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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
slide4
Country Risk
    • Economic
    • Political
    • Legal
    • Regulatory Framework
    • Commitment to Environment
slide5
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
slide7
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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