Carbon Finance Assist Update of Activities Update of Activities Host Country Committee Steering Committee meeting 4-5 October 2005

Strategic Objectives Mission: Enable full engagement of participating countries in the carbon market/ building liquidity in the market Key for CFB delivery on Carbon Funds: CF-Assist should feature as a key tool to enable CFB to implement programmatic approach > deliver on commitment to purchase >$900 million High demand from client countries: client countries expect Bank to go beyond bringing a few deals to closure > expect Bank to build capacity at national / local levels Status: Operational as of April 2005 Currently working on disbursement procedures

Program Description A single-purpose multi-donor trust fund for all CF-Assist: A single-purpose multi-donor trust fund for all WB carbon finance capacity building and technical assistance Features: Modular: program design based on needs assessment of national conditions; Key Players: targeted at government institutions, private sector entities, and the financial sector; Phased Approach: Divided in three phases to be completed in 3-5 years, with measurable performance indicators; Learning-by-doing: one to three projects per participating country will be brought to market; where the Bank is the buyer of last resort; Timing: March 2005 – 2012

Sources of Funding CF Assist Umbrella CFB buyer of last resort for PDDs developed under CF- Assist CFB potential buyer of other projects in portfolio PCF BioC Direct Donor Contributions Carbon Finance Business Carbon Finance Business $ Interest Earnings on CFB Funds (Implemented By Countries & Regions w/CF-A Assistance) Experience Exchange CDCF (in-hand as of 2/05) (Carbon Asset Purchases) (Coordination of all Technical Assistance and Capacity Building) PHRD $8.5M “Plus TA Funds

Status of Funding $10.2 million under management; expected $15.5 million Direct Donor Contributions: Direct Donor Contributions: Spain: 5 million Euros over five yearsSpain: 5 million Euros over five years Danish Carbon Fund: $425KDanish Carbon Fund: $425K PCF plus: ~$300K per yearPCF plus: ~$300K per year CDCF plus / UNEP/ UNF: $1 millionCDCF plus / UNEP/ UNF: $1 million Japan PHRD Grants: ($500K each) Japan PHRD Grants: ($500K each) Bolivia, Brazil, Senegal, South Africa, Kenya, UgandaBolivia, Brazil, Senegal, South Africa, Kenya, Uganda In discussions with: In discussions with: Japan PHRD grantsJapan PHRD grants Agence Française de Développement:Agence Française de Développement: French Ministère de l’Ecologie et du DéveloppementFrench Ministère de l’Ecologie et du Développement Government of CanadaGovernment of Canada Government of SwitzerlandGovernment of Switzerland Government of AustraliaGovernment of Australia

Phase I: Bank execution Indicators for Phase I Completion: CDM Governance: DNA has been established with criteria and procedures / timelines for project approval Private Sector Engagement: Key experts in financial sector / industry have been trained on design of carbon finance projects Deal Flow: Key sectors identified and potential volumes of ERs quantified; information widely disseminated At least one PDD has been completed Knowledge Management: Private sector and public sector agencies are fully aware of the CDM/JI potential and have put systems in place to assess projects at their institutions

Phase II: Recipient and/or Bank Executed Indicators Phase II Completion: CDM Governance: supportive regulatory and policy frameworks for carbon finance projects developed Private Sector Engagement: Financial industry trained on in synergies of carbon finance with lending/ grant instruments Deal Flow: At least one project validated [and registered] and marketed to carbon buyers (three for middle income countries) One industry association or intermediary fully engaged in carbon finance (intermediary has signed an agreement) Existence of a healthy and dynamic deal flow Participation at Carbon Expo Knowledge Management: knowledge sustained through distance learning/ web-based instruments National and regional networks of experts cultivated

Phase III: Recipient Executed Indicators for Phase III completion CDM Governance: Procedures refined/ validated by objective, external evaluation Private Sector Engagement: Carbon Finance is fully integrated in investment promotion strategies / concessional lending decisions Deal Flow: Intermediaries/ project developers access the carbon market JI countries: First Track/Art 17 participation. Establishment of green investment scheme, traded volume Ongoing participation at Carbon Expo Knowledge Management: South / south knowledge transfer nationa/ regional community of practitioners

Measurable Indicators during First Year Goal was to initiate CF-Assist programs in fourteen to sixteen countries; complete phase two in eight to ten Status: initiated programs in sixteen countries Argentina, Bolivia, Brazil, Cambodia, Cameroon, Central America, Ghana, Kenya, Mali, Mexico, Mozambique, Senegal, Sri Lanka, South Africa, Uganda, Zambia Challenge: monitor results, disseminate lessons learned Carbon Market Study: issued at Carbon Expo in May 2005; translated to Spanish

Mexican CF-Assist Program : enabling energy sector to bring projects to market for the first commitment period before closing window of opportunity Period: three years Sector-focused program, first year on energy sector; Executed by local implementing agency, in close collaboration with Energy Ministry (SENER), and Environment and Natural Resources (SEMARNAT), PEMEX, CFE, and the World Bank. Launch date: end of November 2005 Example of Program: Mexico

Argentine Carbon Facility: first of kind facility managed by host country to overcome significant financial barriers Objectives: to promote new investments in climate friendly technologies, enhance Argentina’s potential in the carbon market, promote partnership between public and private sector. Status: design: evaluating proposals, discussion paper should be done by end of 2005 design: evaluating proposals, discussion paper should be done by end of 2005 identification of portfolio of projects identification of portfolio of projects Argentina

Without special focus, possibility that Africa is being by-passed by the carbon market Without special focus, possibility that Africa is being by-passed by the carbon market PHRD grants in: Kenya, Senegal, South Africa, Uganda PHRD grants in: Kenya, Senegal, South Africa, Uganda CDCF/ UNEP Partnership in Zambia, Mozambique, Mali, Ghana, and Cameroon CDCF/ UNEP Partnership in Zambia, Mozambique, Mali, Ghana, and Cameroon Activities: PIN/ CFD development Training on project formulation and baseline methodologies DNA/ institutional capacity building Status: on track; seeking additional funding Focus on Africa

Green Investment Schemes Key to bridging OECD compliance gap in Kyoto Protocols Key to bridging OECD compliance gap in Kyoto Protocols Greening necessary to increase comfort level of many buyers to ensure that proceeds from sale of AAU s > result in real and measurable emission reductions Greening necessary to increase comfort level of many buyers to ensure that proceeds from sale of AAU s > result in real and measurable emission reductions Need more funding Need more funding Demand from Bulgaria, Russian Federation, Latvia, Czech Republic, Slovak Republic Demand from Bulgaria, Russian Federation, Latvia, Czech Republic, Slovak Republic Other likely countries: Romania, Ukraine, Poland Other likely countries: Romania, Ukraine, Poland

Carbon Expo: May 10-12, 2006 Preparations Under Way Building on Last Year’s Success  participants from 85 countries in 2005 (50 % increase from previous year)  134 exhibitors (168 % increase from previous year) First Platinum Sponsor: TFS Brokers Gold Sponsors: Government of Canada, DNV Bank support for Host Countries: priority to CF-Assist countries; those with large portfolios, well prepared

Training/Market Development Activities Integral part of CF-Assist country programs: Project identification and design Baseline Methodologies Contracting and Risk Management Exploratory Workshops in countries with high potential: Georgia, India, Pakistan, Russian Federation GHG Forum: in India Carbon Expo Asia Fellows: from China and Morocco

Demand far exceeds our capacity to deliver Demand far exceeds our capacity to deliver Some unfunded activities in work program: transportation sector, more countries, small grants Some unfunded activities in work program: transportation sector, more countries, small grants Early success needed to build confidence Early success needed to build confidence First Commitment Period First Commitment Period Challenges/ Opportunities

Issues for Discussion Issues for Discussion Is program meeting needs of Host Countries? Is program meeting needs of Host Countries? How to make CF-Assist more effective? How to make CF-Assist more effective? HCC members to take lead in some activities: newsletter; pricing sub-committee; HCC members to take lead in some activities: newsletter; pricing sub-committee; Comments on report Comments on report