The CDM Project Cycle

The first step -- submit a PIN (template on Description of Project Proponent Type of Project Location of Project Expected Schedule Financing Sought Technical Summary of Project Expected Environmental Benefits

Proposal Review and Upstream Due Diligence 1.PIN reviewed by CFB 2.Upstream Due Diligence 3.If PIN is acceptable, sponsor notified with request to prepare CFD; Regional/ Sectoral approval sought 4.Host Country Endorsement/No Objection sought in some cases where country CDM approval process is not clear 5.If CFD approved (approval process varies from fund to fund), further work is authorized 6.Letter of Intent issued after PIN or CFD approval Negotiation of Project Agreements Periodic verification & certification Construction and start up Project completion 3 months 2 months 3 months 1-3 years Up to 21 years Project Proposal Review and Upstream Due Diligence

Preparation and review of the Project Carbon Asset Due Diligence 1.Project Design Document prepared (a. Determine whether existing methodology is applicable b. may require baseline study) 2 Monitoring Plan prepared 3. CFB quality control of results 4. Documents for Validation prepared by CFB and sponsor 5. Bank region begins technical, financial, environmental and social due diligence Periodic verification & certification Construction and start up Project completion 3 months 2 months 3 months 1-3 years Up to 21 years Carbon Asset Due Diligence

Preparation and review of the Project Carbon Asset Due Diligence Validation process 1. CFB contracts the Independent Validator and submits documents 2. Validator studies project design document, including baseline study and monitoring plan where applicable 3. Documents are posted for 30-day comment period 4. Validator issues a report and opinion 5. Registration request is submitted (can be after the ERPA signature) Negotiation of Project Agreements Periodic verification & certification Construction and start up Project completion 3 months 2 months 3 months 1-3 years Up to 21 years Validation Process

Preparation and review of the Project Carbon Asset Due Diligence Validation process Negotiation of Project Agreements Periodic verification & certification Construction and start up 1. CFB prepares term sheets and draft ERPA and negotiations initiated Project Due Diligence is completed and World Bank internal approvals are secured. 4. Letter of Approval obtained from Host Country 5. ERPA is signed Project completion 3 months 2 months 3 months 1-3 years Up to 21 years Negotiation of Project Agreements

Preparation and review of the Project Carbon Asset Due Diligence Validation process Negotiation of Project Agreements Periodic verification & certification Construction and start up 1. At construction completion, CFB contracts Independent Verifier 2. Verifier checks that specifications of the monitoring plan are met (“Initial Verification”) 3. Project implementation starts 4. Project entity monitors in accordance to the monitoring plan Project completion 3 months 2 months 3 months 1-3 years Up to 21 years Start of Generation of ERs & Monitoring

Preparation and review of the Project Baseline Study and Monitoring Plan (MP) Validation process Negotiation of Project Agreements Periodic verification & certification Construction and start up 1. Verifier issues periodic verification report 2. CFB pays project sponsor for ERs 3. Certified ERs are issued by the CDM Exec. Board 4. Verification undertaken annually or as deemed appropriate Project completion 3 months 2 months 3 months Up to 21 years Verification and Certification

Preparation and review of the Project Carbon Asset Due Diligence Validation process Negotiation of Project Agreements Periodic verification & certification Construction and start up Project completion 3 months 2 months 3 months 1-3 years Up to 21 years Crediting period either 10 years fixed or 7 year renewable (maximum 21 years) Project Completion

Preparation and review of the Project Carbon Asset Due Diligence Validation process Project Appraisal and Negotiation Periodic verification & certification Construction and start up Project completion 3 months 2 months 3 months 1-3 years Up to 21 years Upstream Due Diligence, carbon risk assessment and documentation: $ 25K For new methodologies Baseline : $30 K Monitoring Plan: $25K Contract, Processing and documentation: 25k Consultation and Project Appraisal: $60K Negotiations and Legal documentation: $100K Carbon Asset Creation and Maintenance Manufacturing Process and Costs based on Bank experience Total through Negotiations All expenses: $265 K for regular size projects $150 K for small scale projects Initial verification at start-up: $25K Verification: $10-25 K Supervision: $10-20K

What is involved in CFD/ PCN preparation? Field visits for identification and preparation Due diligence on: –environmental and social issues, –carbon asset, –status of project financing, –quality and experience of project sponsors and any financial intermediaries Consultations with Government on the proposed carbon financed project (including relevant discussions needed to obtain a letter of approval), and related legal services review and support