Introduction CPF Objectives... 3 Structure of the CPF Progress Report... 4

Transcription

1 2012 ANNUAL REPORT

2 Table of Contents Introduction... 3 CPF Objectives... 3 Structure of the CPF... 3 Progress Report... 4 First Tranche of the Carbon Fund... 4 Carbon Asset Development Fund... 4 First Tranche Portfolio/Pipeline... 4 CDM Methodology Development/Innovation... 7 CPF Instrument/Policies... 8 CPF Meetings and Workshops... 9 Plans for the Coming Year Financial Report Annex - CPF First Tranche Pipeline Overview Brazil - Solid Waste Management Program Vietnam - Renewable Energy Development Program Morocco - Municipal Solid Waste Management Program China - Hebei Regional Biogas Program Thailand- Energy Efficiency (EE) Program Tanzania Renewable Energy Program Jordan - Amman Green Growth Program (City-Wide Approach) Egypt - Wind Program P a g e

3 Introduction CPF Objectives The Carbon Partnership Facility (CPF) is one of the World Bank s major carbon finance instruments for the post-2012 period. The CPF is designed to innovate in scaling up the use of carbon market mechanisms, and to develop emission reductions and support their purchase through the provision of carbon finance to long-term investments. In order to scale up carbon finance, the CPF collaborates with governments and market participants on investment programs and sector-based interventions that are consistent with low-carbon economic growth and the sustainable development priorities of developing countries. The Facility draws on the World Bank s financial and knowledge resources to strategically integrate carbon finance with sustainable development plans by aligning carbon finance with World Bank country assistance programs, and often linking with lending operations. It facilitates the implementation of lowcarbon programs across an array of sectors and technologies - energy generation and distribution, energy efficiency, and waste management - in situations where governments need policy measures or investments. In the current Kyoto period, the CDM has operated largely on a project-by-project basis. The CPF utilizes scaled-up, programmatic approaches, initially the CDM Programme of Activities, to enable carbon finance to support partner country initiatives that move toward low-carbon economies. It will also target areas that have not been reached effectively by CDM in the past, such as energy efficiency and will pilot city-wide carbon finance programs. The CPF brings together industrial country buyers and developing country sellers of emission reductions, as well as developing and donor country governments, into a partnership with shared decision making and opportunities for sharing experience and knowledge regarding carbon finance. Structure of the CPF The Carbon Partnership Facility is comprised of two funds: the Carbon Fund (CF), which purchases emission reductions from CPF programs; and the Carbon Asset Development Fund (CADF), which funds the preparation and implementation of CPF programs. The CADF became operational in January 2009 and the First Tranche of the Carbon Fund was declared operational on May 15, P a g e

4 Progress Report First Tranche of the Carbon Fund As of May 15, 2012, the Carbon Fund Buyer Participants included the Governments of Spain, Norway and Sweden, Endesa and E.ON. Commitments to the First Tranche equal million. The key objective of the First Tranche is to test the CPF model. The goal is to demonstrate the efficacy of scaling up the use of market mechanisms through the CDM Programme of Activities approach, linked to Bank operations that support partner country initiatives. This involves working closely with the Seller Participants in their role as CDM Coordinating/Managing Entities for the PoAs, building their capacity to add project activities to the program and to become engaged in management of the CDM process. The aim is to generate emission reductions that will provide benefits to both Buyer and Seller Participants. The longer term vision for the CPF is to innovate and scale up market mechanisms at the frontier. The lessons learned from initial efforts on the First Tranche programs will set the stage for the Bank to make further constructive contributions to the design and implementation of future carbon market mechanisms. Carbon Asset Development Fund The Carbon Asset Development Fund has four donors: Spain - Ministry of Economy and Competitiveness, Norway - Ministry of Foreign Affairs, the European Commission and Italy Ministry of Environment. As of May 15, 2010, the Buyer Participant contributions to the Carbon Fund became subject to the 9 percent CADF charge, payable in three annual installments of 3 percent each. First Tranche Portfolio/ Pipeline As of May 15, 2012, there were seven Seller Participants in the Carbon Partnership Facility: Caixa Economica Federal of Brazil, for the Brazil Solid Waste Management Program. Brazil enacted by law a new National Solid Waste Policy in 2010, encompassing a range of measures to improve practices in the sector. Caixa, the main financing source for municipalities, will play a significant role in the implementation of the law. A World Bank loan for an Integrated Solid Waste Management and Carbon Finance Program, which Caixa administers, channels funds to landfill operators in conjunction with the construction of sanitary landfills, and supports 4 P a g e

5 development of the PoA to provide carbon finance to these projects. The Program was accepted into the First Tranche portfolio in June 2011 and an ERPA was signed on December 5, 2011 with a contract volume of 3 million CERs and a call option for an additional 2 million CERs. Fonds D equipement Communal of Morocco (FEC), for the Morocco Solid Waste Management Program. The Bank has been working closely with the Government of Morocco over the last several years to support the upgrading of environmental practices in the solid waste management sector, including through two Development Policy Loans. Carbon finance has been envisaged in these operations as an incentive for landfill operators, supported by municipalities, to invest in methane capture from new landfills and during improvements to existing operations. FEC, as the Coordinating/Managing Entity (C/ME) for the Program, is managing the outreach to municipalities and landfill operators to participate in the PoA. The Program was accepted into the First Tranche portfolio in January Negotiation of the ERPA is pending a revision to the CPF Pricing Approach. Hebei Green Agriculture Co., for the Hebei Regional Farm Biogas Program. The objective of this program is to improve the local environment and human health through upgrading the animal manure management practice at farms in Hebei province. The Hebei Green Agriculture Co. is the C/ME of the PoA, and is receiving support from the Hebei New Energy Office, a local government agency. The government will provide 20-25% of grant subsidy to reduce the upfront investment cost for participating farmers, who will finance the rest of the installation cost. Carbon finance will increase the incentives for farms to participate in the program. The Program was accepted into the First Tranche portfolio in January Negotiation of the ERPA is pending a revision to the CPF Pricing Approach and a reduction of the official China CDM floor price. Ministry of Industry and Trade of Vietnam (MoIT), for the Vietnam Renewable Energy Program. The Bank has provided an IDA credit to Vietnam to streamline the regulatory process for approving small scale power projects; the loan will provide long term financing to small scale hydropower developers through financial intermediaries. With domestic banks providing about 80% of project costs, carbon finance is an integral part of the financial incentives for project developers. The MoIT, as C/ME for the program, approves individual investments under the Bank loan and works closely with the participating domestic banks to facilitate participation of project developers in the PoA in conjunction with project financing. 5 P a g e

6 Provincial Electricity Authority (PEA) of Thailand, for the Thailand Energy Efficiency Program. The program is in the course of being restructured -- PEA is taking over for PEA-ENCOM as the Seller Participant and the PoA for biomass energy has been dropped. PEA resources will finance small scale street lighting energy efficiency for national highways. PEA will be the C/ME, with carbon finance enhancing the pace and financial viability of the street lighting investments. The Rural Energy Agency of Tanzania, for the Tanzania Renewable Energy Program, which will promote the implementation of small scale renewable energy, primarily hydropower, throughout the country. A Bank loan to channel funding through financial intermediaries has already been completed, together with subsequent funding to strengthen the capacity of the Rural Energy Agency (REA) to provide financial and technical assistance to potential project developers. The REA is the Seller Participant and Coordinating/Managing Entity for the PoA, which will provide an additional source of revenues for projects. A Revolving Fund is being established in the REA to help project developers meet an equity financing gap. Greater Amman Municipality (GAM) of Jordan, for the Amman Green Growth Program. GAM is in the process of developing a city-wide Green Growth Program based on the Amman master plan The Amman Green Growth Program includes potential opportunities in municipal waste, urban transport, sustainable energy and urban forestry. The Amman program is the first carbon finance program to take a city-wide approach, which is intended to leverage the capacity of the Amman government to catalyze investments and emission reduction activities across a range of sectors within GAM s administrative purview. Since the intended PoA will not be registered by the end of 2012, the CPF is exploring with the GAM authorities the restructuring of the program as a pilot for testing a new carbon market mechanism to be developed under the UNFCCC. In addition, the Egypt Wind Program has been under development for possible inclusion in the First Tranche portfolio. The Government of Egypt is planning a wind power development program that could reach 3000MW by 2020, with loan finance from the Bank and Clean Technology Fund for transmission infrastructure to evacuate power from the wind farms to be built by the private sector under a Build- Own-Operate framework. The carbon finance operation is intended to provide revenues to the Egyptian Electricity Transmission Company, the potential Seller Participant, to defray part of the costs of the transmission infrastructure. Since a PoA cannot be registered by the end of 2012, the CPF has proposed 6 P a g e

7 to the EETC and the Government of Egypt to reformulate the program as a pilot for testing a new carbon market mechanism to be developed under the UNFCCC. There is one Host Country Partner in the CPF: Government of China (National Development and Reform Commission), for the Hebei Regional Farm Biogas Program and IGCC methodology development. Additional details on the portfolio/pipeline can be found in the Annex. CDM Methodology Development/Innovation One of the objectives of the CPF is to contribute to innovation in the use of the carbon market mechanisms through the development of new methodologies and approaches that support a more programmatic and scaled-up approach to emission reductions. Over the last year, the CPF achieved important progress on CDM methodology development. It also began preparing for the post-2012 carbon market by starting a new work program aimed at piloting a New Market Mechanism (NMM). Energy efficiency in buildings. The CPF contributed to the development of a new methodology for energy efficient buildings by the Small Scale Working Group of the CDM EB, which is in the approval process. This methodology takes a number of elements from a building methodology developed with CADF support. IGCC methodology. The CPF reached a major milestone in developing a new CDM methodology on Integrated Gasification Combined Cycle (IGCC) projects with the submission of the methodology for approval to the CDM Executive Board (EB). Micro scale activities. Based on the experience with the CPF PoAs, the World Bank is developing a concept for a possible new EB regulation with the potential to substantially simplify the operation of PoAs targeting micro scale activities. The concept builds on a standardization of the CDM project cycle and is included in a recent World Bank study.1 1 Improving efficiency and outreach of the CDM through standardization, World Bank, May This study was not financed with CADF resources. 7 P a g e

8 New market mechanism concept and methodology development The decisions taken by the UNFCCC at Durban in December 2011 to establish a new market mechanism and to allow that its credits may be used by Parties for compliance with their commitments under the second commitment period of the Kyoto Protocol has opened new perspectives for the CPF. There is now an opportunity to develop post-2012 compliance assets for the European market beyond the CDM and to innovate on new scaled-up market mechanisms. Against this background, the CPF intends to develop pilot programs under the new market mechanism and has started related conceptual and methodological work. The first product of this work is a conceptual framework for NMM development, including a new Program Idea Note template. This framework builds on the two major design features of the NMM: achievement of net global emissions reductions, i.e. moving away from pure offsetting; and crediting on an aggregate level instead of on a project-by-project level as under the CDM. Related conceptual work is focusing on the elements of NMM pilot design, while preserving all fundamental design features of full-fledged NMM programs and the potential to scale-up pilots in a subsequent step. This conceptual work can build on experience gained with CDM PoAs, but will move beyond the CDM in particular by integrating NMM programs with host country climate and development policy frameworks. Methodological innovations regarding sectoral baselines and monitoring approaches will be important. The preparation of several blueprints is planned to develop these conceptual approaches in more depth and to set the stage for full-fledged pilot design. CPF Instrument /Policies Proposed amendments to Section 10.10(a)(ii) and Section 18.2 of the CPF Instrument were presented to Buyer and Seller Participants during the Annual Meeting and approved in October The CPF ERPA General Conditions were presented to Buyer and Seller Participants during the Annual Meeting and approved on a no-objection basis in July Following consultations with Buyer and Seller Participants, a proposed revision of the CPF Pricing Approach was circulated on May 11, 2012 for approval by the Partnership Committee on a no-objection basis by June 1, The proposed revisions to the CPF Pricing Approach are intended to take into account the significant decline in carbon market prices since August P a g e

9 CPF Meetings and Workshops The CPF is a partnership among Buyer and Seller Participants, and one of the key objectives of the partnership is to share perspectives on the challenges in developing programmatic approaches to emission reduction programs and to set key policies of the CPF together. In this context, there is also an important role for the CPF to provide capacity building to Seller Participants in engage as members of the partnership and to enable them to meet the challenges of implementing these new approaches. Over the last year, there were the following CPF events: Seller Participant Training A training session was held for Seller Participants on June 5, 2011 in Madrid, Spain, to increase their familiarity with recent carbon market and regulatory developments, and to provide training on management of the C/ME function. CPF Annual Meeting The CPF Annual Meeting was held on June 6, 2011 in Madrid, Spain. The Meeting included presentations by Seller Participants on each of the programs under consideration as part of the pipeline of the First Tranche. The meeting also included presentations on the CPF Annual Report; the current regulatory framework related to programmatic CDM activities and the strategy of the CPF; the proposed General Conditions applicable to CPF ERPAs; and a CPF/CADF financial report. Participants selected the members of the Partnership Committee. Participants were also informed of proposed amendments to the CPF Instrument. CPF Buyer Participant Meeting A CPF Buyer Participant meeting was held on March 1, 2012 in order to consider ideas for revising the CPF Pricing Approach. The meeting also provided an opportunity for a briefing to Buyer Participants on ideas for CPF new program development, taking into account the decisions reached at the UNFCCC negotiations in Durban in November CPF Seller Participant Meeting A CPF Seller Participant meeting was held (by video conference) on May 3, 2012 in order to discuss the Trustee s draft proposed revision to the CPF Pricing Approach. 9 P a g e

10 Plans for the Coming Year The major focus for the coming year will be achieving substantial progress on the programs in the pipeline. The most important objective will be to successfully register in the CDM the following programs by the end of 2012: Brazil (Caixa) Solid Waste Management, Morocco Municipal Solid Waste Management, Vietnam Renewable Energy, China Hebei Regional Farm Biogas and Thailand Energy Efficiency. (Registration of the Tanzania Renewable Energy Program is not subject to this deadline.) Concurrently, the CPF Team will be working closely with the Seller Participants to support the addition of project activities (CPAs) to the PoAs in order to meet the emission reduction volumes set out in the Seller Participation Agreements. As the preparation of a program in the First Tranche pipeline has sufficiently matured, it will be presented to the Buyer Participants for inclusion in the First Tranche portfolio. Working closely with Buyer Participants and the respective Sellers, the CPF will seek to conclude ERPAs for each of the programs as they are included in the First Tranche portfolio. Further capacity building will be provided to the Seller Participants, in particular to strengthen their management systems and capability to manage the CDM monitoring, verification and issuance process. The CPF Team will also evaluate the potential for inclusion in the First Tranche portfolio of additional PoAs that will be registered by the end of 2012, and which have ERPAs with other Bank carbon funds that will conclude by Another important objective over the coming year will be to progress work on the development of new market mechanism pilots. The planned work on methodology, including the preparation of blueprints, has been highlighted above. Substantial work will be needed to engage with World Bank Regions and country counterparts to identify program ideas and begin PIN development. Continued dialogue with regulators will also be needed to align pilot program parameters with the evolving regulatory framework. The possibility of developing the Amman Green Growth Program and Egypt Wind Program as NMM pilots will be explored. Additional programs will be included in the First Tranche pipeline as progress is made in defining the modalities for piloting a new market mechanism. 10 P a g e

11 Financial Report The Financial Report for the 12 months ending June 30, 2012 is presented below. The report reflects actual expenditures through end March and estimated expenditures for the last quarter of the fiscal year. The Financial Report covers the CPF Carbon Fund and Carbon Asset Development Fund (CADF). Carbon Fund The total pledged amount to the Carbon Fund stands at million. Of this total pledged amount, 47.5 million has been received into a prepaid trust fund account, all of it before FY12. Table 1: Pledged and Received Amount from Participants (Amounts in 000) Participant Name Commitment Amount in EURO Contributions Received From Inception to June 30, 2012 in EURO Contributions Received From Inception to June 30, 2012 (note 1) In USD Prepaid From Inception to June 30, 2011 in EURO Gov of Spain 47,500 2,850 3,696 47,500 Endesa 35,000 2,100 2,580 Gov of Sweden 20,000 1, Gov of Norway 20,000 1,200 1,655 E.ON 10, ,500 7,950 10,411 47,500 Note 1: The contribution received represents the two installments (6%) of CADF charge, which was transferred to the CADF. Carbon Asset Development Fund In FY12, there were no new commitments. As of June 30, 2012, total sources of funds are $27.5 million, including (i) $14.6 million from donor contributions; (ii) $10.4 million from the first two installments (6%) of the 9% Buyer s CADF charge; and (iii) $2.52 million in investment income. expenditure for FY12 is $3.49 million, bringing the cumulative expenditures to $10.2 million, leaving an ending balance of $17.3 million. The Table 2 summarizes the Sources and Uses of Funds. Total 11 P a g e

12 Table 2 CADF: Sources and Uses of Funds (Amounts in 000) Participant Name Currency Commitment Amount Contribution Received July 1 - June (currency) Contributions Received Inception - June 2012 (currency) Total Contributions Inception - June 30, 2012 USD Equivalent Source of Funds Direct Contribution Norway - Ministry of Foreign Affairs NOK 19,000 19,000 2,731 Spain - Ministry of Economy & Competitiveness EUR 5,000 5,000 6,464 European Commission EUR 2,000 2,000 2,593 Italy - Ministry of Environment EUR 2,000 2,000 2,767 Total Contributions (USD equivalent) 14,554 Buyers CADF charge transferred from Carbon Fund 4,950 7,950 10,411 Investment Income 2,532 Total Source of Funds Use of Funds (See Table 3) 10,220 Ending Balance 17,277 The Table 3 below shows the total expenses incurred by the Carbon Partnership Facility for FY12 and cumulative expenditures as of June 30, Total FY12 expenditures are $3.49 million, of which $1.5 million (or 43%) is for specific program development costs, $1 million (29%) for business development and related costs, $453k (13%) relates to administrative expenses and $517k (15%) for grant disbursements. CADF Grants Grant agreements for four programs have been signed. The China CADF grant ($1.4 million) is for the preparation of the Regional Biogas Program 2 and the preparation of a CDM methodology for Integrated Gas Combined Cycle (IGCC) power generation. The Vietnam grant ($257k) is for capacity building and some preparation expenses for the Vietnam Renewable Energy Program. The CADF grant for the 2 Note that the China Regional Biogas Program preparation expenses are being funded primarily through a CADF grant, while the preparatory activities for other programs are being funded by the CADF primarily through Bank expenditures. 12 P a g e

13 Morocco Solid Waste Management Program ($520k) is for capacity building and preparatory expenses, and a grant was signed for the Amman Green Growth Program ($600K) for preparatory expenses. The Caixa Solid Waste Management Program CADF grant is at an advanced stage of preparation. As of June 30, 2012, grant disbursements total $1,017k, of which $967k are for the China grant and $50k for the Vietnam grant. Table 3 Uses of Funds (Amounts in 000) Project Name Cumulative Costs as of June 30, 2011 Expenses July - June 30, 2012 Expenses Inception to June 30, 2012 Vietnam Renewable Energy Development China Hebei Regional Farm Livestock Waste Management Thailand PEA Energy Efficiency Program Tanzania Renewable Energy Program Jordan Amman Green Growth Program Morocco Municipal Solid Waste Carbon Finance Program Brazil Caixa Solid Waste Management Egypt Wind Power Carbon Asset Development Dropped Programs (Indonesia Geothermal, China Hubei, Thailand RE, etc) Program Development Costs 2,192 1,511 3,702 Regional Business Development and Coordination 1, ,462 Carbon Unit Program Development ,162 Methodology Development Business Development and Related Costs 2,892 1,009 3,901 General & Administrative Expenditures Fund Development Legal Administrative Costs 1, ,600 Total 6,230 2,973 9,203 Grant disbursement ,017 Grand Total 6,730 3,490 10, P a g e

14 CPF Tranche-1 Pipeline Overview (May 2012) BRAZIL - Solid Waste Management Program Description CPA Implementation Project Activities Milestones CDM Status PoA Type: Land fill gas methane capture/flaring Objective: Reduce environmental and social impacts and GHG emissions from the solid waste management sector PoA Coordinator/Managing Entity (CME): Caixa Economica Federal (Lender) Caixa signed Seller Participation Agreement with CPF Caixa signed ERPA with CPF on December 5, 2011 Contract Volume : 3 million tco 2e in ER Volume + 2 million tco 2e in Options Methodology: ACM0001 ver Consolidated baseline and monitoring methodology for landfill gas project activities World Bank Operations/Safeguards: World Bank loan to Caixa to finance landfill upgrading Country systems to be utilized for safeguards First CPA: CTR Santa Rosa (6 MtCO 2e between ) - Sub- ERPA signed between CPA developer and Caixa Additional CPAs: 1. São Gonçalo (0.7 MtCO 2e between ) - Sub- ERPA signed between CPA developer and Caixa 2. Barra Mansa (0.24 MtCO 2e between ) - LoI signed between CPA developer and Caixa Isolated Projects selling post-2012 CERs to Caixa: 1. Itaoca (0.2 MtCO 2e between ) 2. Candeias (1.1 MtCO 2e between ) - Sub- ERPA signed between CPA developer and Caixa for both projects Validation Status (ongoing): The PoA Design Document and the CPA Design Document published in September 2010 The first validation site visit by the DOE took place in October 2010 Validation concluded in January 2012 HC Letter of Approval (LoA) Request to the Brazilian DNA sent on January 27, The DNA will provide after the next DNA meeting (June 5, 2012). Annex I country Letter of Approval (LoA) Official request to the Spanish DNA can be submitted once HC LoA is obtained. Informal contacts have been initiated to expedite the process. Registration Status : Request for registration: The Trustee is aiming to send the request for registration by early June 2012, in advance of the deadline of July 25, 2012 for the current version of the methodology. Registration by September P a g e

15 assessment of project activities Financing Program Status World Bank loan to Caixa to finance landfill upgrading Caixa loans to landfill operators to be closed in conjunction with sub-erpa signing Submission of Program to CPF Buyers for inclusion in the First Tranche portfolio in May 2011 Included in the First Tranche portfolio in June 2011; pricing agreed in August 2011, with a benchmark of 7.50 and a 0.15 premium million in capital from Tranche 1 of the CPF Carbon Fund has been allocated to this program. ERPA signing took place on December 5, coinciding with the signature of the World Bank loan to Caixa. The legal agreement package includes 2 ERPAs for CPF: one for the PoA and another for the isolated projects. Delays are expected on delivery from the Itaoca and Candeias individual projects (both registered) that are part of the Spanish Carbon Fund and CPF ERPAs, but we do not expect there to be any impact on the CPF since delivery to the CPF is not planned on these projects until Project activities under the CPF PoA ERPA and individual project ERPAs are planned to deliver the full contract volume of 3.0 Mt, which is 29% of the PDD volume. 15 P a g e

16 CPF Tranche-1 Pipeline Overview (May 2012) VIETNAM - Renewable Energy Development Program (REDP) Description CPA Implementation Project Activities Milestones CDM Status PoA Type: Regular scale hydropower generation (30 MW or less for each hydropower plant) Objective: Increase the supply of renewable energy to the national grid PoA Coordinator/Managing Entity (CME): Ministry of Industry and Trade of Socialist Republic of Vietnam (MoIT) Vietnam (MoIT) signed Seller Participation Agreement with CPF in December 2009 Contract Volume (Estimated): 2 million tco 2e Methodology: ACM0002 World Bank Operations/Safeguards: Environmental Category: FI* CPA Identification: small hydropower projects with installed capacity of 200+MW will be supported by REDP loan (according to the PAD) 15 projects with MW installed capacity have indicated their interest in joining the CPF. 7 projects are under the consideration for WB loan under the REDP lending program. The other 8 projects are in early stage of applying for such loan. First CPA: In construction phase. The first batch of electromechanical equipment should be delivered by mid May. Commissioning may take place as early as October Financing World Bank lending is available to CPAs through financial intermediaries CADF Grant Agreement: The CADF Grant Agreement was signed on Validation Status (ongoing): The latest response was sent to the DOE on May 4, 2012 responding to the key concerns on the starting date of the first CPA. Solid evidence was provided and accepted by the DOE. Agreement was reached with the DOE to achieve a faster turn-around time, with the intended objective to close all CARs and CLs by the mid-june. The DOE s feedback is expected on May 21, Every effort will be made to have the program ready for submission for registration by end-july Host Country DNA Letter of Approval (LoA) signed on 10 February The DOE has requested that the DNA clarify that the CME is also Project Participant. clarification was sent to the DOE but was rejected. Therefore, a formal letter from the DNA is being arranged, led by MOIT. Registration Status : Submission for registration by July 2012 Program Status Circular 58 which prevents private developers from receiving CERs under REDP has been revised and published, paving the way for MOIT to build the CPF pipeline. With intensifying efforts from MOIT and WB team, 10 additional projects (2 of which were already in the REDP 16 P a g e

17 * A project is classified as FI if it involves investment of Bank funds through a financial intermediary, in subprojects that may result in adverse environmental impact April 6, The procurement plan and TOR for the consultant have been cleared by WB. lending pipeline) have been identified, bringing the total to 15. Submission of Program to CPF Buyers for inclusion in the First Tranche portfolio during the third quarter of Safeguard compliance by project developers needs to be strengthened before the safeguard clearance from EAP Region can be provided. Currently, a supervision mission is being carried out to assess the compliance of the agreed action plan. Results of this latest supervision will be available toward the end of May ERPA Signing tentatively planned for fourth quarter of 2012 pending the safeguard clearance from EAP. Note: The key challenge for this program is to ensure that the potential new developers receive timely approval from WB to get loans from REDP. If all 8 new developers receive approval from the WB for the REDP loan, the target volume of 2 MtCOe2 can be met by 2020 (based on CPF 50% purchase guideline). In addition, safeguards compliance issues have been identified for the REDP projects, including the five CPAs where construction has started. The EAP Region has prepared a mitigation action plan in collaboration with MOIT and project developers to strengthen capacity of the government, banks and especially developers to meet Bank safeguard requirements. Mitigation actions were agreed by the developers. Following the substantial decline in carbon prices, the team plans to organize workshops to discuss pricing with MOIT and participating developers and assess the financial viability of the program under various pricing scenarios. 17 P a g e

18 CPF Tranche-1 Pipeline Overview (May 2012) MOROCCO - Municipal Solid Waste Management Program Description CPA Implementation Project Activities Milestones CDM Status PoA Type: Landfill gas (LFG) recovery, flaring and use for electrical and/or thermal energy generation Objective: To improve financial sustainability and environmental practices in the municipal solid waste management sector. Carbon finance will support reforms implemented under two World Bank development policy loans (DPLs) PoA Coordinator/Managing Entity (CME): Fonds d Equipement Communal FEC (the Moroccan Municipal Development Bank) FEC signed Seller Participation Agreement with CPF in October 2009 Contract Volume (Estimated): Between 1 and 3 million tco 2e, depending on the number of CPAs targeted under the ERPA. First CPA: Greater Rabat (Oum Azza) - LoI signed with FEC Investment by private sector participant conditional on signature of ERPA between FEC and CPF, and on submission of project for registration. 1 MtCO 2e between Additional CPAs: The possibility of adding CPAs to the program is highly dependent on the terms of the ERPA between the CPF and FEC. In general, only large landfills, which have a lower threshold for financial viability, could be enticed into joining the program, provided that the price is sufficient. Potential CPAs would now be ranked according to their size rather than other readiness considerations. The main candidates would be Casablanca, Agadir and Marrakech. Smaller CPAs, such as Al Hoceima and Nador, would be more difficult to include in the program. Validation Status (ongoing): Program started validation in August 2010 The first validation site visit by the DOE (AENOR) took place in September 2010 All CARs and CLs are closed for the PoA-DD and the first specific CPA-DD. The Program is in Technical Review by the DOE and the Final Validation Report is being drafted. DNA Letter of Approval (LoA) has been issued Annex-I LoA has been issued by Sweden Registration Status: Submission for registration by end of June Methodology: Financing Program Status ACM0001 World Bank Operations/Safeguards: No World Bank lending. This program however, is linked to a WB Development Policy Loan to modernize the waste sector in Morocco. Country systems are being utilized for the The landfill operators will finance all CPAs in the Program. Téodem-Pizzorno, the operator of the landfill of Greater Rabat (Oum Azza), will finance the investment and operate the first CPA. FEC is not involved in the financing scheme and does not provide lending to the municipalities for these activities at the current time. However, A legal agreement for the first CPA (Oum Azza) was signed between the municipality, the project operator and the CME. Official Expressions of Interest have been received for 3 additional CPAs (Akreuch, Agadir and Marrakech). Negotiations with other CPAs are on hold, pending an ERPA between FEC and CPF. 18 P a g e

19 safeguards assessment of project activities. municipalities that want to implement LFG capture and flaring/energy production are eligible for FEC financing. Submission of Program to CPF Buyers for inclusion in the First Tranche portfolio took place on December 22, The program was included in the First Tranche on January 24, 2012 (following concurrence from FEC to increase to 30% from 20% the contract volume from executed CPA subproject agreements required for ERPA effectiveness). A final appraisal mission to confirm full compliance of the country safeguards framework with Bank requirements took place in February 2012 and the MNA Region s clearance for ERPA signing has been granted. ERPA Signing is expected in June/July 2012, provided an agreement is found on pricing. Note: FEC has communicated that the former benchmark price of 3.50 is too low for the program to go forward. A financial analysis of the program was made and discussions with FEC on pricing are underway. 19 P a g e

20 CPF Tranche-1 Pipeline Overview (May 2012) CHINA - Hebei Regional Farm Biogas Program Description CPA Implementation Project Activities Milestones CDM Status PoA Type: Small scale manure management program Objective: Improve local environment and human health through upgrading the animal manure management practice PoA Coordinator/Managing Entity (CME): Hebei Green Agriculture Co. Ltd., under the support of Hebei New Energy Office (government agency) Hebei Green Agriculture Co. Ltd signed Seller Participation Agreement with CPF in March 2011 Contract Volume (Estimated): 1.2 million tco 2e Methodology: AMS-III.D. ver. 18 AMS-I.C. ver. 19 AMS-I.F. ver. 2 World Bank Operations/Safeguards: No World Bank lending/stand-alone safeguards assessment CPA Identification: About livestock farms will participate in this PoA The CME has signed Letters of Intent with 42 farms that could potentially be included in the PoA After seeing the validation progress and the proposed eligibility criteria accepted by DOE, the CME will launch intensive marketing campaign to recruit more CPAs First CPA: Feasibility study is finalized. Construction started after the PDD was published for GSP in May The first CPA will generate 30,000 CERs per year, and the estimated contract volume of 1.2 Mt will be drawn from 35 CPAs out of 42 farms that have been identified. The CFD includes a proposal from the Seller to sell 80% of PDD volumes from the third year on from each farm, in line with the prior delivery experience of a similar Bank project. If delivery falls short of the target, the Seller will bring additional farms into the program. Financing Chinese government will provide about 25% of grant subsidy but no more than RMB 1 million to reduce the upfront investment cost Validation Status (ongoing): The program has prepared the first draft PoA-DD and CPA-DD PoA-DD was published on May 11, 2011 DOE completed the site visit in July 2011 and has delivered the draft validation report. No significant issues were identified. Draft validation report was received in mid February. The PoA-DD has been finalized and PoA validation report was received with all clarification and correction issues closed. The CPA-DD is under revision to comply with the updated eligibility criteria. The PDD package and validation report are expected to be finalized by end of May and TR process starts in the first week of June. The NDRC has requested to be the joint focal point in the Modality of Communication, which is expected to be available by end of May. DNA Letter of Approval (LoA): Application for a unilateral LoA was submitted in conjunction with an amendment to the SPA (see note below). Registration Status : Submission for registration by June Program Status The CME has signed Letters of Intent with 42 prospective farms. When the validation has reached the final stage and the eligibility criteria are fixed, the CME will know how many farms are eligible for the Program. 20 P a g e

21 Participating farmers will finance the rest of the installation cost Submission of Program to CPF Buyers for inclusion in the First Tranche portfolio took place on December 22, 2011 and was approved subsequently based on noobjection. If delivery falls short of the target, the Seller will seek to bring additional farms into the program. Amendment to SPA. The CME has signed an amendment to the SPA to take the following two actions: 1) include the IBRD as a joint focal point in the Modality of Communication in order for the IBRD to have full control of the communication with the UNFCCC; and 2) apply for a bilateral LoA immediately after the CME reaches agreement with the Trustee on the pricing for the program. ERPA Signing prospectively viewed for winter 2013 following agreement on pricing. Note: The task team undertook a mission to Hebei to carry out an analysis of the minimum price that can support the financial viability of sub-projects. The key parameters to determine the biodigester revenue such as prices of electricity, coal, and biogas are location specific and can vary considerably. However, it is clear that small livestock farms have to incur disproportionally high O&M costs and the financial viability of their biodigester investments relies largely on a higher carbon price, perhaps close to EUR 7/CER. The task team also met NDRC officers to seek their view on variable pricing approach and its floor price policy. The NDRC officers explained that the official floor price will be maintained for the time being. The potential for signing an ERPA will be revisited in early 2013, depending on whether the official floor price is reduced. 21 P a g e

22 CPF Tranche-1 Pipeline Overview (May 2012) THAILAND - Energy Efficiency (EE) Program Description CPA Implementation Project Activities Milestones CDM Status PoA Type: Small Scale PoA: EE Small-scale street lighting energy efficiency programs Objective: Reduce nationwide energy consumption for highway street lighting PoA Coordinator/Managing Entity (CME): Provincial Electricity Authority of Thailand (PEA), which is one of the leading State-Owned-Enterprises in the Kingdom of Thailand, responsible for electricity distribution outside of the Bangkok Metropolitan area PEA Has signed the SPA on May 11, 2012 Contract Volume (Estimated): 0.7 million tco 2e Methodology: AMS II.L for EE PoA CPA Identification: RE: EE: Due to the longer expected time is required to get necessary approval from the Cabinet, many key data and information could not be finalized. As a result, the Trustee in consultation with PEA- ENCOM has decided to drop this component from the program. The street lighting energy efficiency program will involve the replacement of around 500,000 old High Pressure Sodium (HPS) lamps with LED lamps as well as modernizing related equipments throughout national highway in Thailand First CPA: In-design and pre-feasibility study phase. Pilot program have been approved location of the first CPA has been identified. Equipment testing for LED lamp was completed for supplier prequalification. TOR for the pilot program has been finalized. Validation Status (ongoing): Site visit has been completed. The latest response was sent to the DOE on Mar 23, Feedback from DOE was received on March 30, The team is preparing a response package included the latest evidence and data that were received on May 10. Program aims to complete validation by September DNA Letter of Approval (LoA): Expected to be granted by July 2012 pending the completion of the Initial Environmental Evaluation (IEE) report for EE POAs. Registration Status : Complete submission for registration by October 2012 World Bank Operations/Safeguards: Financing Program Status Environmental Category: C Partial Assessment (Concept Stage) Operational budget from PEA will be utilized for the EE program by provide payment from energy saving to the suppliers in five installments. Submission of Program to CPF Buyers for inclusion in the First Tranche portfolio in September 2012 ERPA Signing tentative for December P a g e

23 Note: Due to the longer expected time is required to get necessary approval from the Cabinet, many key data and information could not be finalized. As a result, the Trustee in consultation with PEA-ENCOM has decided to drop this component from the program. PEA-ENCOM is preparing to send a notification to the Trustee to withdraw from the CPF. The EE program is now going to be implemented by the parent company, PEA. The SPA was signed on May 11, 2012 Only cabinet acknowledgement is needed for the EE program as PEA is going to use its own operating budget for this activity. Necessary approval from PEA has been provided. The pilot program is going to be implemented in June Registration of this Thailand EE POA by the end of 2012 is feasible, but will require steady progress and strong commitment from PEA and close attention over the next 6 months. Furthermore, strong support from PEA is needed to work with the WB team to complete the necessary due diligence which is a prerequisite for moving toward the ERPA negotiation stage. 23 P a g e

24 CPF Tranche-1 Pipeline Overview (February 2012) TANZANIA Renewable Energy Program Description CPA Implementation Project Activities Milestones CDM Status PoA Type: Grid connected and off-grid renewable electricity generation Objective: Expand access to energy through increased coverage of rural electrification in Tanzania, by promoting both off-grid and on-grid renewable energy projects PoA Coordinator/Managing Entity (CME): Rural Energy Agency (REA) - Government Agency that became operational in October 2007 Seller Participation Agreement has been signed with REA Contract Volume (Estimated): 2.8 million tco 2e in first 10 years ( ) ER Estimate only Power Supplied to National Grid = 50% Power supplied to Isolated Mini Grids = 50% Methodology: AMS I.D / AMS I.F CPA Identification: All CPAs under the PoA will be renewable energy generation projects implemented by a private developer. Proposed PoA is envisaged to include primarily small scale hydropower, but also solar, bio-mass and wind. Project implementation to be carried out in stages over next five to six years. Installed capacity in each CPA will range between 1 MW to 15 MW, while the entire addition to the generating capacity is expected to be between 100 to 150 MW First CPA: 10 MW small hydro projects identified as first CPA. Validation Status : Validation has been initiated at end-november. The validation site visit has been completed in the first week of February Validation protocol has been received and response to issues raised by DOE will be submitted by end May No major concerns have been raised. The POA-DD has been prepared in a flexible manner to accommodate all types and sizes of projects within the small scale threshold The technical details of the technology applied in CPAs will be comprehensively outlined in the corresponding individual CPA-DDs, when identified in the future The first CPA has been identified. The POA-DD for the program and the CPA-DD for the first CPA have been prepared and finalized in consultation with REA and the first CPA developer. DNA Letter of Approval (LoA): The DNA issued the Letter of No Objection to the PoA in January The LOA was issued by the DNA on April 30, 2012 and is being reviewed by the DOE for adequacy/accuracy. Registration Status : Expected by early P a g e

25 World Bank Operations/Safeguards: Financing Program Status Long-term debt enabled by WB Tanzania Energy Development and Access Expansion Project (TEDAP) credit line of $100 million All the CPAs will be subject to the environmental and social framework (ESF) adopted for the WB TEDAP project All the projects under the program are expected to be implemented by the private sector Government of Tanzania has already put in place a strong policy foundation and several financial incentive schemes: i.e., connection grants from REA Total investment requirement associated with the program is estimated to be US$262 million (for several projects to be implemented over a period of time) Financing plan includes advance payments under CPF ERPA to bridge the equity gap faced by individual project developers The advance payment from CPF is backed by a Revolving Fund mechanism, which protects CPF s advance payment from project implementation risk in the following way. The revolving fund would initially finance the equity gap to enable the project to achieve financial closure and get implemented. Carbon advance payment would be sought from CPF only after the project achieves commissioning status. Program Promotion Several rounds of consultations/workshops have been conducted with the Project Developers Standard contracts have been developed that are being signed between REA and the prospective CPAs; operational guidelines have been prepared for implementing the carbon linked equity advance scheme REA has constituted a dedicated team to focus on the carbon finance program, and has been training its staff Additional Funding. Obtaining additional resources to increase the size of the Revolving Fund is not a critical issue now, as the presently available resources of US$ 6.5 million could finance the equity gap for the pipeline of projects up to the year 2014 (about 70% of the projected scale). Submission of Program to CPF Buyers for inclusion in the First Tranche portfolio to be determined ERPA Signing: To be determined $6.5 million in trust fund resources (from Russia) managed by the Bank have been allocated to the program for the REA Revolving Fund. Note: The team is aware of the concerns raised by the Participants on the functioning of the Tanzanian DNA In July 2011, during a Bank mission to Tanzania, the DNA issue was escalated to the level of REA management, which organized a meeting with the DNA on 28 July, which was attended by Mr. Richard Muyungi (Head of DNA) and one his colleagues. The Bank mission also participated in the meeting. This effort culminated in issuance of the Letter of Approval by the DNA in April The REA has indicated that due to the funding structure for the program, the outreach to project developers to join the program would be ramped up after the program is included in the First Tranche portfolio. Therefore, the pace at which the program can be fully developed will depend in part on the timing of this step. 25 P a g e

26 CPF Tranche-1 Pipeline Overview (May 2012) JORDAN - Amman Green Growth Program (City-Wide Approach) Description CPA Implementation Project Activities Milestones CDM Status PoA Type: City-wide program Objective: Support the low carbon development plan of the Great Amman Municipality by applying, for the first time, a city-wide approach to carbon finance PoA Coordinator/Managing Entity (CME): Greater Amman Municipality Greater Amman Municipality signed Seller Participation Agreement with CPF in May 2010 Contract Volume (Estimated): million tco 2e Methodology: Initially intended to utilize existing methodologies in a framework agreed by the CDM EB in Sept following guidance from the CMP at Cancun and initiated at a UNFCCC workshop on PoAs in May World Bank Operations/Safeguards: To be determined depending on choice on CPAs CPA Identification: The City-wide Program will reduce GHG emissions at the city level, aggregating carbon emissions from following sectors: Waste (plastics recycling and slaughterhouse waste to energy) Energy (energy efficiency and renewable energy) Transport Urban Forestry Energy projects could cover street lighting, solar water heaters, building energy efficiency for GAM buildings and new construction. Transport could include BRT and light rail transit. First CPA: First CPA-DD in the Energy Efficiency sector -- street lighting -- has been prepared, but requires revisions as the city would like to explore different advanced technologies, thus requiring a detailed feasibility study. Feasibility study for solar water heaters is underway as well. Financing To date GAM, AFD and KFW. World Bank lending has been requested as well. Validation Status (ongoing): PoA-DD and first CPA-DD (energy efficiency in street lighting) were submitted to the EB with a proposed consolidated approved methodology utilizing a multisectoral approach (city wide). At its 63rd meeting, the CDM Executive Board approved the multi-methodology rules for PoAs, which opens the door for registration of a city-wide PoA and for beginning the process of registering the Amman Program. Validation plan under review pending consideration of the program as a post-2012 pilot. Registration Status : Registration plan under review pending consideration of the program as a post-2012 pilot. Program Status Submission of Program to CPF Buyers for inclusion in the First Tranche portfolio to be determined ERPA Signing - To be determined 26 P a g e