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Outline of Chapter 3 - Financing the Development Dividend

Outline of Chapter 3 - Financing the Development Dividend. Introduction Understanding the Challenge Case Studies Existing Support Mechanisms Identifying the Gaps Possible Solutions Recommendations. Introduction. Ways in which more financing can be made available; and

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Outline of Chapter 3 - Financing the Development Dividend

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  1. Outline of Chapter 3 - Financing the Development Dividend • Introduction • Understanding the Challenge • Case Studies • Existing Support Mechanisms • Identifying the Gaps • Possible Solutions • Recommendations

  2. Introduction • Ways in which more financing can be made available; and • Ways financing could encourage project stakeholders to include and/or enhance the development dividend.

  3. Financing Challenge • Wide Range of Financing Sources What do they all have in common • “WIIFM” Factor (What’s In It For Me?) • Risk - Reward

  4. Country Risk • Economic • Political • Legal • Regulatory Framework • Commitment to Environment

  5. Project Risk • Project Technology • Project Size (Cost) • Project Proponents, developers and stakeholders • Project Infrastructure Needs • Project Construction • Project Operation • Project Viability, Creditworthiness of key counterparties • Sustainable Development Benefits • Community commitment and support, political complexity

  6. Financing Challenge • Carbon Credit Risk • Delivery Risks, including payment for carbon credits up front or on delivery • Market Risk, including volume and value to buyer and seller • Ownership

  7. Summary of Cases • Offshore Financing Vs Local Sources • Traditional Vs Non Traditional Sources • Project Size Vs Complexity • Project Size Vs Transaction Costs • Carbon Credits Vs Sustainable Development Benefits

  8. Current Sources • Not Driven by Sustainable Development • MDBs and PS Carbon Funds – Compliant CERs • ECAs “export” benefit • etc • Risk – Reward not in balance • Equity ROI • Debt Term, Interest Rate and Security • Capacity • CDM and Carbon Credit Knowledge • Staff • Volume (“One Offs”)

  9. Identifying the Gaps BetweenSupply Side and Demand Side Needs Supply Side Sources of Financing Need: • Good “Bankable” Projects • Credible, Timely, Cost Effective Approval Processes • Risk Sharing Demand Side Requirements for Financing Need: • More Flexible, Risk Tolerant Debt, Equity Sources • Up Front Purchases of Carbon Credits • CERs and Offsets (Voluntary) • ODA/Grants • Budgets • Sustainable Development Funds

  10. Possible Solutions Are Previously Identified Solutions Still Valid? Are Voluntary Market Credits More Appropriate Than CERs for Small Scale Projects with a low CC:SD Ratio? Can SD Be Standardized? Can SD Projects Be Fast Tracked? Can SD Projects Be Pooled? Can SD Projects Receive Premium CER or Voluntary Credit Price?

  11. A Solution to Bridge Supply Demand Gap Process to Select SD Projects • Projects Bankable: “Yes-No-Maybe” Decision • Transparent, Independent, Expert Committee • DNA, MDB, DFI, UNEP, Plus Private Sector • Feedback and Capacity Building • Appropriate Funding Sources for Project • “Modified China Clean Development Fund” • External and Domestic Sources • ODA, MDB, ECA, Insurance, • SD:CC Measure • Debt, Equity, Budgetary, Other Funding Sources Identified • Appropriate Carbon Credit Market (CER vs Voluntary)

  12. Recommendations • Pilot Project • Country or Region “Clearing House” • Tool to screen cost of developing project as CDM or VER from policy and financing perspective • Role of Offset Markets as Source of Financing • Capacity Building of Project Developers/Proponents/Stakeholders • Pressure on Developed Country Gov’ts to prioritize SD • Project Finance Sources • Clarify Role of ODA • Research “Supercredit”

  13. Discussion Thank you Tom and Emily for The Cases and Your Patience

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