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“ Making the Carbon Market work for Development Finance ”. ADB Carbon Market Program. Bruce Dunn Environment Specialist GEF Carbon Finance Meeting 15 November 2010, Washington, D.C. Growing Carbon Market. (Forecast). Source: Point Carbon. However…. Global CDM Slowdown?. - PowerPoint PPT Presentation
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““Making the Carbon Market work for
Development FinanceDevelopment Finance”
ADB Carbon Market ADB Carbon Market
ProgramProgramBruce Dunn
Environment Specialist
GEF Carbon Finance Meeting
15 November 2010, Washington, D.C.
Source: Point Carbon
Growing Carbon Market
(Forecast)
However…However…
2008 2009 2010 2011 2012
Final figures Final Figures Forecast Forecast Forecast
Mt € m Mt € m Mt € m Mt Mt
EU ETS total 3,091 66,993 5,386 69,374 5,350 95,165 6,140 6,950
OTC 1,816 40,048 2,313 30,112 2,300 41,400 2,600 3,000
exchanges 1,152 25,488 2,851 37,110 2,800 50,400 3,300 3,700
auctions 42 965 78 1,019 90 1,620 70 60
options 80 492 144 1,134 160 1,745 170 190
CDM total 1,609 24,172 1,590 17,520 1,770 21,781 2,160 2,520
primary 549 6,039 304 2,548 240 2,160 170 130
secondary 1,037 17,943 1,252 14,776 1,490 19,370 1,940 2,330
options 23 189 34 196 40 251 50 60
JI 72 720 44 399 55 440 40 25
AAU 43 330 138 1,379 125 1,250 30 10
RGGI 71 178 765 1,773 985 1,590 1,085 985
Other total 34 119 75 284 110 440 110 120
Sum 4,920 92,511 7,998 90,729 8,395 120,666 9,565 10,610
Global CDM Slowdown?
Source: Point Carbon
Kyoto Protocol commitments ending in 2012; no agreed
international framework yet on post-2012
Lack of long-term price signal to give incentive for
economies to invest in low-carbon alternatives
Lack of investment/equity – carbon market contributing
to cash flow of approved projects, but rarely contribute
to project financing
Issues
?
Year: 2009 10 11 12 13 14 15 16 17 18 19 20 21
ProjectApproval
ProjectCompletion
Car
bo
n C
red
it V
olu
me
Issue 1: Post-2012 Uncertainty
Few buyers
End of Kyoto Commitments
Emission reduction portfolio (e.g. 10 year period)
Source: UNEP Riso Centre (March 2010)
Issue 2: CDM adds benefit to entities with (access to) funds in the
first place?
Distribution of CDM Projects by Scope(Registered as of July 2010)
ADB Carbon Market Program
Overview
ADB’s Climate Change Program
Finance Knowledge Partnership
Scaling-up Clean Energy
Encouraging Sustainable Transport and Urban Development
Managing Land Use and Forests for Carbon Sequestration
Strengthening Policies, Governance and Capacity
ModalitiesModalities
Pri
ori
ties
Pri
ori
ties
Promoting Climate-resilient Development
CMP
Carbon Market Program
Carbon Funds
1. Need underlying finance
2. Require carbon market technical support
3. Desire highest prices/best conditions for CERs
4. Seek upfront payment for credits to fill finance needs
Consultation in DMCs (2005-2006)
Question: “What do you need to scale up Question: “What do you need to scale up
low-carbon projects?”low-carbon projects?”
ADB long-term finance
Expert technical team
Dedicated credit marketing service
Carbon co-finance vehicle: Carbon Funds
Ongoing ADB Climate Change Projects Ongoing ADB Climate Change Projects (Sample)(Sample)
Underlying Finance:Ongoing projects (sample)
Country Project Type
Indonesia Geothermal power
India Wind power
Lao, PDR Small hydropower
Bangladesh Waste composting
China, PR Geothermal space heating
Pakistan Hydropower
Philippines Energy-saver bulb distribution
Thailand Biomass power
Mongolia Boiler efficiency improvement
Uzbekistan Small hydropower
China, PR Urban transport system
Upstream support in project preparation phase
Due diligence: technical, financial, legal, safeguards, governance
Capacity building trainings
Carbon credit valuation
Documentation preparation for credits (PIN, PDD, methodology)
Obtaining host country approvals
Facilitating project Validation & Registration
Downstream support in project execution and commercialization
Implementation / commissioning
Monitoring & Verification
Certification & Issuance of CERs to sponsor/developer & fund
Technical Support for CDM
Integrate Carbon Credit Valuation
Lower Additional Transaction Costs
General Project
Analyses
Additional
Analysis for
Potential
Emission
Reduction
Projects
Credit Marketing Facility
Terms of reference and fee structure pre-negotiated with
ADB; contracts directly with project entity as “seller’s
agent” to find best offer from buyers
Agents are only allowed to collect fee from the seller in
percentage terms of actual funds transferred from the
buyer to the seller
Currently retained agents
TFS Green: 2-3.5% charge depending on project size (in CER
volume)
CM Capital Markets: 1% charge regardless of project size
CMF Agents
Asia Pacific Carbon Fund (APCF) for credits up to end
of 2012, and Future Carbon Fund (FCF) for post-2012
Co-finances projects alongside ADB to help fill project
financing gap
Purchase of credits generated from now up to 2020
Can purchase 25-75% of expected carbon credits on
upfront payment basis and the remaining credits via
payment on delivery
Lower transaction cost if debt/equity financier is ADB
Carbon Co-Finance: Carbon Funds
Certain funds today, for commodity with uncertain
value in the future
Reduced budget commitments to close the financing
plan of projects
Comprehensive technical and implementation support
Extra credits from successful project implementation
can be marketed with ADB support for further financial
upside
CMP Summary: Main Advantages for Project Developers/Sponsors
Tech-transfer CDM to accelerate the transfer and diffusion of energy-efficient equipment/appliances and other clean energy technologies using CDM
Broadening the Regional Distribution of CDM through capacity building and project identification/development seminars in collaboration with IGES and UNFCCC Secretariat
Asia-Pacific REDD financing as part of the global REDD partnership (led by the World Bank FCPF and UN-REDD); possible future public-private regional REDD carbon fund
Other Ongoing Initiatives
THANK YOU!
Bruce Dunn / Toru Kubo
bdunn@adb.org / tkubo@adb.org
Regional and Sustainable Development Department
General inquiries: adbcdm@adb.org
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