5. Tao Wang - World Bank Experience on Carbon Finance Operations in Biogas

INTERNATIONAL WORKSHOP ON DOMESTIC BIOGAS

WORLD BANK EXPERIENCE ON CARBON

FINANCE OPERATIONS IN BIOGAS


Table of contents

1. Introduction of WB CF Business

2. Biogas Project Experience

3. World Bank’s View Forward


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


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.


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


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Table of contents


How carbon finance works

A stream of payments based on results

Carbon project cycle (validation and verification)

Purchase agreement signing


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


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.


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


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


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


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


# 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)


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





Table of contents


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


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


Our Mission:

Catalyze climate action by enabling

payment mechanisms for measurable

results through public-private

partnerships and markets

Thank you

5. Tao Wang - World Bank Experience on Carbon Finance Operations in Biogas

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