Transcript General Outlines of Japan Carbon Fund (JCF)

【Chile】
The Role of JBIC
in Support of Overseas
Projects Related to Kyoto
Mechanisms
December 2004
Yohei NISHIYAMA
Japan Bank for International Cooperation (JBIC)
1. JBIC at a Glance
Organization
Established as a Governmental Financial
Institution of Japan in October 1999 by the
Merger of :
The Export-Import Bank of Japan (JEXIM:est.1950) and
Overseas Economic Cooperation Fund, Japan
(OECF:est. 1961)
Purpose
・ Promotion of Japan’s international Trade and other
international economic Activities
・ Stabilization of the international financial Order
・ Economic and social Development and/or Stability of
developing Areas
2
Regional Distribution of Commitments
during the last 5 years (April 1999～March 2004)
Asia
M ultilaterals, others
5%
E urope
7%
N orth A merica
A frica
4%
4%
M iddle E ast
10%
O ceania
2%
South America
Middle East
Europe
Multilaterals, others
Africa
North America
Oceania
A sia
53%
S outh A merica
15%
Outstanding Amount: JBIC Total
USD 178.8 billion (Japanese Yen 115/USD)
3
Overseas Network (26 Representative Offices)
[Asia(13)] Beijing, Hong Kong, Bangkok, Hanoi,
Jakarta, Kuala Lumpur, Manila, Singapore, Colombo,
Dhaka, Islamabad, New Delhi, Sydney
[Europe(4)] Moscow, Frankfurt, London, Paris
[Africa(2)] Cairo, Nairobi
[North America(2)] New York, Washington
[South America(5)] Bogota, Buenos Aires, Lima,
Mexico City, Rio de Janeiro
4
2. JBIC and GHG Pollution Prevention
Projects
(1) JBIC is actively supporting Projects to alleviate
GHG Effect through Financing Operations, for
example
 Renewable Energy
–
–

Northern Luzon Wind Power Project, Philippines
(ODA Loan)
Upper Kotmale Hydropower Project,
Sri Lanka (ODA Loan)
Natural Gas
–
Beijing Environment Improvement Project,
China (ODA Loan)
5
– Severnaya Natural Gas-Fired Combined Cycle
Power Plant Project Ⅱ,Azerbaijan (ODA Loan)

Energy Saving / Energy Efficiency
– Rehabilitation of Coal-Fired Thermal Power (Cogeneration) Plant Project, Romania (Export Loan)
– LD Gas Recovery System Project, Brazil (Export
Loan)
– Shaanxi Province Xian Co-generation Project, China
(Export Loan)

Forest Conservation, etc.
6
3. Outline of Kyoto Protocol and CDM
(1) Kyoto Protocol: Adopted at the Third Conference
of the Parties to the United Nations Convention on
Climate Change held in Kyoto, Japan in December
1997. It commits industrialized country signatories
to reduce their greenhouse gas by an average of
5.2% compared with 1990 emissions, in the period
2008-2012(first commitment period).
In case of Japan:
commitment to reduce by 6% compared with
1990 level ⇒（A）
actual emission level in 2002 increased by 7.6%
compared with 1990 level ⇒ （B）
（A）＋（B）＝13.6% (approx. 174Million t-CO2/Year)
7
(2) Greenhouse gases (GHGs): The six GHGs are
responsible for climate change and global
warming;carbon dioxide (CO2), methane (CH4), and
nitrous oxide (N20), as well as hydrofluorocarbons
(HFCs), perfluorocarbons (PFCs), and sulfur
hexafluoride (SF6).
(3) Clean Development Mechanism (CDM): The
mechanism provided by Article 12 of the Kyoto
Protocol, designed to assist developing countries in
achieving sustainable development by permitting
industrialized countries to finance projects for
reducing greenhouse gas emission in developing
countries and receive credit for doing so.
8
Host County
(no limitation of emissions)
Transferred to
participants
(Annex I Country)
reduction
CER☆
GHGs emissions
GHGs emissions
(Certified
Emission
Reductions)
Annex I Country (investor)
with limitation of emission
Adding the
emission
reductions with
CER
Distributed to
Host Country
Without CDM Project With CDM Project
“Additionality
☆☆”&“Baseline☆☆☆”
（Ministry of the Environment, Japan, modified by Nishiyama)
9
☆Certified Emission Reductions (CERs):
A unit of greenhouse gas emission reductions issued
pursuant to the Clean Development Mechanism of
the Kyoto Protocol, and measured in metric tons of
carbon dioxide equivalent.
☆☆Additionality:
Gas emission reductions generated by CDM and Joint
Implementation project activities must be additional
to those that otherwise would occur. Additionality is
established when there is a positive difference
between the emissions that occur in the baseline
scenario, and the emissions that occur in the
proposed project.
☆☆☆Baseline:
The emission of greenhouse gases that would occur
without the contemplated policy intervention or
project activity.
10
4. JBIC’s Engagement to Kyoto Mechanisms
(1) JBIC’s contribution to Prototype Carbon Fund
(PCF) of World Bank (Committed Amount:
USD180 million)
 Objective:
Accumulation and dissemination of know-how
for handling CDM/JI projects
 Committed USD10 million along with 8
Japanese companies (May 2000)
 Only JBIC contributed to PCF from public
sector in Japan
 Engaging actively as a member of
Participants’ Committee
11

Chile Chacabuquito (hydropower) Project
achieved 112,000 tons of CO2 VER in total
after almost one year of operation (June 2003)
(2) Financial Support for CDM/JI Projects through:
 International Financial Operations
–
–
–
–
–
Export loan
Overseas investment loan
Untied loan
Guarantee
Equity participation
(Potential CDM project)
 Shanxi Coal Bed Methane Collection & Power
12
Project (currently under negotiation)
 Overseas Economic Cooperation Operations
–
ODA loan
(Potential CDM project)
 Zafarana Wind Power Project (Egypt,Dec.2003)
The necessary procedures for the application of the
CDM have already been started.
13
 Advantages of JBIC’s financing for CDM/JI
Projects
Strong relationship with host country (government
agencies and private sector) built through years of
financing operations and our overseas networks of 26
representative offices
Smooth Implementation of Projects
– Collaboration and Support with/from JBIC Underlying
Finance
– Extensive knowledge and know-how in dealing with
environmental projects in developing countries
– Intermediary Functions: Close and Tight Relationship
with Japanese Industry having interest in CDM/JI
Projects
– Accumulation of experience through investment in PCF
–
14
(3) Support for the Capacity Building in the Host
Countries


Support for Mobilizing Institutional Framework, having
a seminar regarding Kyoto Mechanisms
CAF (Corporación Andina de Fomento) in March, 2003
To provide further financial support and economic and
social development support in the Andean Region, and
to promote CDM project activities as well
Mexican/DNA (Comité Mexicano para Proyectos de
Reducción de Emisiones y de Captura de Gases de
Efecto Inverradero) in Apr. 2004
15


BCIE（Banco Centroamericano de Integración
Económica) in Julｙ 2004
To provide CDM project in Central American countries
through JBIC’s various financial instruments as well as
supporting Japanese firms in acquiring emission
reduction credits
Chilean DNA (Comisión Nacional del Medio Ambiente,
CONAMA), ProChile, SOFOFA in Nov. 2004
(４) MOU with IETA and World Bank


IETA (International Emissions Trading Association) in
Dec. 2003
World Bank in Dec.2004
To further facilitate sustainable development of
developing countries and regions through GHG
emission reduction efforts based on collaboration
concerning the World Bank carbon finance initiative. 16
4. General Outlines of Japan Carbon
Finance,Ltd. (JCF)
The first GHG Reduction Fund in Asia to contribute the
achievement of the GHG Reduction target of Japan defined
by Kyoto Protocol, and to contribute the sustainable
growth in Non Annex I countries.
(1) Objectives : To purchase CERs and ERUs (ERs)
issued for the crediting period until 2012 from
CDM/JI Projects
(2) Fund Pool : Called “Japan GHG Reduction Fund
(JGRF)”, which JCF can utilize to purchase ERs
(3) Committed Fund Amount: Approx. USD 140
million
17
(4) Establishment: December 1, 2004
(5) Location: Tokyo, Japan
(6) Fund Providers: Major Japanese Private
Enterprises & Policy-lending Institutions
JCF was established by some of Major Fund Providers
including Japanese Policy-lending Institutions (JBIC,
Development Bank of Japan).
(7) Project Development Cost (PDD Preparation,
Validation, etc.): To be borne by JCF in principle
with a certain ceiling
(8) Timing of Payment : Payment on Delivery in
principle (Upfront Payment is to be made on
case-by-case basis)
18
(9) Purchase Price: To be decided on project-byproject basis through Project Selection Process
(10) Project Information Notes (PINs) : Submission
of PINs to JCF are welcome in any time & any
form (JCF is happy to provide own PIN form if
requested to the e-mail address: [email protected])
(11) Project Screening Criteria: Inclusive of
Fulfillment of Kyoto Rules, Additionality,
Environmental & Social Safeguard
Requirements, Project Feasibility, Contribution
to Sustainable Development of Host Country,
Portfolio Guideline, etc.
19
Portfolio Guideline;
ERs to be purchased from:
approx. in USD, million
a Single Project
Up to 17
a Single Host Country
Up to 25
a Single Sector *
Up to 30
*Sector: “Sectoral Scopes” listed in UNFCCC web site
which include A) Renewable Energy, B) Waste
Handling and Disposal, C) Manufacturing Industries
(Energy Efficiency, Fuel Switching, etc.), D) Fugitive
Emissions, E) Chemical Industries, F) Agriculture, etc.
20
(12) Advantage for Projects

Additional Cash Flow: Project Viability to be improved
by Cash In-flow in USD under ERPA

Development Function: JCF will provide assistance and
orientation to develop CDM/JI projects.

Possibility of Co-purchase: Fund Providers for JGRF
may purchase a part or all of the remaining ERs after
the purchase by JCF.
21
JCF/JBIC Collaboration Scheme
JBIC
Japanese
Commercial
Banks
Emission Reduction
Purchase Agreement
（ERPA)
Loan
Agreement
(L/A)
CDM/JI
Project
(ERs Seller)
*Fund Provision
through JGRF
*
*
JCF
（ERs Buyer)
DBJ
*
Japanese Company
*
*
Financing for Capital
Expenditure and long–
term Working Capital
during the Construction
Period of the Project
JBIC
Payment for ERs
generated during the
Crediting Period of
the Project
A
Japanese Company
B
Japanese Company
C
・
・
22
・
・
ERs Purchase Structure
Relationship between JCF & JGRF
CDM/JI
Project
Entities
(ERs
Seller)
Payment
Payment
Emission
Reduction
Purchase
Agreements
(ERPAs)
Emission
Reduction
Resale
Agreement
ERs
Japan Carbon
Finance, Ltd.
(ERs Buyer)
Japan GHG
Reduction
Fund
(Fund Pool)
ERs
23
Example Model for Underlying Finance
provided for CDM /JI Projects by JBIC
JBIC
Fund Provision
JCF
Purchase of CER
(Carbon Finance)
Cash Inflow during
Crediting Period
Underlying Finance
（On-Lending Scheme）
Intermediary Financial
Institution
Underlying
Finance
Direct Loan
Companies in
Power /Energy Sector, etc.
Sponsorship
(Equity, etc.)
Cash Inflow during
Construction Period
CDM/JI
Projects
24
Operational Flowchart
Project Entity/Sponsor
Submission of PIN
JCF
Clarification & Screening of PIN
Evaluation & Selection of Project
Execution of Letter of Intent (LOI) which defines basic terms & conditions
PDD Preparation
Assistance & Orientation
to develop Project
Validation & Registration
Execution of ERPA
Exclusivity Period for ERPA Execution
25
Key Criteria at Screening of PINs
 Project Description and Project Participants
 Fulfillment of Kyoto Rules:
Methodology (Baseline Study & Monitoring Plan)
Validation (Methodology Applicability, Data, Quality Control,
etc.)
Possibility of Authorization & Approval by Host Country
Stakeholders’ Comments
 Additionality (Investment Analysis/Barrier Analysis and
Common Practice Analysis, etc.)
 Environmental & Social Safeguard Requirements:
Compliance with Laws & Regulations, etc.
26
 Project Feasibility:
Construction Plan, Business Plan and Fund-raising Plan
Project-related Contracts
Concession/License & Permits
Creditworthiness and Competence of Project Sponsors
Experiences of Management and/or Project Operator
Commercially Viable Proven Technology
Financial Viability (Cash Flow Projection, Sensitivity
Analysis, etc.)
 Contribution to Sustainable Development of Host
Country (Environmental, Social & Economic Impacts,
Technology Transfer Effects, etc.)
 Portfolio Guideline and Purchase Conditions
27
CDM Host Country Rating by ‘Point Carbon’
Point Carbon presented a rating of the most important CDM countries at the end of this November.
The rating has been based on its recently developed methodology which includes (1)
assessment of host countries’ institutional conditions for CDM, (2)investment climate, as well as
(3)project status and potential.
1.India
2.Chile ☆・・・Japanese DNA has approved 12 projects including 4 projects in Chile.
3.Brazil
4.Peru
5.China
6.Morocco
7.Mexico
8.Vienam
9.Thailand
10. South Africa
☆Point Carbon describes as follows regarding Chile (end of October,2004).
‘ Despite of limited theoretical potential for CDM projects and rather strict sustainability criteria,
Chile can be characterized as a good prospect foe CDM investment-----.
The DNA has shown promising results so far, the investment climate is quite good, and several
CDM projects are to be submitted for registration at CDM Executive Board.’
28
Muchas Gracias!!
29