5. tao wang - world bank experience on carbon finance operations in biogas
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Presentations from the International Workshop on Domestic Biogas, November 2012, PRCTRANSCRIPT
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
WORLD BANK EXPERIENCE ON CARBON
FINANCE OPERATIONS IN BIOGAS
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Table of contents
1. Introduction of WB CF Business
2. Biogas Project Experience
3. World Bank’s View Forward
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Evolving role and activities of World Bank in carbon finance
2000 2001 2002 2003 2004 2005 2006 2007 2008 2011 2010 2009 2012+
Partnership for Market Readiness
KP & EU-ETS effective
confidence innovation access quality efficiency scale predictability
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
The Carbon Finance Unit has pioneered multiple funds
bridging innovative public private partnerships
Carbon Finance Unit – introduction of business
Delivery of Carbon Credits
Established Prototype Carbon Fund in 2000
and then family of 11 additional innovative
funds and facilities linked to carbon
>$3.1bn of funds committed since 2000;
>$900m currently under management for post
2012 funds
Partnered with >90 companies and
governments in funds
Projects in >50 countries with over 110 million
emission reductions delivered to investors to-
date
Overview of Carbon Activities
0
25
50
75
100
125
150
175
200
225
250
2001 2005 2009 2013 2017 2021
Contracted Delivered Projected Delivery
Mt
CO
2e
Total Contracted Emission Reductions: 229 Mt
Total Expected Delivery: 203 Mt
*Future delivery rate based on World Bank risk adjusted estimates of future ER generation. Past delivery based on date the assets were
forwarded to fund participants.
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
THE UNITED KINGDOM
THE UNITED STATES
JAPAN
SWITZERLAND
THE EUROPEAN COMMISSION
SPAIN
GERMANY
AUSTRALIA
NETHERLANDS
AUSTRIA
SWEDEN
FINLAND
DENMARK
ITALY
NORWAY
REGIONAL GOVERNMENTS OF
BRUSSELS-CAPITAL, FLEMISH
AND WALLOON REGIONS
IRELAND
AGENCE FRANÇAISE
DE DÉVELOPPEMENT JAPAN INTERNATIONAL
COOPERATION AGENCY
LUXEMBOURG
PORTUGAL
Public Sector Partners
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Private Sector Partners F
ina
nc
ials
O
il &
Ga
s
Uti
liti
es
In
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str
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O
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INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
1. Introduction of WB CF Business
2. Biogas Project Experience
3. World Bank’s View Forward
Table of contents
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
How carbon finance works
A stream of payments based on results
Carbon project cycle (validation and verification)
Purchase agreement signing
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Overview of biogas carbon finance projects
12 biogas related projects (incl. 3 programs)
Projects aim to reduce 10+ mega tons of
CO2e
Current projects in China, Nepal,
Philippines and Thailand
— Technologies such as household biogas,
poultry manure, ethanol wastewater,
and household livestock management
New projects in early stages of development
in Nepal and Ethiopia
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Biogas projects in Nepal
Project description
CDM Projects are part of the broader national biogas program
2 CDM projects (PA1 and PA2) each having about 10,000 Household Level Biogas Plants were
registered in December, 2005 following bundle approach
Alternative Energy Promotion Center (AEPC), a Government Agency is the Project Entity that
claims the emission reductions
Methodology and baseline scenario
Emission reduction is claimed against reduction in consumption of non renewable biomass only,
which is established through Biogas User Surveys
Subsequently the methodology was withdrawn and a new methodology to claim emission
reductions against displacement of NRB was approved
Scale up strategy
2 additional CDM projects (PA3 and PA4), each having about 20,000 HH level biogas plants
were developed and registered in December, 2011 following the same bundling approach
In order to avoid the project by project approach, a new CDM program of Activity has been
prepared which is expected to be registered soon.
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
The Biogas Program in Nepal has been largely supported by donor
resources
Carbon revenues generated from the projects are used in the following
areas
Financing the program implementation cost
Financing the biogas subsidy program
Financing after sales services beyond the normal guarantee period assured
by the biogas companies
Success in tapping the carbon market has proved to be a sustainable
model to raise resources for the program
The approach to access the carbon market is being replicated for the
Improved Cook Stoves Program where carbon credits can also be
claimed against reduction in consumption of non renewable biomass.
Carbon Finance Contributions
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Background
• Reducing Livestock manure pollution -- one of the top priorities in Chinese government’s rural development strategy.
• Biogas utilization -- identified as a means of addressing rural environmental degradation and improving the living conditions of rural households, as well as an important tool for climate change mitigation.
Objective • Deliver environmental and economic benefits by integrating biogas from livestock farming and
cooking in rural households by introducing carbon finance as an instrument to increase incentive for rural household’s participation and to strengthen the digester service extension network.
Description • The project is part of the World Bank lending program which covers 200,000 rural households in 4
provinces and 1 municipality. • The first household biogas Clean Development Mechanism (CDM) project from China • Target eight counties listed as national poverty county in Hubei province significant poverty
alleviation benefit • A bundled small scale project comprising 33,000 households • Baseline is methane emission from anaerobic open pit and coal burning for household cooking Status • Registered and CER issued for first reporting period. CER for the second reporting period is
awaiting issuance
Biogas Projects in China: Hubei Eco-farming
Household biogas project
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Background
• Livestock farming is becoming progressively more intensive in order to realize economies of production and scale
• Result in large amount of manure and wastewater that create profound environmental consequences, such as GHG emissions, odor nuisance, and water/land contamination from animal waste. Confined Animal Feeding Operations (CAFOs) use similar AMMS- uncovered anaerobic lagoons to treat and store animal manure, uncovered anaerobic lagoons emits large amounts of GHGs from the anaerobic decomposition processes.
Objective • To bring environmental and economic benefits to livestock farms by improving manure management practice and
utilizing biogas co- generation system to meet captive power demand.
Description • To convert the high-GHG of animal manure management system (AMMS) uncovered anaerobic lagoons to low GHG
AMMS with mesophilic temperature anaerobic digesters with biogas capture and power generation at chicken farms. Biogas capture and utilization reduces the GHG emissions from manure management systems and biogas-based power generation will supply electricity to the grid replacing electricity that would otherwise be generated from coal-fired power plants, reducing coal-based GHG emissions as well.
Status Registered and CER issued for the first reporting period as the first CDM project applying ACM0010 with successful issuance. CER for the second reporting period is awaiting issuance
Biogas Projects in China: Shandong Minhe Animal
Manure Management Project
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Policy Context
Pollution in rural area as a result of rapid expansion of intensive livestock
farming.
Biodigester identified as a key pollution control technology
A subsidy program set up by Gov. of China to provide a small portion of
construction subsidies for biodigester investments.
Take-off has been slow due to investment and technological barriers.
Objective establish a sustainable livestock waste management model to
improve rural environment and reduce GHG emissions through a
programmatic approach that allow livestock farms to access carbon revenue
to improve investment return and strengthen operations and maintenance of
biodigesters through training and regular services .
Description Install advanced biodigester to replace baseline open anaerobic
lagoons and establish training and service system that livestock farm owners
can readily access. Phase I targets at 42 large pig farms in 12 prefectures in
Hebei Province
Status Submitted for registration
Biogas Projects in China: Hebei Animal Manure
Management System GHG Mitigation Program
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
# 1: Good understanding of benefits and challenges in the use of carbon finance
Carbon Finance can be accessed successfully to support scale-up of biogas program
Challenges: long lead time of getting carbon revenue and price variability
Benefit sharing arrangement for carbon revenue
- Nepal model replenish subsidy funding and strengthen underfunded biodigester
service network
- China model annual carbon revenue payment to incentivize farmers who otherwise
don’t see revenue generation from biodigester installation and strengthen underfunded
biodigester service network
#2. Ensure good maintenance and establish a solid monitoring system
Design of the Biogas User Surveys has evolved over the years and UNFCCC guidance has
ensured an uniform approach
Multiple-level monitoring and reporting structure
Standard monitoring procedures and recording tables, and training courses
Frequent and timely data aggregation in central database system
Initial verification crucial to detect any change occurred and quality gap of monitored data
Lessons Learnt (1 of 2)
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Lessons Learnt (2 of 2)
#3. A strong CME is key to success of bundled small scale projects and PoAs
Strong commitment from senior management and extended multiple-level
implementation network
Resources available to invest in training and setup of monitoring system
# 4: Challenges in financing upfront project costs
Carbon Finance can be used as collateral (future revenue streams) for debt
financing
Government subsidy to support project development
Strong additionality
#5. Price Variability
Variable price indexed to a market reference with floor and ceiling
Floor price reflects the project maintenance costs to keep the project viable
Subsidy to bridge the price gap
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
1. Introduction of WB CF Business
2. Biogas Project Experience
3. World Bank’s View Forward
Table of contents
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Responding to the challenges in the market
Testing purchase
of REDD+ credits
FCPF Carbon Fund
Scaling-up carbon
finance
$220 million
$147 million^
7 public and 2 private and 1 non-profit
participants
6 selling country, 3 buying country and 2
donor participants
WB Facility Focus Resources Partners
^All components
Scale up of
afforestation &
reforestation and
soil carbon
Raising resources Anticipating mix of public and private
participants BioCarbon Fund Tranche 3
Support low-
income countries
to benefit from
carbon finance
Raising resources Donor governments aiming to sustain
carbon market capacity and test results
based finance frameworks
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Expanding carbon finance for household/community level
programs like biogas – Carbon Initiative for Development
Ci-Dev Readiness Fund Ci-Dev Financing Fund
Allowing carbon finance to contribute to
closing the critical investment financing gap
Well adapted to micro / community level
investments w/ high capital cost such as biogas
systems
Testing results based finance delivery
mechanisms for potential use in future climate
finance instruments, with possible deviation
from today’s market prices
Promote reforms in carbon market rules to
benefit low income countries:
Suppressed energy demand to combat
energy poverty
Standardized baselines
Support the definition of and transition
towards the next generation of market
mechanisms
Build capacity & lend technical assistance to
carbon finance project entities
Support African and LDC climate negotiators
Research and Develop innovative carbon
financing
Build readiness and capacity to access carbon markets and support a pipeline of low-carbon investment
opportunities in low-income countries with a focus on fighting energy poverty. This initiative will work through
complementary components…
UNDER
DEVELOPMENT
INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS
Our Mission:
Catalyze climate action by enabling
payment mechanisms for measurable
results through public-private
partnerships and markets
Thank you