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Investing in PoAs Dr. Francois Beaurain 7th CDM Joint Coordination Workshop

Investing in PoAs Dr. Francois Beaurain 7th CDM Joint Coordination Workshop. asset management. 12 March 2011. CDC Climat Asset Management. Asset management company incorporated in 2010 specialized in the carbon markets

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Investing in PoAs Dr. Francois Beaurain 7th CDM Joint Coordination Workshop

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  1. Investing in PoAs Dr. Francois Beaurain 7th CDM Joint Coordination Workshop asset management 7th Joint Coordination Workshop I 12 March 2011 12 March 2011

  2. CDC Climat Asset Management • Asset management company incorporated in 2010 specialized in the carbon markets • 100% subsidiary of CDC Climat and publicly-owned Caisse des Depots (France) • Several active investment mandates focused on post-2012 credits and non-BRICs • Strong focus on long-term investments in high quality carbon assets (CERs, ERUs, VERs) 7th Joint Coordination Workshop I 12 March 2011

  3. Why is CDC Climat AM looking at PoA opportunities? asset management • PoAs are ideal for micro-activities • They are currently many PoA leads in Africa and LDCs • Because once registered, PoA can offer opportunities to make future carbon revenues bankable 7th Joint Coordination Workshop I 12 March 2011

  4. Benefit 1: PoAs are ideal for micro-activities From investor point of view, PoA is needed to diversify our project portfolio. 7th Joint Coordination Workshop I 12 March 2011 • Absence of practical large-scale methodologies targeting micro-activities (contrast with GS VER meths, e.g. cookstoves). • PoA is the only option to develop large-scale programme using small-scale methodologies. • Over 50% of PoAs in validation cover household sector (<<1% for stand-alone CDM projects)

  5. Benefit 2: PoAs can generate opportunities to invest in Africa PoAs can offer a means to source EU-ETS eligible carbon credits. 7th Joint Coordination Workshop I 12 March 2011 • After 2012, only CDM projects developed in LDCs will be eligible in the EU-ETS • 19% of PoAs are in Africa (<3% for CDM projects)

  6. Benefit 3: Registered PoA could be a safer and scalable investment From investor point of view, once registered PoA could be safer and scalable investment. 7th Joint Coordination Workshop I 12 March 2011 • Under registered PoA • Inclusion is faster than validation • inclusion risk is lower than registration risk • PoA is a vehicle where investments could be safer and scalable. • Free of CDM validation/registration risks, CERs become more bankable. CERs can be used for pre-payments.

  7. What are the most critical regulatory barriers to investing in PoAs? asset management • DOE liability • Unclear additionality guidance • Timeline 7th Joint Coordination Workshop I 12 March 2011

  8. Obstacle 1: DOE liability asset management • DOE liability for erroneous inclusion is potentially unlimited since it covers all issued CERs and large upward price risk • We do not see how these risks can be credibly managed by private entities • Difficulties to appoint a DOE for validation/verification for most PoAs • Can one invest in PoAs without gambling? Most PoAs are currently financed thanks to donors! 7th Joint Coordination Workshop I 12 March 2011

  9. Obstacle 2: Unclear additionality guidance asset management • Absence of a clear guidance on additionality of PoAs and existence of contradictory guidances • Absence of “CDM prior consideration“ concept for PoAs • Application of VSSC additionality guidance in the context of PoAs? • It is currently almost impossible to assess additionality risks ex-ante. • Additionality rules should allow demonstration at PoA and CPA level. 7th Joint Coordination Workshop I 12 March 2011

  10. Obstacle 3: CPA implementation cannot start before PoA validation asset management • Under PoA rules, there is no “CDM prior consideration“ but CPAs cannot start before PoA validation start. • PoA preparation has different time requirements than programme implementation • PoA-DD preparation and/or DOE appointment can delay CPA implementation. Some programmes are sometimes not eligible to the CDM because of this rule. • Proposed solution: “PoA start date“ concept needs to be introduced. CPA cannot be implemented before PoA start date 7th Joint Coordination Workshop I 12 March 2011

  11. Other minor regulatory obstacles asset management 7th Joint Coordination Workshop I 12 March 2011

  12. PoA will be fully workable when... asset management • A time limit to DOE liability issue is introduced. • Additionality for PoAs is clarified. • PoA debundling rules, start date, VSSC guidance, combination of methodologies and CDM prior consideration are the same as for “normal“ CDM. We want to invest in PoAs, but CDM regulatory issues are complex – Gold Standard-PoA and VCS grouped projects are strong competitors even in absence of clear price formation mechanism. 7th Joint Coordination Workshop I 12 March 2011

  13. PoA Guidebook available on our website: http://www.cdcclimat.com/PoA-Developping-programs-of.html Submissions from the PD forum for call for inputs on PoAs To go further... asset management 7th Joint Coordination Workshop I 12 March 2011

  14. For any other inquiries, do not hesitate to contact : Dr.François Beaurain, francois.beaurain@cdcclimat-am.com Thank you! asset management 7th Joint Coordination Workshop I 12 March 2011

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