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International Climate Change Regime UNFCCC – Kyoto Protocol – – “stabilization of greenhouse gas concentrations at a level that would prevent dangerous anthropogenic interference with the climate system” QELROs for OECD countries and EITs (Annex I) to reduce emissions of six GHGs on average 5.2% below 1990 levels in 2008 - 2012 Kyoto Mechanisms: JI; CDM; Emissions Trading Buenos Aires Plan of Action – – – Strengthen implementation of the Convention Demonstrate, inter alia, substantial progress on the Kyoto Mechanisms Decisions on the operational modalities of the Kyoto Mechanisms by CoP-6 Purpose of the PCF To help create a market for carbon offsets within the framework of the Kyoto Protocol through – – – demonstrating how CDM and JI trade can contribute to sustainable development providing “learning by doing” experience for Parties to the Protocol on key policy issues (for example, defining and validating baselines) building confidence that the trade can benefit both sellers and buyers What is the Prototype Carbon Fund? OECD governments/ companies buy offsets Client countries WB manages PCF (EITs/ developing countries) originate offsets $ $ CO2 Benefits: • risk diversification • reduced transaction costs Project selection and validation From Projects to Emissions Reductions Project implementation Periodic independent verification/ certification Distribution emission reductions Registration Protocol “PCF Value Chain” Transfer Emission Reductions Why would the private sector participate in PCF? ...one or more of the following reasons.... cost- effective way to meet Kyoto Protocol obligations (price of $ 20-30$/T) reduce entry barriers to carbon market. Learn from PCF at low cost to do your own Funds and trades increase image of environmental responsibility as a competitive tool profit in the secondary market PCF will catalyze Market Development through: Building private sector and host government confidence in offset trade (Bank will exit market when private sector enters) demonstrating intermediation and brokerage in mitigating risk and lowering transaction costs engaging major private capital in learning from PCF experience creating “high quality” uniform sovereign commodity developing generic contracts, procedures, protocols helping client countries and companies develop own “funds” building host government market capacity demonstrating price contracts that share risk acceptably between buyers and sellers in uncertain early markets Examples of Knowledge Generated “Additionality” and Baseline determination Validation, Certification and Verification protocols, procedures and outcomes sample project-based offset contracts (e.g. with host government, project sponsor) emerging market and risk analyses price formation agreements (e.g methods for risk and benefit-sharing) Targeted seminars and workshops on PCF experience and implications Option Space for Climate Change Mitigation $/Tonne Carbon Abated MC (Mini-) Hydro; Gas; Geothm’l Some CCT’s; CH4 Capture; Potential “Win-Win” Renewables; DSM; Nuke (?) 200 Lowhanging fruit 50 Pseudo“Win-Win” The IBRD/ $20 IDA Bill 0 Developing Renewables; Fuel Cells 40% 20% 80% 100% % or Volume Abated Win-Win Policy Dialogue IBRD/IDA/BI-L Private Cap. GEF Lubricant Lo-Cost J.I./AIJ Public-Private Investment Funds High-Cost GEF Buy-Down OECD R,D&D Venture Cap. Curtailment PCF Project Selection and Portfolio Criteria Generic: Adhering to UNFCCC, Bank standard, with emphasis on renewable energy projects Broad balance between CDM and JI with initial emphasis on CDM Not less than 2% and no more than 10% of Fund’s assets in one project Not more than 20% of Fund’s assets invested in Projects in the same host country Not more than 10% of the Fund’s assets in forest-based sinks (and only in EITs) Mostly renewable energy technology - but no more than 25% of the Fund’s assets in any one technology PCF Indicative Project Pipeline Endorsed: Latvia: Liepaja Solid Waste Management Costa Rica: Renewable Energy Small Scale Power Under consideration: Hungary: Tatabanya Biomass Power Kazakhstan: Mini Hydro Power Uganda: Renewable Energy Host Country Committee for the PCF Joined Deciding Latvia Russia Discussing Kazakhstan, Hungary, Poland Czech Republic, Slovakia, Ukraine Mexico, Costa Rica, Guatemala Argentina, El Salvador, Brazil Senegal Togo Egypt, South Africa Burkina Faso, Gambia, Uganda, Zimbabwe PCF Status and Time Line PCF Participants: Governments reviewing participation: 6 Companies signed MoUs: 20 Companies reviewing participation: 30+ Key Dates: Public Announcement - December 15, 1999 First Closing - February 2000 Organizational Meeting - February/ March 2000 Host Country Role in the PCF – Host country committee • • • – Composed of those countries either signing a letter of endorsement for a PCF project or a Memorandum of Understanding Provide advice and strategic guidance to the Fund Management Annual meetings, prior to Participants’ Meeting to provide effective input Observer status in Participants committee and Participants’ meetings