Utilizing carbon Finance for Eenergy Development

1. «Utilizing Carbon Finance
for Energy Development»
OLIVER MASSMANN
DUANE MORRIS SELVAM

2. INTERNATIONAL CLIMATE
ARCHITECTURE
POLICY
UNFCCC
policy
framework
2Kyoto
Protocol
Green
Climate
Fund
International
emissions trading
Voluntary
schemes
REDD
+
CDM JI
Tradable offset credits
Meeting nationalMeeting private sector
commitments commitments

3. INTERNATIONAL CLIMATE POLICY HAS CREATED
MECHANISMS TO SUPPORT THE DEVELOPMENT OF
CLEAN ENERGY PROJECTS THAT REDUCE
EMISSIONS & RESULT IN SUSTAINABLE
DEVELOPMENT.
WE CAN CLASSIFY THESE MECHANISMS AS EITHER
CARBON MARKETS OR CARBON FINANCE

4. CARBON MARKETS CARBON FINANCE
VS
Carbon offsets created by projects that
reduce emissions e.g. wind energy
Trading of carbon offsets & permits via
schemes such as the CDM
Rely on market supply & demand
Demand-side mainly from companies
covered by ETS compliance schemes
Demand-side mainly from companies
covered by ETS compliance schemes
Direct finance (grants, subsidies and low-
interest loans awarded to projects that reduce
emissions e.g.wind power
Non-market based, therefore little
Volatillity
Competitive i.e. limited pool of
finance

5. CARBON MARKETS
Flexible Mechanisms
United Nations
Framework Convention
on
Climate Change
Joint Implementation (JI)Clean Development
Mechanism (CDM)
International Emissions
Trading
KYOTO PROTOCOL
flexible abatement mechanisms

6. THE CLEAN DEVELOPMENT MECHANISM
What is an Offset?
“A carbon offset is a reduction in emissions of
carbon dioxide or greenhouse gases made in
order to compensate for or to offset an
emission made elsewhere”
http://en.wikipedia.org/wiki/Carbon_offset

7. THE CLEAN DEVELOPMENT MECHANISM
What type of Offset Projects?
• RenewableEnergy
• EnergyEfficiency
• Industrialprocesses
• Waste
• Afforestationandreforestation
• Hydro
• Otherproject types:
 Unilateral CDM
 Programmatic CDM
 Small Scale CDM

8. THE CLEAN DEVELOPMENT MECHANISM
Overview
 3 goals (reduce emissions, promote technology transfer
encourage sustainable development).
 Project mechanism where entities from industrialised
countries invest in GHG-mitigating activities in
developing countries.
 Entities can earn abatement credits called Certified
Emissions Reductions (CERs). These fungible with AAUs and
compliance units in domestic schemes (industrialised countries)

9. THE CLEAN DEVELOPMENT MECHANISM
Projects
o Over 6,600 CDM projects registered
o Equal to more than 1.2 billion CERs (tCO2e) per annum
o Most CER issues from HFC destruction projects (China) and
renewable energy projects (Hydro, wind and biogas)
o Only 22 biosequestration projects to date (.0036%)
o 1 Project in Myanmar – Hydropower (Dapein 1)

10. THE CLEAN DEVELOPMENT MECHANISM
Outlook for Carbon Markerts
• Carbon offset market is oversupplied, price will be low in the short-term
• Proposed structural changes to the EU-ETS is likely to boost carbon price
• New compliance in schemes in China, Thailand-Vietnam, Chile and
Australia will “suck-up” excess carbon offsets and increase carbon offset
price
• Critically, a recent rule change under for the EU-ETS will only allow
carbon offsets to be purchased from least developed countries (LDCs)
• Potentially opening up a huge new source of opportunity for Myanmar to
support hydro power and other clean energy projects…

11. LDCS SET TO PLAY A MAJOR ROLE
CARBON OFFSETS…
China to have a Big Role in
Carbon markets
IN
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;
,, /

12. IN THE SHORT-TERM, CARBON MARKET PRICE WILL
REMAIN TOO LOW TO SUPPORT WIDER RANGING
INVESTMENT IN CLEAN ENERGY…
HOWEVER, THERE ARE OVER US$300B EVERY
YEAR IN CARBON FINANCING OPPORTUNITIES CAN
HELP FILL THIS VOID.

13. CARBON FINANCE
Overview
Sources of Funding Mitigation
(USO Billion)
Proportion of Total
Financing
$115.0 - $129.3
$69.3 - $80.5
$32.3
$0.6
$30.7 - $40.4
$2.4
35%
21-22%
9-10%
0%
Project Developers
Corporate Actors
Households
Institutional Investors
Commercial Financial Institutions
Venture capital, private equity and
funds
TOTAL PRIVATE FINANCE
0%infrastructure
76-77%$250.3 - $285.5
$14.9 - $18.2
$37.5
$18.3
$8.6
$1.1
$80.4 - $83.7
5%
10-11%
5-6%
2-3%
0%
23-24%
Governments Budgets
National Finance Institutions
Multilateral Finance Institutions
Bilateral Finance Institutions
Climate Funds
TOTAL PUBLIC FINANCE
$330.7 -$369.3
Climate Change Mitigation for 2011 (Buchner et al. 2012)
100%TOTAL MITIGATION FINANCE
Table 7 International Annual Flows

14. CARBON FINANCE
e.g. Existing World Bank Funds
PROJECT NAME VALUE
The Prototype Carbon Fund (PCF) $219.8M
The Community Development Carbon Fund (CDCF) $128.6M
The BioCarbon Fund (BioCF) T1 = $53.8M T2 = $36.6M
The Italian Carbon Fund (ICF) $155.6M
The Danish Carbon Fund (DCF) €90M
The Spanish Carbon Fund (SCF) T1 = €220M T2 = €70M
The Umbrella Carbon Facility (UCF) T1 = €799.1M T2 = €112.5M
The Carbon Fund for Europe (CFE) €50M
Forest Carbon Partnership facility (FCPF) $447M
Carbon Partnership Facility (CPF) €143.5M
Partnership for Market Readiness (PMR) $70M

15. CARBON FINANCE
e.g. Future Green Climate Fund
• Objective to raise $100 billion a year by 2020. To kick-start
environmental projects, a Fast Start Funding of the GCF was
agreed, encompassing$30 billion for the period 2010-2012.
• Based in South Korea, the Fund will provide simplified and
improved access to funding, including direct access, basing
its activities on a country-driven approach and will encouragethe
involvement of relevant stakeholders, including
vulnerable groups and addressing gender aspects.
• Administered via NationallyAppropriate MitigationActions
(NAMAs), REDD+, buying up CERs and other schemes.

16. CARBON FINANCE
Nationally Appropriate Mitigation Actions (NAMAs)
• NAMAs are policies, programmes and projects that
developing countries undertake to contribute to the global effort
to reduce greenhouse gas emissions.
• NAMAs are policies, programmes and projects that
developing countries undertake to contribute to the global effort
to reduce greenhouse gas emissions.
• The policy framework around NAMAs is still being
developed but NAMAs are set to become a building block for a
future climate agreement.

17. CARBON FINANCE
Nationally Appropriate Mitigation Actions (NAMAs)
1. Sustainable Peat Land Management
2. Reduction in Rate of Deforestation and Land Degradation
3. Development of Carbon Sequestration Projects In Forestry
and Agriculture
4. Promotion of Energy Efficiency
5. Development of Alternative and Renewable Energy Sources
6. Reduction in Solid and Liquid Waste
7. Shifting to Lew-Emission Transportation Mode
http://www.oecd.org/env/climatechange/48304156.pdf

18. KEY MESSAGES
o Big opportunities for LDCs (including Myanmar) in using carbon markets
to support clean energy investment
o However, carbon price to remain low in the short- medium term
o Carbon finance, such as from the world bank and other institutions a
big opportunity for Myanmar in Short-long term
o Scoping studies need to be done to identify the specific opportunities

19. THANK YOU
FOR YOUR ATTENTION!
omassmann@duanemorris.com;
Oliver Massmann
DUANE MORRIS & SELVAM MYANMAR