Projects Bankable: “Yes-No-Maybe” Decision

  • Transparent, Independent, Expert Committee

    • DNA, MDB, DFI, UNEP, Plus Private Sector

  • Feedback and Capacity Building

  • Appropriate Funding Sources for Project

    • “Modified China Clean Development Fund”

      • External and Domestic Sources

      • ODA, MDB, ECA, Insurance,

    • SD:CC Measure

    • Debt, Equity, Budgetary, Other Funding Sources Identified

    • Appropriate Carbon Credit Market (CER vs Voluntary)


Recommendations
Recommendations

  • Pilot Project

    • Country or Region “Clearing House”

  • Tool to screen cost of developing project as CDM or VER from policy and financing perspective

  • Role of Offset Markets as Source of Financing

  • Capacity Building of Project Developers/Proponents/Stakeholders

  • Pressure on Developed Country Gov’ts to prioritize SD

  • Project Finance Sources

  • Clarify Role of ODA

  • Research “Supercredit”


Discussion
Discussion

Thank you

Tom and Emily for The Cases and Your Patience


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