Kobu_Session24_ACEF2008
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Transcript of Kobu_Session24_ACEF2008
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Carbon Market Initiative:Carbon Market Initiative:
Future Carbon FundFuture Carbon Fund
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Role: catalyze the development and financing ofnew mitigation & adaptation projects
Means: National/regional capacity building activities
Loans, investments and guarantees Project-specific technical support
The Carbon Market Initiative
Background: ADBs Role in Climate
Change
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Ongoing Climate Change
Projects Supported by ADB(selection)
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Approved by the ADB Board in November 2006
Three integrated components:
Asia Pacific Carbon Fund: upfront financing against
carbon credit purchase
Technical Support Facility: grant-based technical
support for capacity building, project preparation and
implementation
Credit Marketing Facility: marketing support to project
developers for credits not used for upfront financing
Background:
Carbon Market Initiative
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Background:
Carbon Market Initiative
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Year: 0 1 2 3 4 5
7
Commercial Operation
Standard
Pay-on-Delivery
1.CarbonCredits
Carbon
Market Initiative
Turning Cash Flow into Financing
DevelopmentProject phase:
2.
$/
Financing Cash Flow 1.TechAsst
1.
$/
2.CarbonCredits
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The Proposal:
Future Carbon Fund
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Kyoto Protocol commitments ending in 2012
No international framework yet on post-2012
There is no long-term price signal to induce developing (and
developed) economies to invest in new low-carbon technologies
and infrastructure
In the meantime, countries are installing massive amounts of new
power/thermal capacity with conventional systems, locking the
world into another 20-30 years (depending on the lifetime ofinstallations) of voluminous greenhouse gas emissions
Mounting public awareness and pressure on policy makers to
commit to long-term and meaningful reductions to avoid reachingdangerous level of greenhouse gas concentrations
International Context
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Establishment of a Future Carbon Fund (FCF) to pre-purchase future carbon credits (post-2012) from projectssupported by ADB financing and the CMI
The FCF would become the fourth component of theCarbon Market Initiative, along with:
The Asia Pacific Carbon Fund
The Technical Support Facility
The Credit Marketing Facility
Future Carbon Fund
Proposal
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Purchase post-2012 carbon credits from projects proposed today
Pay upfront, similar to the APCF, to help developing countries reduce
the upfront capital constraint of installing clean energy systems
Proposed to project developers in conjunction with ADB financial
support and the CMI
Benefit from ADBs grant-based technical support
Associated costs and risks are largely reduced due to piggy back
design and strategy
General technical, financial and legal due diligence carried out by ADB
main operations to process/approve financing
CDM specific due-diligence carried out by CMI
Future Carbon Fund
Key Features
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Sample Project Financing Plan
ADB Project with Carbon Content
Illustrative Financing Plan - Debt
Source of Finance %
Carbon CreditsCarbon Credits
(over 7 to 21 yrs)
Additional KP1 CreditsCredit
MarketingFacility Additional post-2012 Credits
Credits generated beyond 2012
Firstpost-2012
credits
Credits up to end of 2012 (KP1)
FirstKP1credits
Asia PacificCarbon Fund
ADB Loan Finance
APCFOthers
Total
60
1525
100
FutureFutureCarbon FundCarbon Fund
60
1510
15
100
ADB Loan Finance
APCFFuture Carbon Fund
Others
Total
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Year: 2007 08 09 10 11 12 13 14 15 16 17 18 19 20
Asia PacificCarbon Fund
Loan
Inception
Project
Completion
Car
bonCreditVolume
End of Kyoto Commitments
FutureFutureCarbon FundCarbon Fund
CreditMarketing
Facility
CreditMarketing
Facility
Sample Project Credit Flow
Many buyers Few buyers
Emission reduction portfolio (10-year period)
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Reduced budget commitmentsReduced budget commitments to close project financing planto close project financing plan
ComprehensiveComprehensive technical and implementation supporttechnical and implementation support
Less transaction time/costLess transaction time/cost due to proposeddue to proposed piggypiggy--backback structure:structure:
ADB finance and supportADB finance and supportrisk mitigation through extensive duerisk mitigation through extensive duediligencediligence
CMI involvementCMI involvementadditional risk mitigation for CDMadditional risk mitigation for CDM--specificspecific
elementselements
Extra credits from successful project implementation can beExtra credits from successful project implementation can be
marketed with ADB support for further financial upsidemarketed with ADB support for further financial upside
Future Carbon Fund
Advantages for Developers/Sponsors