A partnership for low-carbon growth April 29, 2008, Moscow Taisei Matsuki

1. 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. ERs P1 CDM CDM CDM Time ERs P2 Time ERs P3 Time Project by project: higher transaction costs, lower predictability for project owners

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

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

8. 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

9. 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

10. 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

11. Participation process and operational features

12. Participation Process for Sellers • Program sponsor submits a Program Idea Note (PIN) for review • 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 • Seller prepares the ER Program consistent with the Russian national legislation/policy • Negotiation and signing of Emission Reductions Purchase Agreement

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

14. 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

15. 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)

16. Emission Reduction program ideas under discussion

17. 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

18. Example of Emission Reduction program ideas under discussion

19. Carbon Partnership Facility Opportunities in Russia ?

20. 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)

21. 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

22. 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

23. CPF Opportunities for Russia? (4) CMM: Coal Mine Methane, CBM: Coal Bed Methane

24. Expected Timeline

25. Expected Timeline • 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

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