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Breaking Legal Grounds….
Implementing a PCF Project
Sao Paulo, Brazil - November 20, 2002
Charlotte Streck, PCF
Presentation/Discussion of
I. Role of the Host Country: Legal Framework, Project Approval
II. Legal Structure of a CDM (PCF) Project
Role of the Host Country
• International Law: HC is party to the UNFCCC and eventually to the Kyoto Protocol
• HC represented in the COP [COP/MOP]
• For CDM participation: HC has to meet participation requirements
• HC approves CDM projects
The Host Country is not
[unless the host country is also owning the project]
• Responsible for developing project documentation
• The guarantor for the environmental credibility of the project
• Liable for any action [or lack of action] with regard to the project
Marrakesh Accords
40. The designated operational entity shall:
(a) Prior to the submission of the validation report to the executive board, have received from the project participants written approval of voluntary participation from the designated national authority of each Party involved, including confirmation by the host Party that the project activity assists it in achieving sustainable development;
Host Country Approval
• Confirmation that the project contributes to the sustainable development of the country
• Voluntary participation
• Authorization of project participants
Institutional Aspects of the CDM
Establisment of a National Authority for the CDM. Such National Authority:
• Evaluates projects
• Defines the priorities for the sustainable development of the host country
• Issues a Letter of Approval
Creation of a National Authority for the CDM
• Definition of mandate and mission• Legal nature• Notification of the UNCCC Secretariat• Harmonization of the CDM with the priorities for the
sustainable development of the country• Evaluation of the legal framework in the host country
• Coordination with the UNFCCC focal point
Legal Structure of the National Authority
• Definition of the mandate
• Legal status
• Authorization for the sale and export of ERs
• Authorization to approve projects
• Guidelines for the approval of projects
The Catalytic Function of the National Authority
• Facilitator/broker between offer/demand
• Promoting renewable energy in the country
• Establishment of contacts between potential buyers and sellers
• Identification of projects
• Awareness raising, Capacity building
Prototype Carbon Fund
World Bank administered multi-donor Trust Fund to finance projects in developed countries and countries with economies in transition to generate greenhouse gas emission reductions which could be transferred to the participants in the fund thereby assisting them in satisfying their obligations under the Kyoto Protocol.
Organizational Structure of the PCF
World Bank
As the “PCF Trustee”PCF Participants- 17 companies and- 6 Governments
PCF Fund Management Committee- 5 Sector Managers
Fund Management UnitFund Manager + Staff
Participants Committee- 4 companies- 3 Governments
Host Country Committee
Host Country Steering Committee
A Major Legal Challenge
• First Private Public Fund administered by the World Bank to provide returns to donors/contributors
• Designed to buy something that does not exist• From people who may not be able to sell it• Which the World Bank cannot own and• With governing rules that keep changing
Basic Approach
Emission Reductions
(Host Country + Project Entity)
Payments (PCF)
World Bank /PCF
UNFCCC rules
Host government (transferring
country)
Project entity
PCF : Actors involvedPCF : Actors involved
Annex 1 Government (acquiring country) –
PCF Participants (Gov. + Priv.)
Host Country
PCF Trustee
Project Entity
1. Letter of Project Endorsement
National Legislative Framework / Agreement / Authorization
4. Emission Reductions Purchase Agreement
Legal Agreements for PCF Projects
2. Letter of Intent
3. Letter of Approval
PCF Key Legal Instruments
• Letter of Project Endorsement from the Host Country
• Letter of Intent• Letter of Approval• Emission Reductions Purchase
Agreement+ Letter of Approval from the Host Country
16
Letter of Project Endorsement Host Country endorses further development of
the project for the purposes of the UNFCCC/KP
Host Country:
• Signals Commitment to render aid and assistance (e.g. registration of the ERs in any international or national regulatory regime)
• Approves projects for KP purposes
• Allows access to information
Letter of Intent
• Project Sponsor agrees– To reserve exclusive right to ERs generated by the
project– To recover project preparation costs in case project
sponsor decides not to negotiate an ERPA
• PCF Trustee agrees – To purchase ERs under specific terms
Letter of Approval
Host Country:
• Formally approves the Project for the purposes of Article 12 of the Kyoto Protocol
• Authorizes the Participating Entities
• Confirms the Contribution of the Project to the Sustainable Development of the Country
Emission Reductions Purchase Agreement
PCF Trustee Project Entity
Purchase Price (net of costs)
Exclusive Right of Certification and Verification of purchased ERs (ERs)
Transfer of ERs
Main Elements of Emission Reductions Purchase Agreement (ERPA)
• Purchase of ERs from the Project Entity / Payment for achieving ERs
• PCF commits to arrange for initial and periodical verification, validation and certification.
• Transfer of ERs
PCF Trustee
Project Entities
2. Letters of Project Approval
3. Standard Emission Reductions Purchase Agreements
Legal Agreements for PCF Projects
Model for Small Projects
Host Country
1. Letter(s) of Intent
PCF Trustee
Legal Agreements for PCF Projects
Model for working with Intermediaries
Host Country
Intermediary
1. Intermediary Agreement
2. Letters of Approval
Project Entities
3. Emission Reduction Purchase Agreements
Questions ?
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