Introduction to the Project Cycle Jane Ebinger Senior Energy Specialist Sustainable Development Department The World Bank

Outline Introduction to the project cycle Illustrate concepts through the preparation of a typical carbon project by the World Bank

Introduction to the Project Cycle The project cycle is unique:  Governed by the requirements of the Kyoto Protocol  Requires domestic approval by the Designated Focal Point (DFP) in Belarus  A number of specific responsibilities also reside with the project developer The World Bank has significant experience with supporting projects through this process

Host Country Obligations To inform JISC secretariat of: Its Designated Focal Point for approving projects Its national guidelines and procedures for approving projects, including the consideration of stakeholder comments

When to Integrate the Carbon Project Debt Equity Cash out Cash in …………………………………….2025 Carbon revenues Operating revenues = annual carbon payments = other sources of revenue from service or production = debt servicing Construction Carbon contract Develop a PIN

Developing a Project Concept The project developer should first develop a Project Idea Note (PIN) and submit this to the World Bank:  Description of Project Developer  Type of Project  Location of Project  Expected Schedule  Financing Sought  Technical Summary of Project  Expected Environmental Benefits  Financial Analysis The World Bank will typically review (and approve) this within 2 weeks

Reaching Agreement on Project Development In some countries a project developer is required to apply for a Letter of Endorsement from the Designated Focal Point (DFP) for the project. Procedures defined under the national rules for JI project approval A Letter of Intent is negotiated between the project developer and the World Bank  Formal signal of intent to purchase  Exclusive right to contract for the purchase  Commitment by project developer to repay (a capped amount) JI-specific preparation costs

Preparation and Review of Project The project developer prepares a Carbon Finance Document – expanded PIN The World Bank  contracts consultants to prepare the Project Design Document (PDD) using forms established by JISC  PDD includes a monitoring plan - methodology and tools for measuring and calculating emission reductions  completes due diligence of the project

JI Track 2 Requirements JI Track 2 does not require the submission and approval of methodologies for ER calculation  2/3 of current projects use CDM methodologies to reduce risk  A complete list of approved CDM methodologies (> 50) are on UNFCCC website - Additionality must be demonstrated in the PDD  Demonstrate the project is not part of the conservative baseline and reduces GHG emissions  Use CDM Additionality tools as appropriate  Use the precedent of a positive determination of a similar JI projects (as a benchmark)

Approvals and Contract Negotiation The project developer applies for a Letter of Approval from the host country’s Designated Focal Point  Host country agrees to issue and transfer the ERUs generated by the project An Emission Reduction Purchase Agreement is negotiated and signed by the project developer and the World Bank  Detailed requirements, obligations and procedures for emission reduction generation, verification and delivery and price

Project Determination The World Bank contracts an Accredited Independent Entity (AIE) to perform a ‘determination’  confirm that the project ERUs are additional to the baseline, that the monitoring plan is sufficient and that there is a high probability that the ERUs will be generated. PDD is made publicly available through JISC website for 30 day public comment period After comment period, AIE publishes determination report on the project, taking into account public comments  45 days following determination, JISC may request a review of project  If no review is requested, this implies a positive determination (or ‘approval’)

Costs and Timing To take a project from a concept to a contract to sell GHG emission reductions.  Typically it takes 10 – 12 months to complete  Costs range between US$ 150,000 – 200,000 The World Bank can advance preparation funds and provide support to process the project

What Happens after Determination ER determination – after construction and before project commissioning  The World Bank contracts the Accredited Independent Entity (AIE)  A letter of approval is required from the buying country at this point  Verification report published through JISC website  If JISC do not request review of verification report within 15 days ERUs are eligible for transfer Periodic (typically annual) monitoring, and ER determination  The project developer implements the monitoring plan  The World Bank contracts AIE Annual transfer of ERUs by the host country to the national registry of the purchasing country Annual payment by World Bank

Summary – JI Track 2 Project Cycle No submission & approval for new methodologies AIE responsible for determination No registration process

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