Transcript Considerations on a Facility to Finance the Climate Benefits

Considerations on a Facility
to Finance the Climate Benefits
of ODS Bank Management
Seminar on the Environmentally Sound
Management of Banks of
Ozone-Depleting Substances
Geneva, Switzerland
14 June 2010
Overview of Presentation
The challenge:
• To establish sources of financing - which are sufficient and sustained to finance the climate benefits of ODS bank management
The focus of this presentation:
•
•
•
•
Constraints regarding the voluntary carbon markets
Possible solutions: targeting sources of international climate finance
A key consideration: HCFC waste-streams
The role and rationale for a Facility
To note:
• All ODS bank activities under a Facility would be voluntary measures
• Other possible sources of financing are not addressed here (e.g., GEF)
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The Issue: Constraints of Voluntary Carbon Markets
While the voluntary carbon markets have an important initial role to play,
they have a number of limitations as a financing solution for ODS banks
Voluntary Market Constraints
Total
Voluntary Developing Country ODS Banks
Market
(Low and Medium Effort)
Price. Lower prices limit the range
of ODS banks to be financed
400 -
Demand. Small size of market
inadequate for potential ODS supply
300 -
Quality. Perceptions of
environmental integrity vary
200 -
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
100 -
2008
2009
Annual Emissions (Mt CO2e)
Supply/Demand Imbalance
Scope. Limitations, such as no
foams or US-only destruction
Sources: TEAP; World Bank
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Possible Solutions: Targeting International Climate Finance
Market Mechanisms
Cost Coverage Mechanisms
International Climate Finance
Voluntary
Carbon
Markets
Compliance
Carbon
Markets
International
Public
Finance
Multilateral
Fund
- Pilots
e.g., EU ETS,
e.g., Copenhagen Acc.
$118bn in 2009 • $10bn/yr 2010 -12
• up to $100bn/yr
by 2020
Source: World Bank
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Possible Solutions: Targeting International Climate Finance
Compliance
Carbon Markets
International
Public Finance
• Opportunity:
• Opportunity:
international offsets
• One global market (UNFCCC) or
regional/domestic (EU, US)?
grants, concessional loans
• One global fund or fragmented
funds and bilaterals?
• Costs of ODS can be fully
• Links to developing countries
internalized into economy
mitigation actions (NAMAs)?
•
•
•
Common Barriers
Lack of awareness/understanding of ODS
Uncertainty (politics) and complexity
Exclusion of MP gasses (UNFCCC only)
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Key Consideration: Anticipating HCFC Waste-Streams
CFC/HCFC Dynamic
• HCFCs will soon be the main
ODS bank waste stream
• Large, increasing volumes
• Opportunities still cost-effective
= CFC
= HCFC
100 -
80 60 -
• HCFCs are not being addressed
40 -
by voluntary carbon markets
• Key barrier: “production for
20 -
2019
2020
2018
2016
2017
2015
2012
2013
2014
2011
destruction” perverse incentive
2010
Annual Emissions (Mt CO2e)
Commercial Refrigeration in Developing Countries
(Densely Populated) (Emissions Only)
Opportunity
International climate finance solutions for ODS should be comprehensive
and include a pathway for CFC to HCFC continuity
Sources: TEAP, UNDP
5
ODS Climate Facility: Overview
A Facility, developing a portfolio of demonstration projects
targeting specific financial instruments, can be a
stepping stone to sources of international climate financing
Market
Voluntary
Carbon
Markets
Cost Cover.
Today
Ad hoc projects
MLF
Bilaterals
Near/Med. Term
ODS Climate Facility
• Donor led-fund
• Oversight framework
• Portfolio of projects
Med//Long Term
ODS established in
Compliance
Carbon
Markets
International
Public
Finance
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ODS Climate Facility: Key Components
The Facility’s components are designed to build credibility and establish
modalities for ODS bank projects under each targeted financial instrument
Donor
Fund
Finances projects an on incremental cost basis
For carbon projects:
• Provides demand and price
• Follows market convention: contract to buy offsets
Oversight
Framework
Environmental integrity is critical
• For carbon projects: methodologies, registry, verifiers
• For int. public finance: verified emission reductions
Portfolio of
Projects
Market development and broad representation
• Different sectors, project sizes, HCFCs, etc.
• Different partners: public sector, private sector
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ODS Climate Facility: Possible Structures
• A number of possible structures for a Facility exist
• Designs with MLF, MP bodies, MLF Implementing Agencies
• Variations could also involve voluntary carbon standards
• Factors to consider include
• Leveraging respective qualities, expertise and existing capabilities
• Ease/speed of establishment in different institutions
• Short term versus long term structures
#1
Fund
(Managed by)
Multilateral Fund
Oversight
Framework
Montreal Protocol Bodies
#2
MLF Implem. Agencies
Montreal Protocol Bodies
#3
MLF Implem. Agencies
MLF Implem. Agencies
Configuration
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Concluding Remarks
The voluntary carbon markets will not provide the sufficient and sustained
financing necessary for ongoing ODS bank management
A Facility can explore 3 related strategic issues for ODS banks
• Targeting the compliance carbon markets
• Targeting international public finance
• In due course, addressing HCFC bank management
The Facility’s value is in moving from an ad hoc to a systematic approach,
and more effectively and credibly making the case for financing ODS bank
management
• Maximizes awareness-raising and engagement
• Coordinated action to address barriers
• Controlled, ring-fenced portfolio of projects
Precedents exist: UN REDD, Prototype Carbon Fund for CDM
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Thank you.
For further information:
www.undp.org/chemicals
www.mdgcarbonfacility.org
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