The Costs of doing nothing : the damages from business-as-usual would be equivalent to at least 5 and up to 20% of consumption a year, depending on the types of risks and effects included.
The costs of removing most of that risk , getting to 550 ppm or below, are around 1% of GDP per year. The cost could be above or below 1% depending on policies, technological progress and ambitions but would be in this region.
Source: Stern Review, 2006
Global Emissions by Sector Source: Stern Review, 2006
Bank start with the first carbon fund , in 1999 (US$ 180 million, Prototype Carbon Fund) to purchase carbon credits.
The WB portfolio is about US$ 2 billion
71% ($1.3 billion in East Asia and Pacific Region)
The WB purchases carbon emission reductions on behalf of our Fund Participants
Focus in on energy efficiency, industrial gas emission reduction, waste management, reforestation
How Carbon Funds Work Industrialized Governments and Companies Developing Countries and Communities Bank Managed Carbon Fund $ Technology Finance Payment on delivery of emissions reductions, not up-front capital costs $ Technology Finance CO Equivalent 2 Emission Reductions CO Equivalent 2 Emission Reductions
Basic Elements of Carbon Finance and Carbon Economics
Banks Investor Debt Equity Waste Management Agreement $$ Service $$ Carbon Credits Role of carbon finance in project financing Carbon Fund $ $ 2 2 Emission Reduction Purchase Agreement Upfront payment as “Equity” Less than 25% of contract Collateralization of ERPA
Both public and private capital – new and additional sources for sustainable development financing
Payment on Delivery – payments are made upon annual independent verification that emissions reductions have occurred.
Unlike most buyers in the market, Participants in Bank Funds agree to take Kyoto regulatory risk: Hence, our carbon fund contracts are “bankable”, allowing more projects to get financing than if regulatory risk remained open.
Payment stream is in hard currency , reducing financing risk for foreign lenders
Preparation and review of the Project Project Design Document Validation process Negotiation of Project Agreements Periodic verification & certification Construction/Implementation and start up Project completion 3 months 2 months 2 months 3 months 1-3 years Up to 21 years
Project Idea Note
Carbon Finance Document
Letter of Endorsement from Host Country
Validation by independent Accredited Operation Entity
Submission of new method to CDM EB if needed
Project Appraisal and related documentation
Letter of Approval from Host Country
Emission Reduction Purchase Agreement
World Bank/CDM Project Cycle – The Manufacturing Process for Emissions Reductions
Initial verification report
Verification and certification
Philippine Projects supported by the World Bank Carbon Finance Facilities
Northwind Wind Power Project – ERPA signed December 2004
Nasulo Geothermal Project – ERPA signed December 2005
Laguna de Bay Solid Waste Management – ERPA signed June 30, 2006
Laguna de Bay Reforestation – ERPA signed June 30, 2006
Northern Negros Geothermal Project – ERPA signed February 2007
Ethanol Plant Wastewater Treatment Project – ERPA signed on January 14, 2009
Pipeline WB Carbon Finance Projects in the Philippines