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About Umbrella Carbon Facility (UCF)
The Umbrella Carbon Facility (UCF) is an aggregating facility to pool funds for the purchase of emission reductions from large projects. The Facility would purchase greenhouse gas emission reductions from CDM and JI projects. The purchases would be made on behalf of interested public and private entities that will have contributed to the Facility as they strive to meet their commitments under the Kyoto Protocol or other international regulatory system (such as the European Emission Trading System), including contributions from the Bank's other carbon funds. The proposed Facility would have multiple tranches, each tranche buying emission reductions from one or more individual projects (such as one HFC23 destruction facility) or a program (such as program for coal thermal power sector re-powering by a public sector financial institution in India).
Most existing World Bank carbon funds have a limitation on the size of projects or have portfolio limits on country and sectoral exposure. These restrict the ability to undertake large CDM (Clean Development Mechanism) projects within the existing fund structure. For example, a single HFC23 (Trifluoromethane) destruction project located at a HCFC22 (Chlorodifluoromethane) manufacturing facility in China can generate about 50 million TCO2e (tons of carbon dioxide equivalent) of emission reduction valued at over $250 million before 2012. No single World Bank carbon fund can undertake a project of this magnitude; in fact even all the World Bank managed carbon funds together may not be able to purchase all emission reductions from one such project and other buyers in the market may need to be mobilized to complete the transaction. The proposed Facility will also allow funding from the individual World Bank carbon funds to be aggregated and for the emission reduction purchase arrangements to be simplified. A single emission reduction purchase agreement with the Facility would be required rather than individual emission reduction purchase agreement with the project for each carbon fund.
The proposed Umbrella Carbon Facility would allow aggregation of many buyers at a scale that would permit the purchase of large volumes of greenhouse gas emission reductions. The proposed Facility would ensure that a part of the capital now accumulating in the OECD countries to meet emission reductions obligations flows to developing countries. Purchases of emission reduction from the proposed Facility would help bring more liquidity to the market and ensure that developed country governments and companies can meet their emission reduction obligations. Internally, it would reduce the risks of delivery on eight existing Funds by providing large amounts of carbon emission reduction credits to these Funds currently under Bank management, thereby helping close the current gap between available funding and delivered emission reductions.
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