PLENARY 1 – “Visioning the Strategic Role of DFIs”

1. 34th ADFIAP Annual Meeting April 20 to 23, 2011  Acapulco Beach Club & Resort Hotel, Kyrenia, North Cyprus PLENARY 1 – “Visioning the Strategic Role of DFIs” Green Finance ~ Business Opportunities and Role of Financial Institutions Takashi Hongo Special Advisor and Head of Environment Finance Engineering Department Japan Bank for International Cooperation

2. Reduction Potential After 2020, the share of energy efficiency in total abatement declines, while more costly options like biofuels and CCS increase their share 45 Abatement Current Policies Gt 2020 2030 2035 Scenario 40 Efficiency 71% 49% 48% – End-use (direct) 34% 24% 24% 35 – End-use (indirect) 33% 23% 23% – Power plants 3% 2% 1% 30 Renewable 18% 21% 21% Biofuels 1% 3% 3% 25 450 Scenario Nuclear 7% 9% 8% CCS 2% 17% 19% 20 3.5 15.1 20.9 Total (Gt CO2) 2008 2015 2020 2025 2030 2035 World energy-related CO2 emissions savings in the 450 Scenario compared with the Current Policies Scenario, by measure Source: IEA WEO 2010 2

3. Reduction Potential of Proven Technology （Commercially Viable Best Available Technology) (‘000 ton/Y ) 1.5 Billion ton CO2 saving per year > 1.3 billion ton CO2 emission a year in Japan Source: IEEJ CO2 emission reduction potential by using Japanese BAT

4. Heat Recovery System of Cement Plant Energy saving and CO2 reduction 18,410Kwh 120,000 ton/y (China, 5000ton X2 units) AQC Boiler PH Boiler Turbine / Generator Building Demineralizer building Cooling Tower Source Kawasaki 4

5. Low Carbon Investment 1 200 Other Countries Billion dollars (2008) 1 000 Other Major Economies OECD+ 800 600 400 200 0 2015 2020 2025 2030

6. Mission of Financial Institutions Investment Projects Financial Institutions Investors Affluent society Mission of Financial Institutions Financial Institutions should support economic growth to realize affluent society under environment constraint. Balancing economy and environment is crucial.

7. Role of Public Finance for Climate Change Mobilizing private funding is a key role Risk Mitigation Guarantee/Insurance Co-financing Improve economic return Low cost funding for co-financing Mezzanine Interest subsidies Improve investment climate Policy dialoguefor incentive/regulation Information service/business matching

8. Green Growth and Technology Cycle Green Growth R&D Investment Economic Return Commercialization Diffusion 8

9. “Emission” or “Reduction”? Reductions Emission from Existent facilities Emission from invested projects Emission from invested projects

10. Green and ＬＩＦＥ

11. J-MRV ・Scaling up low carbon investment ・“simple, practical and internationally acceptable” guideline ・Following investor’s decision-making process Reduction amounts = Baseline emissions - Emissions from projects Baseline amounts = Emissions in the case without investment Option of Baseline a/ Actual emissions before investment, b/ Emissions from similar installations in operation in the country or in the region c/ Emissions from similar installations recently invested in the country or in the region Taking into account: ・investment climate such as economy, energy, technology, regulation. ・availability and reliability of data Sampling and theoretical value may be applicable http://www.jbic.go.jp/en/about/news/2010/0730-01/100730_mrv_guideline.pdf

12. J-MRV Methodology • Rehabilitation of Coal Fired Power Plant (J-MRV002) - CO2 emission amount Reductions Before Investment After Investment Taking into account of the capacity increase of the facility by the investment In case of new facility, CO2 emission amount of new facility will be compared with the national average of the same type of facility

13. J-MRV Methodology • New Coal Fire Power Plant (J-MRV004) - Under Constraint Under Regulation Principle CO2 emission Principle Reductions Reductions National Average Reductions National Average National Average New Plant New Plant National Average (Coal) Regulation, De facto standard Taking into account constraints, such as energy security, supply and investment economics Accepting and endorsing establishment of global de facto standard and regulation

14. J-MRV Process Project Preparation Project Implementation Construction At Commissioning Operation phase ( 1 year after commissioning) For Financial Due Diligence Retained Consultant JBIC Advisory Committee J-MRV

15. Structure of Green Credit Line J-MRV CO2 reductions Share of J-MRV Opinion Finance JBIC Bank J-MRV Advisory Committee Data CO2 reductions Data (Planned and actual, Energy consumption, Power generation) Finance CO2 reductions Data Retained Consultant Project 15

16. Benefit of MRV for Financial Institutions Preparation for regulatory framework Future Carbon Market Better Funding Investment on the opportunities Reputational benefit (CSR)

17. Green Finance Alliance Voluntary Participation Sharing Good Practice MRV and Disclosure Message to Industry and Regulators New Market Mechanism

18. MRV as International Public Goods Finance Policy Rating Industry Nov, 2010 Siam Reap, Cambodia June, 2010 Tokyo, Japan Stake Holder Carbon Market Dec, 2010 Cancun, Mexico May, 2010 Cologne, Germany

19. Public Private Financial Partnership Capacity of Our Planet Change of Lifestyle Use of Technology Better investment climate, More investment Public Sector (Improvement of investment climate) Private Sector (Driving force) Financial Sector (Push last one mile) 19