This document provides an overview of carbon finance and the World Bank's Carbon Finance Business. It discusses the costs of climate change and mitigation efforts, international responses to climate change including the Kyoto Protocol, and how the World Bank works to facilitate carbon market projects through carbon funds. The World Bank manages over $2 billion for carbon finance projects focused on energy efficiency, industrial emissions, and reforestation. The funds provide upfront financing to developing countries in exchange for verified emissions reductions.

1. Introduction to the World Bank Carbon Finance Business Joe B. Tuyor Senior Operations Officer World Bank East Asia and the Pacific Region

2. Projected Impacts of Climate Change Source: Stern Review, 2006

4. Global Emissions by Sector Source: Stern Review, 2006

7. Emission Reductions time GHG Reductions How the CDM works (I) Baseline Emissions Project Emissions

8. How the CDM works (II)

12. How Carbon Funds Work Industrialized Governments and Companies Developing Countries and Communities Bank Managed Carbon Fund $ Technology Finance Payment on delivery of emissions reductions, not up-front capital costs $ Technology Finance CO Equivalent 2 Emission Reductions CO Equivalent 2 Emission Reductions

14. Banks Investor Debt Equity Waste Management Agreement $$ Service $$ Carbon Credits Role of carbon finance in project financing Carbon Fund $ $ 2 2 Emission Reduction Purchase Agreement Upfront payment as “Equity” Less than 25% of contract Collateralization of ERPA

16. Carbon Economics SUMMARY SENSITIVITY ANALYSIS Incremental IRR Results – Contributions of Carbon Finance

22. A Sample of an Institutional Arrangement for A Carbon Finance Program in Laguna de Bay Laguna Lake Development Authority Private Sector LGU 2 LGU 1 SUB-ERPA ERPA Piggery owner