World Bank: Carbon Finance Activities

Transcription

1 PPPs in Infrastructure Day 2 Session 10.2 World Bank: Carbon Finance Activities Jari Väyrynen Carbon Finance Unit, The World Bank

2 Day 2 Risks & Responsibilities Session 10 Alternative Financing Sources: Project Finance Session 10.2 Carbon Finance Carbon Finance Mobilizing ActivitiesCapital Markets Session 6 Service Standards, Tariffs & Subsidy Output Based Aid Day 2 Session 9 Combining PPPs With EU Grants Session 7 Responsibilities & Risks Session 8 Contingent Liability Management Subnational Projects

3 What is carbon finance? New and additional source of revenue for supporting environmental, energy diversification and efficiency goals, better waste management practises etc. Carbon finance is usually not investment finance; instead, provides a cashflow injection Can leverage investment finance Some investors now taking positions and tie that to stake in the carbon reduction credits Based on a market created by regulation (international, regional/eu, and domestic)

4 Regulatory basis for Carbon Finance: UNFCCC & The Kyoto Protocol Kyoto targets may be achieved by Carbon Finance Industrialized countries reducing domestic emissions Trading emission permits ( Assigned Amounts Units ) among governments Most Central and Easter European countries have excess Assigned Amount Units they could trade using the International Emissions Trading mechanism of Kyoto Purchasing emission reductions credits from projects; baseline and credit system In developing countries Clean Development Mechanism (CDM) generating CERs In economies in transition Joint Implementation (JI) generating ERUs

5 Regulatory basis for Carbon Finance 2: EU Emissions Trading Scheme Came into force January 1, 2005 Cap and trade system covering 12,000 installations One of the instruments to achieve EU Kyoto Compliance of -8% The main driver in the carbon market Based on Allowances (EUAs) Linked to Kyoto Protocol Companies can import limited amounts of Emission Reductions from CDM and JI 1 EUA = 1 CER or ERU Most activities that would have been interesting as JI projects are covered by the EU ETS and better off in it Leaves for JI only small scale activities and greenhouse gases not covered by ETS

6 Market Value & Growth 2007 (in MUS$) Project-Based Transactions x 3.5 Allowance Markets x x 1.3 Voluntary & Retail 270 CDM 7,400 x 4 JI 500 x 12 Secondary CDM 5,500 New South Wales Certificates 220 EU Emission Trading Scheme 50,100 x 2 Chicago Climate Exchange 70 x 1 x 2

7 Impact of Carbon Finance INCREMENTAL IRR - CARBON FINANCE Renewable Energy ER Prices Purchase period 5y ('08-'12) 7y 10y 14y 21y Impact per Unit $ % 0.6% 0.8% 1.0% 1.2% $3.16 / MWh $ % 1.4% 1.7% 2.1% 2.3% $6.33 / MWh $ % 2.1% 2.7% 3.1% 3.3% $9.49 / MWh $ % 2.9% 3.6% 4.1% 4.5% $12.65 / MWh INCREMENTAL IRR - CARBON FINANCE Solid Waste Purchase period ER Prices 5y ('08-'12) 7y 10y 14y 21y 0.58 tco2e/tsw 0.74 tco2e/tsw 0.93 tco2e/tsw 1.11 tco2e/tsw 1.29 tco2e/tsw Impact per Unit $ % 24.1% 29.2% 31.7% 32.8% $41 / MWh $ % 59.1% 62.4% 63.5% 63.8% $82 / MWh $ % 93.3% 95.4% 95.9% 96.0% $124 / MWh $ % 127.3% 128.6% 128.8% 128.9% $165 / MWh *tsw = ton solid waste

8 The World Bank s role in the carbon market: the first 10 years Catalyze the carbon market (early participant since 2000) Learning by doing: Provide information for negotiating Parties 25% of all Approved Methodologies in 2005 Crowd in private sector Develop business models in the carbon market E.g., Programmatic CDM Promote sustainable development and flow of new financial resources Buy emission reductions for compliance as trustee of carbon funds

9 How World Bank carbon funds work Industrialized governments and companies Fund resources ($) CO Equivalent 2 Emission Reductions World Bankmanaged carbon funds ER payments ($) Developing countries/ Economies in transition CO Equivalent 2 Emission Reductions World Bank the Trustee for 10 different funds 17 governments and 65 companies as investors $ 2 billion capital Signed about 100 contracts for $1.55 billion so far Return to investors in emission reduction credits only

10 Technological distribution Number of projects Geothermal 4% Hydro 20% SF6 Recovery 1% Transportation 1% Waste Management 17% Wind 6% Bagasse 2% Coal Mine Methane 3% Biogas 1% Biomass 4% Oil and Gas Sector 4% Land Use, Land- Use Change and Forestry 20% HFC-23 Destruction 2% Energy Efficiency 15%

11 Regional Distribution of CFU Portfolio (by # of projects) M iddle East & North Africa 3% South Asia 8% Africa 17% Latin America & Caribbean 33% East Asia Pacific 23% Europe & Central Asia 16%

12 World Bank Carbon Fund Projects in the ECA Region Albania: Assisted Natural Regeneration Bulgaria: Pernik District Heating Bulgaria: Sofia District Heating Bulgaria: Svilosa Biomass Power Czech Republic: RE and DH Umbrella Project Hungary: Pannonpower Pécs Fuel Conversion Latvia: Liepaja Solid Waste Management Poland: Puck Wind Power Plant Poland: Stargard Geothermal Poland: Walbrzych Coke Oven Gas CHP Romania: Afforestation

13 The next 10 years Use the carbon market to tackle mitigation; start now! Support long-term investments for transition to low-carbon economy Integrate carbon finance into public and private investment decisions Shift towards systematic programs of investments in a strategic way Help establish a long-term regulatory framework that provides certainty of a carbon price signal Provide incentives for development of low-carbon technology Create incentives for avoiding deforestation

14 Two new carbon facilities Carbon Partnership Facility (CPF) Use carbon finance / carbon markets to catalyze a transformation toward low-carbon economic development Partnership between buyers and sellers of carbon credits Scaling-up of carbon finance: Programs and sector interventions Long-term emissions from all sources Low-carbon technologies Forest Carbon Partnership Facility (FCPF) Reduce emissions from deforestation and degradation (over 20% of global emissions) Pilot an output-based payment system for carbon credits derived from protection of forests Both approved by World Bank Board in September 2007.

15 Green Investment Schemes: An opportunity for Central and Eastern Europe Most Central and Eastern European countries have excess Assigned Amount Units (AAUs) they could trade using the International Emissions Trading mechanism of Kyoto Protocol Green Investment Scheme is a mechanism established by the selling country to assure buyers that proceeds from AAU trades will finance bilaterally agreed environmental projects and programs through and beyond Pilot transactions being undertaken by Latvia, Hungary, Czech Republic and Poland, others may follow Vary from some million AAUs to potentially tens of even hundeds of millions of AAUs Russia and Ukraine may enter as big sellers

16 PPPs in Infrastructure THANK YOU! Jari Väyrynen Carbon Finance Unit, The World Bank

17 Further Information

18 Contacts For comments or further details contact: Penny Williams Jari Väyrynen Cledan Mandri-Perrott Sabino Escobedo David Stiggers

19 PPPs in Infrastructure THANK YOU!