Post on 15-Dec-2015
transcript
World Bank Carbon Finance:
Making Markets for Carbon
Regional Scientific Workshop: Land Management for Carbon Sequestration in West Africa
Bamako, MaliFebruary 26-27, 2004
www.carbonfinance.org
The Bank’s Mission and Climate Change
Bank’s Mission:
Poverty reduction and sustainable development
Heavy Engagement in Climate Change because: Accept IPCC predictions on trends and impacts Poor countries will be worse off and poorest people have
the least capacity to adapt, especially the rural poor
Private Capital and Technology Transfer: Kyoto’s flexible mechanisms and lower marginal cost of
abatement provide unprecedented incentives for private investment in clean technology, agriculture and forestry in developing and transition economies
World BankCarbon Finance Vehicles
BioCarbon Fund
Netherlands CDM Facility
Italian Carbon Fund
How the Funds Work
Industrialized Countries
and Companies
Host Countries
and Communities
$ Finance $Technology
Finance
CO Equivalent2
Emission Reductions
PCF
Other project fundingPayment on
delivery
Source: PCF calculations, based on database assembled with Natsource,Co2e.com and PointCarbon
0
10
20
30
40
50
60
70
1996 1997 1998 1999 2000 2001 2002(est.)
Est
imat
ed v
olu
mes
tra
nsa
cted
(M
tCO
2e)
Vintages up to 2012 only
Carbon Trades: estimated quanitity
Buyers are becoming more diverse
Source: Authors’ own calculation, based on transaction database assembled with Natsource, Co2e.com and PointCarbon
1996-2000 2001-2002
Canada
USA
Netherlands
Other WEU
Japan PCF
Australia
Canada
USA
Other WEU
Japan
Australia
PCF
Netherlands
Market Intelligence:“Few Countries Benefiting, Little Private Sector Buying”
Market: cumulative 200 million tonnes CO2 traded ($500 million) since 1996
Five-fold increase between 2001 and 2002
But … Only 43% of all carbon transactions made in CDM/JI (2001-
2002), dominated by Dutch and PCF
Only 13% of the private sector’s purchases were in CDM (2001-2002)
African countries, smaller countries and small-scale projects are largely bypassed
CDM as a Source of Compliance Assets CDM/JI will fall far short of the 2 billion ton
plus cumulative “compliance gap”
Even at 50% compounded per year in CDM activity, CDM is unlikely to deliver more than 350 million tons ERs before 2012
Aggressive Chinese CDM participation may increase this by 150-250 tons CO2e million maximum
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Summary
CF to small projects in small CDM countries, poor areas
Generate high value ERs “Development + Carbon” ($3 to $6)
Catalyze private capital to alleviate poverty
Local intermediaries Highly replicable
Community Development Community Development Carbon Fund (CDCF)Carbon Fund (CDCF)
BioCarbon FundBioCarbon Fund
Extend CF to agricultural, forestry sectors
Generate cost-effective ERs from sequestration and conservation ($3 to $4)
Support projects that conserve biodiversity, combat desertification, alleviate poverty, explore adaptation options
CDM and JI
Learn by doing prototype
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Who is contributing (investing)?
Committed contributions
Canada, Italy & Netherlands; others expected
Seven companies so far, mostly Japanese, but North American and European companies expected
Community Development Community Development Carbon Fund (CDCF)Carbon Fund (CDCF)
BioCarbon FundBioCarbon Fund
Level of Interest stage only
Canada, Italy
Japanese & European “finance” companies
Japanese energy companies
Major NGOs
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Benefits
Private capital flows for projects that help reduce poverty
Investment in cleaner technologies and best practices
Ongoing partnerships Capacity building for communities and
intermediaries
Host Countries and ProjectsHost Countries and Projects
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Benefits
Acquire high value ERs for compliance, trading, insurance
Cheaper transaction costs: expertise of World Bank carbon finance team
Risk mitigation via diversification, hedge future costs
Knowledge of carbon asset creation, market intelligence:
internships, training, advice
Demonstrate social responsibility
Access to additional CO2e in each deal
Leverage private investment for sustainable development
Influence future regulations
Participants Participants (Companies & Governments)(Companies & Governments)
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
BioCarbon Fund
Harnessing the carbon market to sustain ecosystems and alleviate poverty
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
BioCarbon Fund Rationale Demonstrate technical and policy issues of Land use, land-
use change and forestry (LULUCF) activities: learn by doing prototype
Extend carbon finance to agriculture and forestry sectors – particularly in countries with limited opportunities for energy projects
Multiple goals: Atmospheric benefit, local environmental benefits, social benefits and, where possible, explore adaptation options
Meet demand for cost-effective ERs from mandatory and voluntary markets (buy at $3-4/ton/CO2e)
CDM and JI
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Triple Goals of the BioCarbonFund
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
AtmosphericAtmospheric benefit
The project must contribute to reducing GHG in atmosphere
Strict additionality test
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Environmental Goal A project must make a
positive contribution to improving the quality of the environment, e.g. Conserve biodiversity Reduce soil losses Rehabilitate degraded
lands Such benefits are an
integral component of well chosen projects – not an add on
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Social Goal A project must make a
positive contribution to improving the livelihoods of local people and especially the poorest and indigenous peoples, e.g. Additional income Income stability Education, capacity
building, technology transfer
Health benefits
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Additional goals Contribute to adaptation to climate
change in host countries
Seek opportunities for synergies between the major conventions covering climate, biodiversity and desertification (land degradation)
Maximize the opportunity for learning by doing
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Two Windows
1st Window: JI: All LULUCF
CDM: Afforestation/Reforestation
2nd Window to explore activities beyond afforestation/reforestation Restoration of degraded forests, revegetation, improved
tillage, conservation of remnant vegetation
2nd Window is subject to the same standards as all other activities Additionality, permanence, measurement, verification
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
First Window In-fill planting for forest
restoration
Community forestry
Agroforestry
Biofuels
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
BioCF 2nd Window
Landscape Management
CDM Host countriesRevegetation Soil Carbon
Management
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Project Portfolio 90+ Project Idea Notes received already
20-30 good candidates
Supply > Demand: Buyers’ market
BioCarbon Fund will be able to support 10-20 projects
Early screening on financial, environmental and social criteria
Diversity of projects (project types and regions)
Seeking more dryland projects (and funding for them)
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Example Projects .. 1 Community-based tree
planting to combat land degradation
Community groups organised through existing social networks are trained in tree planting and maintenance
Trees reduce soil erosion, provide shade and produce food and fuelwood
BioCF funding supports the teams of trainers and carbon verifiers and helps establish the tree nurseries
Landscape Management Project Coordinated by private
company working with local organizations & government agencies
Forest restoration and protection for conservation and reducing soil degradation
Improved agricultural practices and agroforestry that reduce pressures to clear native forests
Small scale plantings for high quality timbers for longer term income
BioCF funding makes the package as a whole financially feasible
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Example Projects .. 2 Forest protection via
plantings A threatened conservation
area will be protected from encroachment by establishing buffer plantings of fast growing native species
Local people will have the rights to use these areas for fuel and food collection
BioCF funding is the core financial input to make the project feasible
Sugar and biofuels Project will reduce field
burning of sugar cane and its wastes and use them instead as biofuels
Small plantings of fast growing trees will be established to ensure continuity of fuel supply
BioCF vetting and funding will help overcome barriers by demonstrating viability of the concept, and opening the way to additional carbon sales
Tannin, biofuel, and land rehabilitation A business that engages local
communities as “outgrowers” of trees for tannin production and biofuels from the waste is no longer financially viable
Carbon sales through the BioCF can change this and allow the scope of the business to expand
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
BioCarbon Fund and Adaptation
Adaptation challenge: to increase the biological and social resilience of communities reliant on agricultural and forest ecosystems
Fund can act as a catalyst for changing land-use practices Source of funding Demonstration of new
practices/crops Conservation of buffers, genetic
resources etc
Most Host Countries are
more concerned with successful adaptation to
climate change than with mitigation
CF
Carbon Carbon
Finance Finance
Products Products
of the of the
World World
BankBank
Seeking synergies between the major environmental conventions
Climate, environmental and livelihood goals
Compatibility with national sustainable development goals
Local participation: communities, NGOs, private and public sectors
Actions that assist adaptation to climate change
Emphasis on managing the whole landscape
UNCCD