Transcript Access to Carbon Finance Public Heating Biomass

Carbon Finance in Practice
Public Heating Biomass Systems in
Moldovan Rural Communities Project
Anatol Gobjila, World Bank
February 28, 2007,
Tirana, Albania
Institutional Set-Up for Carbon
Finance in Moldova
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Ministry of Environment and National
Resources – Designated National Authority
for Climate Change;
National Climate Change Committee – a
public climate change forum;
Carbon Finance Unit - a public carbon
finance project implementation agency.
Project Specific Country Background
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High levels of poverty in rural areas;
Deteriorating infrastructure and limited public
spending for rehabilitation;
Large dependency on imported fossil fuels;
Vast use of inefficient fossil-based heating systems
in public buildings in rural areas;
Proven potential for energy efficient and clean
energy technology using renewable resources
(biomass from agricultural waste) for heating of
public buildings (schools, hospitals and other public
service buildings) in rural communities.
The Research behind the Project
A 2002 World Bank sector study indicated that:
 Unprocessed agricultural waste, primarily straw, is
the best suited biomass resource for thermal energy
production in Moldova;
 Small scale systems (500 - 1000KWth) are suited for
initial introduction in Moldovan rural communities;
 Primary barriers for switching to renewable energy
systems (RES) are (i) confidence in renewable
energy systems; and (ii) limited financial resources
available at rural community level.
Addressing RES Adoption Barriers
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The Confidence Barrier is addressed through the GEF MSP
Renewable Energy from Agricultural Waste Project (supply and
installation of pilot biomass heating systems);
The Financing Barrier is addressed through:
- the Social Investment Fund (SIF) II Project (capital cost for a
new heating system and energy efficiency improvements);
- the Public Heating Biomass Systems in Moldovan Rural
Communities Project (incremental capital cost for RES through
carbon credits and monetized efficiency gains)
Project Objectives
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Generate an added value to the SIF II
Project, under implementation in Moldova,
through gained GHG Emission Reduction
(ERs) benefits;
Direct GHG ERs benefits towards SIF II
project participants, thus creating incentives
for further implementation of GHG mitigation
measures, such as use of clean energy
technologies (biomass).
Project Description
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Category of the project activity:
I. C "Thermal energy for the user"
II.E "Energy efficiency and fuel switching measures for buildings";
III.B "Switching fossil fuels“;
Buyer of GHG ERs - the Community Development Carbon Fund (CDCF),
administered by the World Bank;
The Project represents a bundle of CDM small-scale project activities
(currently 61, potentially up to some 240) and refers to the installation of new
heating systems for a series of public buildings in rural areas;
The main feature of the Project (although not limited to) is the use of biomass
(straw) as fuel for heat production;
Project activities (PA) are technologically independent, stand-alone, and
spread out all over the country;
Project duration: 2006-2017
Estimated reductions: 356,000 tones of CO2, over 11 years .
Project Benefits
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Economic Benefits: the Project leads to a decrease in the cost of a heat unit
production and additional income streams for beneficiaries in the form of
carbon payments and monetized efficiency gains.
Social Benefits:
- the Project allows to decrease payment burden for consumed energy
resources and increase local employment;
- besides it, the project improves the living and activity conditions within the
considered public buildings (the room heating temperature normalization;
increased duration of the heating period; availability of affordable hot water)
Environmental Benefits: Conventional coal-burning boiler houses create
massive pollution, hence a switch to biomass or gas, as envisaged by the
Project will substantially reduce in-door and out-door pollution.
Technological Benefits: The Project implies the adoption and application of
more advanced technologies for heat production based on the use of biomass.
Description of the Project Set-up
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Project beneficiaries come from the pool of SIF clients (rehabilitation of
heating systems in rural public buildings);
Individual beneficiaries conclude Subsidiary Agreements with the
Carbon Finance Unit (CFU) which stipulate the mechanisms for the
delivery of GHG ERs and payments;
The CFU bundles the agreements into a consolidated Emissions
Reduction Purchase Agreement (ERPA);
The CFU negotiates and signs an ERPA on behalf of the individual
beneficiaries with a ERs buyer (in the case of the Project – the CDCF)
Upon delivery of GHG ERs, the CDCF provides payment to the CFU,
which in its turn makes a series of payments to the individual
beneficiaries in accordance with the stipulations of Subsidiary
Agreements.
Description of the Project Set-up
What is the Carbon Finance Unit
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The CFU is and independent legal entity created under the
Ministry of Environment and Natural Resources with the
support of a Japanese PHRD Grant;
The CFU’s primary role is facilitation of CDM projects in
Moldova, including scouting for and preparation of Project Idea
Notes for interested potential beneficiaries;
The CFU has the authority to enter into principal-agent
relationships with a variety of interested buyers and sellers of
GHG ERs; and
The CFU has the authority to represent its principles financially
and otherwise, as the case may be.
The CFU has direct project implementation responsibilities
towards its principles.
The Financing Structure
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The Social Investment Fund:
- capital cost for the rehabilitation of heating systems and energy
efficiency improvements;
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Beneficiary Community contribution
- Incremental capital cost (if applicable) for a RES financed through
cash, bank loans, various leasing arrangements;
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Payments from the CDCF
- Off-setting over time (10 years) the higher cost of a biomass boiler;
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Efficiency gains
- Monetized savings are used to off-set the higher cost of a biomass
boiler, as well as for other social needs in the rural communities.
Reporting and Monitoring Activities
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Subsidiary Agreements provide for specific reporting and
monitoring commitments between the CFU and beneficiaries;
Monitoring plans are enforced in each community providing,
among other, information on collection and archiving of specific
data (heating system, its capacity, days in operation, use of
resources, etc).
The CFU verifies that the monitoring methodology and plan are
implemented correctly and check the information in accordance
with the provisions of the Subsidiary Agreements
Data from the monitoring reports serves as the basis for
determining carbon payments due at the end of the period.
Implementation Risks and
Lessons Learned
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The Project is complex and synergetic, requiring perfect
synchronization and buy-in among various stakeholders (ex.
the GEF MSP, the SIF, the CFU and the beneficiaries);
Overcoming confidence barriers towards clean energy
technologies is a difficult process in a fossil-dominated fuel
market, even when alternative resources are readily available;
Overcoming financing barriers requires a solid public financial
effort, and/or a fairly sophisticated financial market to allow
communities to renew heating systems;
Carbon finance represents a good financial incentive for poor
communities to adopt and apply clean energy technologies