GEF and Carbon Finance: GEF and Carbon Finance: Exploring New Options for GEF-5Exploring New Options for GEF-5

GEF-5 and Carbon Finance MeetingNovember 15, 2010

Washington, DC

GEF-5 ReplenishmentGEF-5 Replenishment

Concluded in May 2010 for a record replenishment of $4.25 billion for GEF-5 (July 2010 to June 2014)

By focal area– Climate Change: $1,360 million– Biodiversity: $1,210 million– International Waters: $440 million– Chemicals: $425 million– Land Degradation: $405 millionPlus Corporate Programs, Small Grants Program, Private Sector, etc.

Funding for Climate Change Mitigation Funding for Climate Change Mitigation

Focal Area Allocation– $1,360 million

Under STAR– $1,088 million

Contribution to SFM– $100 million

Focal Area Set-aside– $172 million ($80 million + $92 million)– Up to $20 million of the set-aside could be allocated to regional

or global carbon finance projects/programs.

Strategic Objectives in GEF-5: Strategic Objectives in GEF-5: Climate Change MitigationClimate Change Mitigation

Promote demonstration, deployment, and transfer of innovative low-carbon technologies

Promote market transformation for energy efficiency in industry and the building sector

Promote investment in renewable energy technologies

Promote energy efficient, low-carbon transport and urban systems

Promote conservation and enhancement of carbon stocks through sustainable management of land use and forestry

Support enabling activities and capacity building

Features of GEF and CDMFeatures of GEF and CDM(From a 2008 presentation, Zhang)(From a 2008 presentation, Zhang)

GEF CDMMandate Financial mechanism of

UNFCCCMarket-based mechanism of KP

Objective To transform the markets toward less-carbon-intensive paths

To meet emissions targets for developed countries and provide finances resources and technology for developing countries

Strategy Barrier removal; long-term; catalytic

Project based; focusing on direct emissions reduction

Modality Upfront grant or concessional financing for agreed incremental costs

Payment on delivery of emissions reduction (to improve project revenue streams)

Project type

Preventive measures to reduce/avoid CO2; primarily RE, EE, and transport projects

End-of-pipe fixes to capture/decompose gases of high GWP (HFC, CH4); relatively few RE, EE, transport projects

M&V Ex ante estimate; weak traceability; self-reporting

Rigorous methodology; quantified, monitored, verified, and certified

What GEF has supported

GEF creates enabling legal, regulatory environment; CF supports specific projects.

GEF demonstrates technical and financial viability; CF replicates.

GEF provides partial risk guarantees; CF participates in project financing.

GEF provides funding from non-CC focal areas; CF project earns credits from reduced/avoided emissions.

What GEF has shied away from

o Creation and operation of DNAs

o CDM methodology development

o PIN/PDD development

o CDM project verification and certification

o (Co-)Financing projects that earn CERs

““Rule of Thumb” in the PastRule of Thumb” in the Past

Options for Carbon Finance in GEF-5Options for Carbon Finance in GEF-5

Capacity building to help create enabling legal and regulatory environments

Support of programmatic carbon finance and other activities under the post-2012 climate regime

Demonstration of technical and financial viabilities of technologies

Partial risk guarantees and contingent financing for carbon finance projects

Co-financing of innovative carbon finance projects– With credits to be retained in the recipient country for further project replication

Issues to PonderIssues to Ponder

Diversion from ODA

Additionality for CDM (including programmatic CDM)

Double dipping and double counting

Sequencing of GEF and CF projects

Voluntary vs. compliance markets

New frontiers for GEF involvement– Where to push the envelope, and how….

Contact InformationContact Information

Zhihong Zhang, Ph.D.

Coordinator, Climate Change Mitigation

Email: zzhang2@thegef.org

Tel: 202-473-9852

Website: www.TheGEF.org