1. Saving a Toxic City through Eco Banking
The Case of Ulaanbaatar, Innovation and Micro-Finance

2. Part 1: Introduction and Case Study
– Ulaanbaatar Context
– Quick Study: XacBank
– Donor Relationships
Part 2: The Role of Voluntary Markets
– Introduction to the Carbon Cycle
– Monitoring
– CDM Conversion
Part 3: Roles for the Donor
– Current Partnership
– Understanding the Consumer Landscape
– Defining Objectives
Takeaways
Presentation Overview

3. Part 1: Introduction and Case Study

4. Poverty
• 60% of the city population lives in the Ger Districts (200,000 households).
• The average household income is 240,000 MNT ($148 USD).
• The bottom fifth quintile spend as much as 40% of their monthly winter
income on heating fuels.
Climate
• 9 Month Heating Season
• Average Winter Temperature: -20C
Pollution
• On average, households located in the Ger Districts use 5 tons of coal and 1.5
tons of wood per year.
• Most polluted city in the world by particulate matter during heating season
Sources: - ADB Grant Assistance Report August 2008
- Energy Efficient and Cleaner Heating in Poor, Peri-urban Areas of Ulaanbaatar,
World Bank Consultant Summary Report on Activities, October 2008
Intro/ Case Study

5. Where to Start? Addressing Market Barriers.
• Financing
• Products
• Marketing/ Distribution
• Long Term Program Sustainability
Intro/ Case Study

6. X
Financial & Technical Assistance
FMO Loan Xacbank Pass lower % to2.5 Million Consumers
Loan Terms
Expense Coverage
=$$Number
of Units
for loan expenses
Expense Coverage
$12 for each Ger Blanket
$9 for each Stove
$4 for every 3 tons of Fuel
Technical Assistance Funds
50%
(Cost Sharing )X
MicroEnergy Credits
- Provided Eco Marketing
and Product Launch Expertise
- Access to Carbon Markets
=
Affordable
Technical
Assistance
Intro/ Case Study

7. Energy Efficient Stove
- GIZ Engineered
- Designed to circulate and draft
heat for longer periods of time
- Retains heat longer using a
specially designed insulating brick
- Save up to 66% on monthly fuel
costs
- Pays for itself within 5 months
Total Cost Interest
Monthly
Payment
Fuel
Expenditure
w/o Stove
Fuel
Expenditure
with Stove
Fuel + Loan
Payment
Monthly
Savings
152,000 17% 7,550 82,600 41,300 48,850 33,750
Intro/ Case Study

8. Highly Insulated Ger Blanket
UNDP design certified
Six components:
- Roof insulation covering
- Wall insulation covering
- Roof opening insulation
- Wall lower edge strip
- Door insulation
- Water proof covering
- Save up to 50% on monthly fuel
costs
- Pays for itself within 14 months
Total Cost Interest
Monthly
Payment
Fuel
Expenditure
w/o Ger
Fuel
Expenditure
with Ger
Fuel + Loan
Payment
Monthly
Savings
550,000 17% 27,190 82,600 41,300 68,490 14,110
Intro/ Case Study

9. Lessons Learned
• Marketing matters
• Loan terms must match
client needs
• Clear operational
structure must be in place
Intro/ Case Study

10. Part 2: The Role of the Voluntary Markets

11. Ger pollution before use of
Financed Energy Efficient Product
8 Tons 3 Tons
Ger pollution after use of
Financed Energy Efficient Product
CO2 reduced
by 5 Tons
5 Tons
X
Carbon
Credit
sold by
MEC
=$$for bank
Carbon Offset Basics Carbon Financing

12. Carbon Monitoring Carbon Financing
1. Product is monitored at time of installation via smart phone (GPS is
collected and installation is confirmed as active)
2. XacBank follows up every three months with the client through phone or
an in-person visit
Monitoring Methodology prepares program for CDM accreditation via PoA

13. Day 0: Product Installed
and Monitored
Day 91: Product
Monitored by Phone
Day 183: Product
Monitored In-Person
Day 274: Product
Monitored by phone
Carbon Payment Cycle
¼ of Yearly Carbon
Revenue Earned
¼ of Carbon Yearly
Revenue Earned
¼ of Carbon Yearly
Revenue Earned
¼ of Yearly Carbon
Revenue Earned
Carbon Financing

14. $5.00
$5.00$5.00
$5.00
Hypothetical 1: Product Operated Year Round
Assumptions:
Yearly Offset: 4 tons
Price per ton: $5
Yearly Revenue: 4 x $5 = $20
5 year Revenue: 5 x $20 = $100
Day 0: Product Installed
and Monitored
Day 274: Product
Monitored by phone
Day 91: Product
Monitored by Phone
Day 183: Product
Monitored In-Person
Carbon Financing

15. $5.00
$5.00
$5.00
Day 0: Product Installed
and Monitored
Day 274: Product
Monitored by phone
Day 91: Product
Monitored by Phone
Day 183: Product
Monitored In-Person
Carbon Financing
Assumptions:
Yearly Offset: 4 tons
Price per ton: $5
Yearly Revenue: 3 x $5 = $15
5 year Revenue: 5 x $15 = $75
Hypothetical 2: Product Operated 9 months

16. Carbon Revenue Stream Example
Assumptions:
- EE Product is sold and monitored on October 1st
2010
- EE Product is used continuously over the five year period
Note:
Because the product was
sold in the Fall, it only
generated $8 of revenue in
the first year.
The remaining revenue of the product shows up in the
6th
calendar year
Carbon Financing

17. Voluntary Markets CDM Markets
Registration Costs: $0 $200,000+
Registration Period: 0 to 9 months 550+ Days
Price per Ton: $5 to $7 Market (2011 Est. $22+)
Credit Pre-purchase: No/ Not Yet Yes
Validation Period: 5 years 10 to 21 years
Voluntary Markets v. CDM Carbon Financing

18. XacBank will Use The Carbon
Revenues To:
CARBON REVENUES
ALLOW XACBANK TO:
- Cover Project Costs
- Expand marketing to reach
more clients
- Provide Client education
and Awareness
- Lower interest rates or
principal costs
- Fund ongoing customer
Service
- Create a guarantee fund for
supplier SMEs
- Seed fund technical
assistance for other Eco
products
Carbon Financing

19. Carbon Revenue Utilization
Market Maturity (Time)
ProductionCapacity
Carbon Revenue Utilization
Carbon Financing

20. Part 3: Donor Roles

21. Client chooses product and
is issued an invoice that they
take to the Branch to pay
Client deposits or
takes a loan to pay
contribution at local
Branch and takes
receipt to Product
Center
Client turns in receipt, fills out a
customer agreement form and
collects product
DonorDonor
Producer
Account
Producer
Account
DirectlydepositsClient
Contribution
Subm
its subsidy requests
for all
delivered
products once
a
week
Donor pays bulk subsidy to
each producer based on
XacBank submission
Client Cycle and Subsidy Triangle Donor Roles

22. • Is there an established Market for EE producers?
– Do producers/ suppliers exist?
– What type of financing is available to both producers and
consumers?
• What are the cultural implications behind EE product
demand?
– Is the product viewed as an invention or an innovation? (Solar v.
Stove)
– Are you competing against traditional products, if so what are
their price points? (Stove)
Donor RolesUnderstanding the Consumer Landscape

23. (left blank on purpose)
Donor RolesDefining Future Programs

24. Takeaways
Part 1: Case Study
• There are natural local partners
• Micro-Finance works for Energy Scale Up
Part 2: Voluntary Markets
• The Voluntary Markets allow Scale Up
• Conversion to CDM is possible
Part 3: Donor Roles
• Consumer Marketplaces are different and require different
solutions