1. All data in this presentation is drawn from public or commercial sources; no client-proprietary data has been used. The analyses and conclusions contained in this document are based on various assumptions that Carbonding has developed which may or may not be correct, being based upon factors and events subject to uncertainty. Future results or values could be materially different from any forecast or estimates contained in the analyses. The analyses are partly based on commercially-sourced information that has not been generated by Carbonding and has not, therefore, been entirely subject to independent verification. Carbonding believes such information to be reliable and adequately comprehensive but does not represent that such information is in all respects accurate or complete. Carbon Financing in the Residential Sector Latin American Carbon Forum Alberto Carrillo Pineda San José, Costa Rica 28 September, 2011

2. environmental market solutions Contents Setting the Context Case study: Demand-Side Water Efficiency and Carbon Finance Objective and Contents To discuss the potential of CDM to finance and facilitate the adoption of third-generation low- carbon measures in the residential sector in Latin America. To present one case study of third-generation Program of Activities under development in the region. Objective

3. environmental market solutions Contents Setting the Context Case study: Demand-Side Water Efficiency and Carbon Finance Objective and Contents To discuss the potential of CDM to finance and facilitate the adoption of third-generation low- carbon measures in the residential sector in Latin America. To present one case study of third-generation Program of Activities under development in the region. Objective

4. environmental market solutions Three mega-trends shaping the climate in the region Urbanization LA is the region with the highest urban population concentration in the developing world. (IAI, 2007) By 2030, about 83% of the population in LA will be living in cities. (IAI, 2007) Cities (and especially capital cities) concentrate a large share of the GDP in the region. Vulnerability Increasing GHG Emissions Cities represent between 40 and 80% of the global greenhouse gas emissions. (ICLEI, 2010) According to the International Energy Agency cities accounted for 67% of the world primary energy demand and more than 70% of global CO2 emissions in 2006. Continued urbanization and economic growth is expected to increase the GHG emissions associated with cities. The high (uncontrolled) urban growth has considerably increased the vulnerability to natural disasters of a large share of the population in the region. Climate change is likely to increase many of the already existing urban stresses (i.e. heat islands, insufficient sanitation / water supply, inadequate housing, etc.). Increasing GHG Emissions Vulnerability Urbanization

5. environmental market solutions Need to design and implement carbon-finance instruments that respond to these mega-trends 1 st Generation Carbon Initiatives 2 nd Generation Carbon Initiatives 3 rd Generation Carbon Initiatives Key Elements Strong focus on projects that reduce emissions from urban infrastructure (supply side). Some co-benefits addressing urban issues. Projects that reduce emissions changing energy consumption patterns (demand-side) Typically disaggregated project activities Energy consumption patterns and/or urban infrastructure (demand side) Mitigation + Adaptation Co-benefits Type of Projects Landfills WWTP (not Industrial) BRT Demand-Side Energy Efficiency Demand-side water efficiency Sustainable Housing Examples LFG (several throughout the region) BRT(Transmilenio, Medellin, Mexico City, Guatemala) Solar Water Heaters (Peru, Chile), Efficient appliances (Mexico, Brazil) Green Mortgage / Subsidy (Mexico) Water & Energy Efficiency PoA (Mexico)

6. environmental market solutions Contents Setting the Context Case study: Demand-Side Water Efficiency and Carbon Finance Objective and Contents To discuss the potential of CDM to finance and facilitate the adoption of third-generation low- carbon measures in the residential sector in Latin America. To present one case study of third-generation Program of Activities under development in the region. Objective

7. environmental market solutions Water Demand Scenario Case study: Demand-Side Water Efficiency and Carbon Finance Water Marginal Cost Curve Water Availability Cost Efficient Water Fixtures CO 2 Marginal Abatement Curve Cost Efficient Water Fixtures Household Hot-Water Efficiency CO 2 H2OH2O 0.5 – 1 tCO2 / yr 30 – 50%

8. environmental market solutions Mitigation Potential for the largest cities in the region Case study: Demand-Side Water Efficiency and Carbon Finance Clean Development Mechanism AMS-II.M Demand-side energy efficiency activities for installation of low-flow hot water savings devices Gold Standard Indicative Program, Baseline and Monitoring Methodology for Large- Scale Supply and Distribution of Efficient Light Bulb, Showerheads and Water Saving Products to Households Methodologies tCO2 / yr tCO2 / household / yr

9. environmental market solutions Who gets the water- saving benefits? Financial profile for a 100,000 household project Case study: Demand-Side Water Efficiency and Carbon Finance Low volume High volume Very low income Low income Middle income High income Household Government Who gets the water benefits?

10. environmental market solutions Case study: Demand-Side Water Efficiency and Carbon Finance Sustainability co-benefits Challenges / Barriers Environmental Reductions of GHG emissions and water-consumption Reduction in local air pollution and generation of wastewater Social / Economic Significant savings for households and governments (or water utilities) Economic way to address water stress issues Cultural Water perceived as a free, infinite resource Regulatory Post 2012-deadline Economic Difficult to realize the water- saving benefits benefits for investors Unusual project for traditional financing

11. environmental market solutions Thanks for your attention! Contact Information Alberto Carrillo Pineda Managing Partner a.carrillo@carbonding.com Carbonding Climate Community S. de R. L. de C.V. Tel. +52 55 8421 7749 www.carbonding.com We are looking for partners!