The Prototype Carbon Fund:

Project Portfolio Development Issues

Project Selection and Portfolio Criteria

Generic: Adhering to UNFCCC, Bank standard, with emphasis on renewable energy projects

• Proven and low risk technology• Environmental additionality essential• Balance between CDM and JI with initial emphasis on CDM• Not less than 2% and no more than 10% of Fund’s assets in one

project• Not more than 20% of Fund’s assets invested in Projects in the same

host country• Not more than 10% of the Fund’s assets in forest-based sinks (and only

in EITs)• Emphasis on renewable energy technology - but no more than 25% of

the Fund’s assets in any one technology

Technology mix in the Portfolio

• A 3:2 ratio of renewables and energy efficiency• Some supply side energy efficiency projects (such as use

of flared gas in Africa) planned

Region Final project profile OngoingRET EE Total RET EE

Eur & C Asia 4-6 3-4 7 1Latin America 2-3 1-2 3-4 1Africa 2-3 1-2 2-4 1East Asia 1-2 1-2 2-3South Asia1-2 1-2 2-3 1

Total 9-12 6-8 15-20 3 1

Regional and time distribution projects

• Initial portfolio development based on– responding to Central and South America– developing projects in Africa and EITs– waiting for demand to develop in Asia

Regional distribution of project pipeline development Region FY00 FY01 FY02 FY03 TotalTotal 2 4-6 5-9 3-6 15-20Europe & C Asia 1 2-3 1-2 1-2 7Latin America 1 1-2 1-2 3-4Africa 1-2 1-2 2-4East Asia 1-2 1-2 2-3South Asia 1-2 1-2 2-3

PCF Pipeline Status

• Latvia: Liepaja Region Solid Waste Management• To be consideration by the Participant Committee:

– Costa Rica Fund for Renewable Energy

• Under consideration of the PCF Team– Uganda: Rural Energy– India: Upgrading Efficiency of a Distribution Company– Czech Republic: Conversion from coal to geothermal district

heating– ESCO-intermediated Energy Efficiency in Poland and other

Eastern European Countries

Role of Established Intermediaries

• Features– All PCF procedures to be followed by Private Sector Intermediary– Payment on delivery of emission reduction– Third Party Co-financing encouraged

• Advantages– Enables participation of small projects and countries– Builds market capacity through leveraging– Payment on delivery reduces price and quality risk

• Disadvantages– Added political and procedural complexity – Risk of substantial unplaced fund at the end of investment period

Established Intermediariespipeline possibilities

• Costa Rica: Fund for Renewable Energy• Central America: Renewable Energy Fund with

RDB/ Private Sector bank• ESCO-intermediated Energy Efficiency in

Poland and other Eastern European Countries

Issues for discussion

• Relative share of renewables and energy efficiency in the portfolio– should fossil fuel supply side efficiency be included

• Geographical distribution of projects – Pressure from Central and South America– Building demand in Africa– Being reactive in Asia

• Time distribution of projects– All investment be placed by June 2003– This would require 75% of the projects be identified by June 2001

Issues for discussion (2)

• Project development– Relative emphasis on Established Intermediaries– Relative share of IBRD and IFC in the portfolio– Third party projects from

• Participants• Others

• Price outcome goals– Portfolio average 20 $/T of C (or 5-6 $/T of CO2)– Time slice (up to 2012) of purchase and price outcome