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About the Carbon Partnership Facility (CPF)
Introduction
For the first time, in one of the World Bank's carbon funds, the new Carbon Partnership Facility (CPF) will employ a governance structure that features the balanced participation of buyers and sellers. Host country governments and donors will also directly participate in the governance of the CPF in an advisory capacity. Donor contributors may include governments and other public and private entities. Closer collaboration and partnership between all parties in the carbon market is expected to make carbon finance an even more effective tool in climate change mitigation and development, and will provide a unique operational level opportunity for the parties involved to exchange views and discuss issues of mutual interest.
The new Carbon Partnership Facility would be set up as a partnership between buyers and sellers to facilitate the development of low-carbon investments with a long-term impact on mitigating GHG emissions. The partnership will be comprised of two trust funds: (i) the Carbon Asset Development Fund (CADF) to prepare emission-reduction programs, and (ii) the Carbon Fund (CF) to purchase carbon credits from the pool of emission reduction programs.
- The Carbon Asset Development Fund would provide funding for (i) development of carbon assets (e.g., methodologies and their application, documentation, independent audits, etc.), (ii) creation of an enabling environment where needed (e.g., amendments to the regulatory framework in the host country), and (iii) administration of the facility and its activities. If donor funds are made available for this purpose, it may also provide financial support for high-cost activities, such as the preparation of carbon capture-and-storage projects.
- The Carbon Fund would entail the trusteeship functions of (i) administering promissory notes and making draw-downs, (ii) making payments for carbon assets as per the carbon purchase contracts, and (iii) administering and registering carbon assets.
The CPF would target long-term investments that have a significant potential to mitigate emissions in the future. To do this, the CPF would purchase emission reductions for at least 10 years beyond 2012. The CPF would be open for all types of activities that (i) reduce greenhouse gases, (ii) are suitable for scaling up, i.e., can be replicated as part of a program, and where (iii) World Bank involvement would enable or add value to the proposed programs. Examples of the types of programs that could be included in the CPF portfolio include the following: power sector development, energy efficiency, gas flaring, transport sector, and urban development programs. The CPF will be developed in several tranches over time and its overall capitalization could in the longer term reach €5 billion.
For further information, please contact Richard Zechter.
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