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CDCF Operations
Contributors to the Fund (the Participants) will support projects that measurably benefit the poor and
will receive ERs from abated or sequestered emissions. These 'Development + Carbon' ERs (ERs with the added value of development
benefits) will have the potential to be recognized under emerging global, national, and regional programs.
The CDCF, a carbon finance product of the World Bank, is a public/private initiative established as a trust fund, similar to the Prototype Carbon
Fund (PCF).
An Advisory Group of outside experts has helped the World Bank to design the Fund. The Fund
mobilizes parallel resources from donors to support technical assistance and project preparation.
Rationale
Many small-scale projects can benefit from local communities even as they abate or sequester greenhouse gas emissions (GHGs). Examples of such projects are mini- and micro-hydro, wind energy, small municipal and agricultural waste projects, energy efficiency, clean transport, and agro-forestry projects.
Small and less developed countries, in particular the poorer rural communities in developing countries where small-scale projects tend to be located, are at a disadvantage when competing for carbon finance and they are likely to be bypassed by carbon investors. Concern over this market bias has led the Parties to the United Nations Framework Convention on Climate Change (UNFCCC) to find ways to reduce the transaction costs of small-scale CDM projects by streamlining methodologies and procedures. It is in this context that the World Bank has developed the Fund, in line with its role as Trustee for the PCF and its responsibility to help its client countries advance the goals of the UNFCCC.
Carbon assets similar to those to be generated by the Fund, while very small in volume, are reported to be commanding a premium in the market. The Fund works with local intermediaries and small and medium-enterprises (SMEs) including financial institutions, project developers, micro-credit organizations, and NGOs to lower the transaction costs and risks of developing small-scale projects. In addition the Fund seeks to benefit from streamlined small-scale project procedures and other advantages offered by ongoing UNFCCC efforts.
Fund Terms
The CDCF is a multi-donor Trust Fund for which the World Bank has invited participation from both the public and private sectors. Participants will acquire a pro rata share of emissions reductions from purchase agreements signed with host countries or project sponsors.
Advisory Group
Along with IETA, the World Bank co-convened an Advisory Group comprised of internationally recognized sustainable developments experts. Each Advisory Group member helps the Bank establish quality portfolio criteria, market the concept to potential Participants, and design efficient project screening tools.
After the launch of the Fund and during its implementation, the role of the Advisory Group has been to advise management on the direction of the Fund, including adjustments to the project selection criteria, if needed.
The Advisory Group reviews and advises on overall portfolio development in terms of types of projects and distribution of projects between countries, regions, and technologies.
Fund Management
The World Bank, as Trustee, oversees the CDCF's management and appoints a Fund Manager and a Fund Management Unit. This unit is part of the World Bank's carbon finance business and draws on the World Bank's experience with carbon finance, in particular experience gained from the PCF.
An internally appointed Fund Management Committee provide operational guidance to the Fund Management Unit. The governance procedures are designed in consultation with key CDCF partners, including the Participants.
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