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Considerations on a Facility to Finance the Climate Benefits of ODS Bank Management Seminar on the Environmentally Sound Management of Banks of Ozone-Depleting.

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Presentation on theme: "Considerations on a Facility to Finance the Climate Benefits of ODS Bank Management Seminar on the Environmentally Sound Management of Banks of Ozone-Depleting."— Presentation transcript:

1 Considerations on a Facility to Finance the Climate Benefits of ODS Bank Management Seminar on the Environmentally Sound Management of Banks of Ozone-Depleting Substances Geneva, Switzerland 14 June 2010

2 1 Overview of Presentation The challenge: To establish sources of financing - which are sufficient and sustained - to finance the climate benefits of ODS bank management The focus of this presentation: Constraints regarding the voluntary carbon markets Possible solutions: targeting sources of international climate finance A key consideration: HCFC waste-streams The role and rationale for a Facility To note: All ODS bank activities under a Facility would be voluntary measures Other possible sources of financing are not addressed here (e.g., GEF)

3 2 The Issue: Constraints of Voluntary Carbon Markets While the voluntary carbon markets have an important initial role to play, they have a number of limitations as a financing solution for ODS banks Sources: TEAP; World Bank Voluntary Market Constraints Supply/Demand Imbalance Annual Emissions (Mt CO2e) Developing Country ODS Banks (Low and Medium Effort) Total Voluntary Market Price. Lower prices limit the range of ODS banks to be financed Demand. Small size of market inadequate for potential ODS supply Quality. Perceptions of environmental integrity vary Scope. Limitations, such as no foams or US-only destruction

4 3 Possible Solutions: Targeting International Climate Finance Voluntary Carbon Markets Multilateral Fund - Pilots Market MechanismsCost Coverage Mechanisms Compliance Carbon Markets International Public Finance e.g., Copenhagen Acc. $10bn/yr up to $100bn/yr by 2020 e.g., EU ETS, $118bn in 2009 International Climate Finance Source: World Bank

5 4 Possible Solutions: Targeting International Climate Finance Opportunity: international offsets One global market (UNFCCC) or regional/domestic (EU, US)? Costs of ODS can be fully internalized into economy Compliance Carbon Markets International Public Finance Opportunity: grants, concessional loans One global fund or fragmented funds and bilaterals? Links to developing countries mitigation actions (NAMAs)? Lack of awareness/understanding of ODS Uncertainty (politics) and complexity Exclusion of MP gasses (UNFCCC only) Common Barriers

6 5 Key Consideration: Anticipating HCFC Waste-Streams Sources: TEAP, UNDP CFC/HCFC Dynamic Opportunity Annual Emissions (Mt CO2e) = CFC = HCFC Commercial Refrigeration in Developing Countries (Densely Populated) (Emissions Only) HCFCs will soon be the main ODS bank waste stream Large, increasing volumes Opportunities still cost-effective HCFCs are not being addressed by voluntary carbon markets Key barrier: production for destruction perverse incentive International climate finance solutions for ODS should be comprehensive and include a pathway for CFC to HCFC continuity

7 6 ODS Climate Facility: Overview ODS Climate Facility Donor led-fund Oversight framework Portfolio of projects Today Near/Med. Term Med//Long Term A Facility, developing a portfolio of demonstration projects targeting specific financial instruments, can be a stepping stone to sources of international climate financing Market Cost Cover. Voluntary Carbon Markets MLF Bilaterals Ad hoc projects Compliance Carbon Markets International Public Finance ODS established in

8 7 ODS Climate Facility: Key Components Finances projects an on incremental cost basis For carbon projects: Provides demand and price Follows market convention: contract to buy offsets Environmental integrity is critical For carbon projects: methodologies, registry, verifiers For int. public finance: verified emission reductions Market development and broad representation Different sectors, project sizes, HCFCs, etc. Different partners: public sector, private sector Donor Fund Oversight Framework Portfolio of Projects The Facilitys components are designed to build credibility and establish modalities for ODS bank projects under each targeted financial instrument

9 8 ODS Climate Facility: Possible Structures A number of possible structures for a Facility exist Designs with MLF, MP bodies, MLF Implementing Agencies Variations could also involve voluntary carbon standards Factors to consider include Leveraging respective qualities, expertise and existing capabilities Ease/speed of establishment in different institutions Short term versus long term structures Oversight Framework Fund (Managed by) Configuration #1 #2 #3 Multilateral Fund MLF Implem. Agencies Montreal Protocol Bodies MLF Implem. Agencies

10 9 Concluding Remarks The voluntary carbon markets will not provide the sufficient and sustained financing necessary for ongoing ODS bank management A Facility can explore 3 related strategic issues for ODS banks Targeting the compliance carbon markets Targeting international public finance In due course, addressing HCFC bank management The Facilitys value is in moving from an ad hoc to a systematic approach, and more effectively and credibly making the case for financing ODS bank management Maximizes awareness-raising and engagement Coordinated action to address barriers Controlled, ring-fenced portfolio of projects Precedents exist: UN REDD, Prototype Carbon Fund for CDM

11 10 Thank you. For further information:


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