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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. Contents. World Bank and Climate Change World Bank Carbon Finance Products Current JI Projects Lessons Learnt from JI

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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


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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


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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


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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.


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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


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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


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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


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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)


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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


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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


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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


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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


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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?


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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


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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


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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


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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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