PoA Course CH4 L2

Module 2: PoA Management

Chapter 4: Financial Management

Lecture 2

Additional Funding Sources

Congratulations on completing Chapter 4

State of the Carbon Market

Costs and Taxes

Programme and Project Risks

Low carbon prices at the moment following uncertainty over future demand

Complementary Reading Material

Carbon Funds

• Public or private
• Emission target compliance objective
• Profit objective

Costs related to the issuance of CERs can be allocated or shared between buyers and sellers

Buyers usually prefer projects with high environmental and social credentials

Investors are risk adverse and need to see that the CME is well prepared for potential risks

Example:

Different buyers and different regions have different eligibility CER restrictions

List of Carbon Funds:

http://global-mechanism.org/carbon-funds/

Costs can include fees and costs associated with the registration of the PoA

e.g. for EU-ETS, PoAs registered after 2012 are eligible only if located in Least Developed Countries

Potential future demand for CERs:

Climate Finance Options

• Database of funding sources
• Best practice examples
• Knowledge Center

• Fees charged by DOEs to validate and request registration of the PoA and the inclusion of CPAs
• Costs of monitoring GHG reductions, and verification and certification by DOE
• Fees charged by the CDM EB for the issuance of CERs
• Fees charged by registry administrators to open registry accounts and transfer CERs

Country Risk

Operational Risk

Organisational Risk

Technological Risks

Carbon Risk

• International aviation and shipping
• A new market mechanism

Not receiving the expected CERs

Ability of the technology to generate the expected emission reductions

Risk of an unsuccessful implementation and operation of a PoA

CME's and affiliated companies' or organizations' capacity and experience to implement and operate the PoA

Lack of CDM experience in Host Country or countries perceived as high risk investment locations

Investors are reluctant to invest in technologies that are new, complex or difficult to disseminate

Risk can be diminished by:

• Domestic trading schemes

Diminish the risk:

e.g. New Zealand, Australia and Japan

Climate Finance Options:

http://www.climatefinanceoptions.org

Test Your Knowledge

Diminish the risk:

• Programme must be robust and well designed

CERs can also be subject to national taxes

Covering the costs can be negotiated between buyers and sellers

• Well-structured business plan
• Provide a good track record
• Be affiliated with well-recognized partners

• Identify potential risks
• Take actions to minimize the provide risks and seek governmental support for the programme

• Provide data on the technology's performance in local conditions
• Pilot project to assess the emission reductions potential of the technology
• Include maintenance services and training

• A successful registration through a well-structured PoA-DD, monitoring and verification

• The further a programme is in the PoA cycle, the lower the perceived risk

• Investor negotiation after PoA registration can provide higher CER prices

To test the knowledge you attained in Chapter 4, follow the link below and complete the multiple choice questionnaire:

Voluntary Carbon Market where governments, NGOs and businesses buy CERs

• Specific CDM taxes
• General taxes on goods and trade

http://www.classmarker.com/online-test/start/?quiz=6ng51b0443842aad

CDM Loan Scheme

• Interest free
• Targeted to Least Developed Countries and countries with less than 10 CDM activities and PoAs
• Cover costs of Project Design Documents, validation by DOE and 1st verification of CERs

To continue learning more about Legal Management,

continue to Chapter 5 by clicking the arrow below

In some cases, the buyers agree to pay certain costs and taxes and as result, ask a lower CER price

CDM Loan Scheme:

http://www.cdmloanscheme.org/

Continue to Chapter 5

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