UNDP - Fortis MDG Carbon

Facility Marcel Alers

Thursday, February 14, 2008

West Africa Carbon Finance Investment Forum for Financial Institutions, Dakar, Senegal

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UNDP MDG Carbon Facility

MDG Carbon Facility: The Rationale

Geographical Imbalance in the CDM (Projects) Technological Imbalance in the CDM (Credits)

Industrial Gases43%

Renewables24%

CH4 Reduction18%

Energy Efficiency

7%

Cement & Coalmine

5%

Fuel Switch

3%

Other 3%

Source: UNEP Risoe Centre

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UNDP MDG Carbon Facility

UNDP’s core objectives in carbon finance

• Improve access to carbon finance for a broader range of developing countries and project types through creating effective carbon markets (capacity development and one-stop shop service in carbon project development in pre-market situations)

• Maximize carbon development dividend through developing an MDG Carbon portfolio that strike a balance between cost-effective projects (e.g. landfill methane recovery projects) and high development impact projects (e.g. small agro-forestry projects)

• Develop capacity of programme countries to combine & sequence different funding sources (EFR, ODA, GEF, CDM/JI) to channel direct investment towards climate-friendly technologies

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UNDP MDG Carbon Facility

MDG Carbon Facility Mission: Market Transformation

MD

G Im

pa

ct

Geographical & Sectoral Diversity

CurrentCDM Market

Objective for MDG Carbon

Facility

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UNDP MDG Carbon Facility

Step 2:

Establishment of efficient host-country procedures for CDM &

JI review and approval (EFR, ODA)

• Assistance in establishing DNA, CER ownership and approval procedures

• Identify priority sector to maximize the development dividend

Step 1:

Remove barriers to direct investments in

climate-friendly technologies (EFR,

GEF, ODA, foundations)

• Analysis of key barriers for targeted sectors

• Initiation of policy dialogue with regulatory authorities on barrier removal strategies

• Development of sector-specific strategies

• Implementation of barrier removal activities

Step 3:

MDG Carbon Facility -project management services to individual

project developers (carbon finance)

• Project management services to individual project developers to demonstrate the profitability of carbon finance in nascent CDM markets

• Compilation, analysis and dissemination of lessons learned and experiences

UNDP’s approach to leveraging carbon finance for development

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UNDP MDG Carbon Facility

Combining & sequencing GEF and CDM financing

Fin

anci

al R

etu

rn

Risk of Investment

Infeasiblelow-carbon

project

Infeasiblelow-carbon

project

CDM revenueCDM revenue

Attractivelow-carbon

project

Attractivelow-carbon

project

GEF financing

GEF financing

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UNDP MDG Carbon Facility

UNDP’s Project Development Services

Part 3:Establish

Monitoring System

Part 3:Establish

Monitoring System

• Five Tools

– Carbon Layer

– Technical

– Finance & Legal

– MDGs/Environment

– Country risk

• Two step process

– Initial screening

– In depth evaluation

• Five Tools

– Carbon Layer

– Technical

– Finance & Legal

– MDGs/Environment

– Country risk

• Two step process

– Initial screening

– In depth evaluation

• Preparation of documentation

• Approval by host country and CDM Board

• Review by 3rd party auditors

• Preparation of documentation

• Approval by host country and CDM Board

• Review by 3rd party auditors

• Implementation and oversight of monitoring system in project’s first year

• Implementation and oversight of monitoring system in project’s first year

Signing of ERPA with Fortis

Signing of ERPA with Fortis

Part 1:Due Diligence

Part 1:Due Diligence

Part 2:Project

Documentation

Part 2:Project

Documentation

Project registeredwith CDM

Project registeredwith CDM

First Credits Issued

First Credits Issued

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UNDP MDG Carbon Facility

MDG Carbon Facility: What it is

Fortis Bank

CDM Projects

UNDP

Purchase of Carbon Credits

Technical Assistance inProject Development

MDG Carbon FacilityCDM Activities

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UNDP MDG Carbon Facility

Opportunity for Provision of Underlying Finance

Fortis Bank

CDM Projects

UNDP

PurchaseOf Credits

Technical Assistance

Carbon Finance

Underlying Finance to

Project 3rd Party Bank

Loans

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UNDP MDG Carbon Facility

Aggregate Portfolio Attributes

GHG Emission Reduction

Poverty Alleviation

Biodiversity Protection

Other MDG Benefits

Components by Project Type

e.g. a renewable electricity project with employment effects, rural electrification and local air quality improvement

e.g. a forest conservation or reforestation project with land rehabilitation benefits

e.g. a landfill gas project with small local air benefits, or a clean coal project

e.g. a series of school building projects with solar power

# 1

# 2

# 3

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Carbon component

MDG component

Carbon Projects: MDG Impact

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UNDP MDG Carbon Facility

www.undp.org/mdgcarbonfacility/www.mdgcarbonfacility.org/