From: Banking on Carbon
The World Bank Group
Founded in 1944 to provide assistance for postwar reconstruction, the World Bank Group’s current role is to alleviate poverty in developing countries.
The original and largest World Bank organization, the International Bank for Reconstruction and Development (IBRD), which generally is referred to as the World Bank, provides technical assistance and low-interest loans to middle-income and creditworthy poor countries. Countries in this group, as of fiscal 2005, had an annual per capita income, generally, of less than $5,295. In comparison, the annual per capita income for the United States was $34,586 in 2005.
In fiscal year 2005, the IBRD lent $13.6 billion for 118 projects, including solid-waste-management projects and projects with a solid-waste-management component.
The IBRD, a nonprofit organization that is owned by its 184 member countries, covers its operating costs from monies received from loan repayments. In addition to the IBRD, the World Bank is composed of four other entities:
- The International Development Association (IDA) , which provides interest-free loans and grants to countries with an annual per capita income, generally, of less than $895 in fiscal 2005
- The International Finance Group (IFC) , which supports private sector initiatives
- The Multilateral Investment Guarantee Agency (MIGA) , which provides insurance against political and other non-commercial risks and mediates disputes between investors and government
- The International Centre for Settlement of Investment Disputes (ICSID)
The World Bank’s Carbon Finance Unit (CFU) uses money from the funds to help develop carbon-finance projects and to purchase greenhouse gas (GHG) emission reductions in developing countries and countries with economies in transition.
Unlike other World Bank development products, in the case of carbon finance the bank does not lend or grant resources to the projects themselves, but rather contracts to purchase emission reductions similar to a commercial transaction. The emission reductions are paid for on a periodic basis (e.g., annually) once they have been verified by a third-party auditor. The selling of emission reductions increases the bankability of projects. The additional revenue stream in hard currency reduces the financial risks to a project while reducing climate change and contributing to sustainable development.
Again, an important factor in the World Bank’s carbon-finance activities is to ensure that developing countries and economies in transition are key players in the emerging carbon market. The role of the bank is to catalyze a global carbon market that reduces transaction costs, supports sustainable development, and reaches and benefits the poorer communities of the developing world.
Project Cycle
Among the steps needed to implement a carbon-finance project at the World Bank are:
- Project Idea Note (PIN) —A summary report that provides basic project information plus a financial analysis submitted by the project sponsor or developer. The PIN is evaluated to determine project eligibility.
- Carbon Finance Document (CFD) —An expanded PIN used by the Fund Management Committee to review and clear the project for further development, the CFD is submitted to the fund participants for their approval.
- Letter of Intent (LoI) —Under an LoI, the CFU expresses its intention to buy emission reductions under specific terms and receives the exclusive right to contract for the purchase of the emission reductions. The project sponsor also agrees to repay project preparation costs if it decides not to proceed to negotiate an Emission Reductions Purchase Agreement with the World Bank within the defined exclusivity period.
- World Bank Due Diligence—All projects must comply with the World Bank’s operational policies and procedures, including an environmental assessment. An Integrated Safeguard Policies review and Environmental Assessment are undertaken as part of the bank’s project
appraisal process. - Project Design Document (PDD) —A report that shows approval of the project by the parties involved, net additional reductions of GHG emissions, and provides a Baseline and Monitoring Plan. The PDD is prepared by the World Bank and
project sponsor. - Validation—An independent validator, approved by the UNFCCC, is selected by the World Bank to review the PDD and other project documents. Successful validation signifies that the validator concludes that the project will be additional and eligible as a Clean Development Mechanism (CDM) project and that the emission reductions are highly likely to be certified under the Kyoto Protocol.
- Registration—The validator submits a request for project registration to the UNFCCC’s CDM Executive Board, along with a project review and opinion on the suitability of the project and other documents such as the PDD.
- Emission Reduction Purchase Agreement (ERPA) —The ERPA, negotiated by the World Bank, the project sponsor, and the host country, defines terms and conditions for the sale of emission reductions.
To further develop the carbon-finance market, the World Bank provides projects with the option of selling Verified Emission Reductions (VERs) or Certified Emission Reductions (CERs). With VERs, the bank pays for the emission reductions after an independent verifier confirms the emission reductions. The World Bank takes the risk of whether the CDM Executive Board will certify, issue, and register the emission reductions generated by the project.
CERs are higher priced than VERs, and when the certification risk is low—as with projects that use an approved methodology—sponsors are more likely to sell CERs.
In verification and certification, the emission reductions are confirmed periodically by an independent verifier, based on an approved Monitoring Plan. In the transfer of emission reductions, emission reductions are transferred to the fund that pays the project sponsor for the emission reductions.
Solid Waste Management
Solid-waste-management projects—landfill gas recovery and composting in particular—are important components of the World Bank’s carbon-finance activities. Additional methodologies for recycling and transfer stations are being developed or under consideration.
The World Bank has 46 solid-waste carbon-finance projects. The majority (24) of these projects are at the PIN stage, which shows a growing level of activity in solid waste.
A breakdown of solid waste management projects on a geographic basis shows the largest number currently to be in the Latin America and Caribbean regions.
Signed ERPAs
The World Bank has signed nine ERPAs for solid-waste-management projects. Eight of these projects involve landfill gas recovery, and one is a composting project.
The combined ERPA emissions reductions from these projects amount to 8.32 million tons of carbon dioxide equivalents. A breakdown of the emissions reduction per project is provided below.
Olavarria Landfill Gas Recovery
Location: Argentina, Municipality of Olavarria, province of Buenos Aires
Project description: This project aims to capture and destroy landfill gases through flaring at Olavarria’s sanitary landfill, where the town’s solid waste is disposed. The resulting reductions in landfill gas emissions, more than 0.13 million tons of carbon dioxide equivalents, will be purchased by the Community Development Carbon Fund (CDCF).
Project developer: College of Engineering of the National University of the Center of Buenos Aires Province (UNCPBA)
Nova Gerar Landfill Gas
Location: Nova Iguazu, RJ State, Brazil
Project description: This project aims to capture and use landfill gases to produce 10 MW of electricity. A total of 2.50 million tons of carbon dioxide equivalents will be sold to the Netherlands CDM Facility (NCDMF).
Project developer: S.A. Paulista
Egypt: Alexandria Onyx Landfill Gas Capture and Flaring
Location: Alexandria, Egypt
Project description: This project aims to capture and destroy landfill gases through flaring at the Borg el Arab and El Hammam landfill sites in Alexandria to produce electricity for the national grid. A total of 1.10 million tons of carbon dioxide equivalents will be sold to the Spanish Carbon Fund.
Project developer: Onyx Environment
Latvia: Liepaja Solid Waste Management
Location: Liepaja, Latvia
Project description: This project aims to capture and use landfill gases to produce electricity for the national grid. Almost 0.39 million tons of carbon dioxide equivalents will be sold to the Prototype Carbon Fund (PCF).
Project developer: The Government of Latvia and the Liepaja municipality
Peru: Huaycoloro Landfill Gas Recovery
Location: Lima, Peru
Project description: This project aims to capture and destroy landfill gases through flaring at the Huaycoloro sanitary landfill. The resulting reductions in landfill gas emissions, a total of 0.50 million tons of carbon dioxide equivalents, will be sold to the NCDMF.
Project developer: Petramas S.A.C.
South Africa: Durban Municipal Solid Waste
Location: Durban, South Africa
Project description: This project aims to capture and use landfill gases at the Mariannhill and La Mercy Landfill sites to produce electricity, the overall generation goal being that of 1 MW with the potential to expand to 2 MW. More than 0.61 million tons of carbon dioxide equivalents will be sold to the PCF.
Project developer: Durban Solid Waste, which is the municipal solid waste department of eThekwini Municipality
Tunisia: Gas Recovery and Flaring for Nine Landfills
Location: Tunisia
Project description: This project aims to capture and destroy landfill gases through flaring at one cell in nine sanitary landfills throughout the country. The resulting reductions in landfill gas emissions, a total of 1.12 million tons of carbon dioxide equivalents, will be sold to the Italian Carbon Fund (ICF).
Project developer: ANGED (national agency for SWM), Ministry of Environment
Tunisia: Jebel Chakir Landfill Gas Recovery and Flaring
Location: Tunis, Tunisia
Project description: This project aims to capture and destroy landfill gases through flaring at the Jebel Chakir Landfill, which receives all of the urban solid waste from the Tunisian capital. The resulting reductions in landfill gas emissions, a total of 1.93 million tons of carbon dioxide equivalents, will be sold to the ICF.
Project developer: ANGED (National Agency for SWM), Ministry of Environment
The one composting project with a signed ERPA is:
Laguna De Bay Watershed Community Carbon Project
Location: Laguna de Bay Watershed, Philippines
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Project description: This project aims to mitigate GHG emissions through solid waste and wastewater management, particularly through composting. The resulting reductions in methane emissions, more than 0.04 million tons of carbon dioxide equivalents, will be sold to the CDCF.
Project developer: Laguna Lake Development Authority
Elements 2008
From: Banking on Carbon
The World Bank Group
Founded in 1944 to provide assistance for postwar reconstruction, the World Bank Group’s current role is to alleviate poverty in developing countries.
The original and largest World Bank organization, the International Bank for Reconstruction and Development (IBRD), which generally is referred to as the World Bank, provides technical assistance and low-interest loans to middle-income and creditworthy poor countries. Countries in this group, as of fiscal 2005, had an annual per capita income, generally, of less than $5,295. In comparison, the annual per capita income for the United States was $34,586 in 2005.
In fiscal year 2005, the IBRD lent $13.6 billion for 118 projects, including solid-waste-management projects and projects with a solid-waste-management component.
The IBRD, a nonprofit organization that is owned by its 184 member countries, covers its operating costs from monies received from loan repayments. In addition to the IBRD, the World Bank is composed of four other entities:
- The International Development Association (IDA) , which provides interest-free loans and grants to countries with an annual per capita income, generally, of less than $895 in fiscal 2005
- The International Finance Group (IFC) , which supports private sector initiatives
- The Multilateral Investment Guarantee Agency (MIGA) , which provides insurance against political and other non-commercial risks and mediates disputes between investors and government
- The International Centre for Settlement of Investment Disputes (ICSID)
The World Bank’s Carbon Finance Unit (CFU) uses money from the funds to help develop carbon-finance projects and to purchase greenhouse gas (GHG) emission reductions in developing countries and countries with economies in transition.
Unlike other World Bank development products, in the case of carbon finance the bank does not lend or grant resources to the projects themselves, but rather contracts to purchase emission reductions similar to a commercial transaction. The emission reductions are paid for on a periodic basis (e.g., annually) once they have been verified by a third-party auditor. The selling of emission reductions increases the bankability of projects. The additional revenue stream in hard currency reduces the financial risks to a project while reducing climate change and contributing to sustainable development.
Again, an important factor in the World Bank’s carbon-finance activities is to ensure that developing countries and economies in transition are key players in the emerging carbon market. The role of the bank is to catalyze a global carbon market that reduces transaction costs, supports sustainable development, and reaches and benefits the poorer communities of the developing world.
Project Cycle
Among the steps needed to implement a carbon-finance project at the World Bank are:
- Project Idea Note (PIN) —A summary report that provides basic project information plus a financial analysis submitted by the project sponsor or developer. The PIN is evaluated to determine project eligibility.
- Carbon Finance Document (CFD) —An expanded PIN used by the Fund Management Committee to review and clear the project for further development, the CFD is submitted to the fund participants for their approval.
- Letter of Intent (LoI) —Under an LoI, the CFU expresses its intention to buy emission reductions under specific terms and receives the exclusive right to contract for the purchase of the emission reductions. The project sponsor also agrees to repay project preparation costs if it decides not to proceed to negotiate an Emission Reductions Purchase Agreement with the World Bank within the defined exclusivity period.
- World Bank Due Diligence—All projects must comply with the World Bank’s operational policies and procedures, including an environmental assessment. An Integrated Safeguard Policies review and Environmental Assessment are undertaken as part of the bank’s project
appraisal process. - Project Design Document (PDD) —A report that shows approval of the project by the parties involved, net additional reductions of GHG emissions, and provides a Baseline and Monitoring Plan. The PDD is prepared by the World Bank and
project sponsor. - Validation—An independent validator, approved by the UNFCCC, is selected by the World Bank to review the PDD and other project documents. Successful validation signifies that the validator concludes that the project will be additional and eligible as a Clean Development Mechanism (CDM) project and that the emission reductions are highly likely to be certified under the Kyoto Protocol.
- Registration—The validator submits a request for project registration to the UNFCCC’s CDM Executive Board, along with a project review and opinion on the suitability of the project and other documents such as the PDD.
- Emission Reduction Purchase Agreement (ERPA) —The ERPA, negotiated by the World Bank, the project sponsor, and the host country, defines terms and conditions for the sale of emission reductions.
To further develop the carbon-finance market, the World Bank provides projects with the option of selling Verified Emission Reductions (VERs) or Certified Emission Reductions (CERs). With VERs, the bank pays for the emission reductions after an independent verifier confirms the emission reductions. The World Bank takes the risk of whether the CDM Executive Board will certify, issue, and register the emission reductions generated by the project.
CERs are higher priced than VERs, and when the certification risk is low—as with projects that use an approved methodology—sponsors are more likely to sell CERs.
In verification and certification, the emission reductions are confirmed periodically by an independent verifier, based on an approved Monitoring Plan. In the transfer of emission reductions, emission reductions are transferred to the fund that pays the project sponsor for the emission reductions.
Solid Waste Management
Solid-waste-management projects—landfill gas recovery and composting in particular—are important components of the World Bank’s carbon-finance activities. Additional methodologies for recycling and transfer stations are being developed or under consideration.
The World Bank has 46 solid-waste carbon-finance projects. The majority (24) of these projects are at the PIN stage, which shows a growing level of activity in solid waste.
A breakdown of solid waste management projects on a geographic basis shows the largest number currently to be in the Latin America and Caribbean regions.
Signed ERPAs
The World Bank has signed nine ERPAs for solid-waste-management projects. Eight of these projects involve landfill gas recovery, and one is a composting project.
The combined ERPA emissions reductions from these projects amount to 8.32 million tons of carbon dioxide equivalents. A breakdown of the emissions reduction per project is provided below.
Olavarria Landfill Gas Recovery
Location: Argentina, Municipality of Olavarria, province of Buenos Aires
Project description: This project aims to capture and destroy landfill gases through flaring at Olavarria’s sanitary landfill, where the town’s solid waste is disposed. The resulting reductions in landfill gas emissions, more than 0.13 million tons of carbon dioxide equivalents, will be purchased by the Community Development Carbon Fund (CDCF).
Project developer: College of Engineering of the National University of the Center of Buenos Aires Province (UNCPBA)
Nova Gerar Landfill Gas
Location: Nova Iguazu, RJ State, Brazil
Project description: This project aims to capture and use landfill gases to produce 10 MW of electricity. A total of 2.50 million tons of carbon dioxide equivalents will be sold to the Netherlands CDM Facility (NCDMF).
Project developer: S.A. Paulista
Egypt: Alexandria Onyx Landfill Gas Capture and Flaring
Location: Alexandria, Egypt
Project description: This project aims to capture and destroy landfill gases through flaring at the Borg el Arab and El Hammam landfill sites in Alexandria to produce electricity for the national grid. A total of 1.10 million tons of carbon dioxide equivalents will be sold to the Spanish Carbon Fund.
Project developer: Onyx Environment
Latvia: Liepaja Solid Waste Management
Location: Liepaja, Latvia
Project description: This project aims to capture and use landfill gases to produce electricity for the national grid. Almost 0.39 million tons of carbon dioxide equivalents will be sold to the Prototype Carbon Fund (PCF).
Project developer: The Government of Latvia and the Liepaja municipality
Peru: Huaycoloro Landfill Gas Recovery
Location: Lima, Peru
Project description: This project aims to capture and destroy landfill gases through flaring at the Huaycoloro sanitary landfill. The resulting reductions in landfill gas emissions, a total of 0.50 million tons of carbon dioxide equivalents, will be sold to the NCDMF.
Project developer: Petramas S.A.C.
South Africa: Durban Municipal Solid Waste
Location: Durban, South Africa
Project description: This project aims to capture and use landfill gases at the Mariannhill and La Mercy Landfill sites to produce electricity, the overall generation goal being that of 1 MW with the potential to expand to 2 MW. More than 0.61 million tons of carbon dioxide equivalents will be sold to the PCF.
Project developer: Durban Solid Waste, which is the municipal solid waste department of eThekwini Municipality
Tunisia: Gas Recovery and Flaring for Nine Landfills
Location: Tunisia
Project description: This project aims to capture and destroy landfill gases through flaring at one cell in nine sanitary landfills throughout the country. The resulting reductions in landfill gas emissions, a total of 1.12 million tons of carbon dioxide equivalents, will be sold to the Italian Carbon Fund (ICF).
Project developer: ANGED (national agency for SWM), Ministry of Environment
Tunisia: Jebel Chakir Landfill Gas Recovery and Flaring
Location: Tunis, Tunisia
Project description: This project aims to capture and destroy landfill gases through flaring at the Jebel Chakir Landfill, which receives all of the urban solid waste from the Tunisian capital. The resulting reductions in landfill gas emissions, a total of 1.93 million tons of carbon dioxide equivalents, will be sold to the ICF.
Project developer: ANGED (National Agency for SWM), Ministry of Environment
The one composting project with a signed ERPA is:
Laguna De Bay Watershed Community Carbon Project
Location: Laguna de Bay Watershed, Philippines
Project description: This project aims to mitigate GHG emissions through solid waste and wastewater management, particularly through composting. The resulting reductions in methane emissions, more than 0.04 million tons of carbon dioxide equivalents, will be sold to the CDCF.
Project developer: Laguna Lake Development Authority