kobu_session24_acef2008

8/14/2019 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

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