LEGAL ISSUES FOR HOST COUNTRY

CONSIDERATION

CDM Workshop

Kampala, June 6 to 8, 2001

Basic Approach

Emission Reductions

(Host Country + Project Entity)

Payments (PCF)

CDM Projects – Art. 12 KP12 (2) The purpose of the clean development mechanism shall be to assist developing countries•In achieving sustainable development•In contributing

– to the ultimate objective to the UNFCCC– to assists developed countries in achieving compliance

with their quantified emission reduction commitments.

12 (9) Participation under the clean development mechanism, including in activities resulting in certified emission reductions and in the acquisition of certified emission reductions may involve private and/or public entities.

World Bank /PCF

UNFCCC rules

Host government (transferring

country)

Project entity

PCF : Actors involvedPCF : Actors involved

Annex 1 Government (acquiring country) –

PCF Participants (Gov. + Priv.)

PCF Governance Structure• World Bank

– Fund Management Unit– Fund Management Committee

• Participants– Participants’ Meeting– Participants’ Committee

• Hosts– Host Country Committee

Host Country Role– Host Country Committee

• Composed of those countries either signing a letter of endorsement for a PCF project or a Memorandum of Understanding

• Provide advice and strategic guidance to the Fund Management

• Annual meetings, prior to Participants’ Meeting to provide effective input

– Observer status in Participants committee and Participants’ meetings

16

Project Endorsement Letter Host Country endorses further development of

the project for the purposes of the UNFCCC/KP

Host Country:

• Signals Commitment to render aid and assistance (e.g. registration of the ERs in any international or national regulatory regime)

• Approves projects for KP purposes

• Allows access to information

PCF KEY LEGAL AGREEMENTS

• Letter of Endorsement

• Host Country Agreement

• Emission Reductions Purchase Agreement

Host Country

PCF Trustee

Project Entity

1. Letter of Project Endorsement

3. National Legislative Framework / Agreement / Authorization

2. Host Country Agreement

2. Emission Reductions Purchase Agreement

Legal Agreements for PCF Projects

Host Country

PCF Trustee

Project Entity1. Letter of

Project Endorsement

2. Host Country Agreement and Emission Reductions Purchase Agreement

Legal Agreements for PCF Projects

Host Country Agreement

PCF Trustee Host Country

Obligation to buy ERs

Obligation to transfer ERs

Main Elements of Host Country Agreement (HCA)

PCF commits to

– buy ERs

Host Country commits to

– authorize the transfer of ERs by the Project Entity to the PCF

or

– transfer ERs to the PCF

Emission Reductions Purchase Agreement

PCF Trustee Project Entity

Purchase Price (net of costs)

Exclusive Right of Certification and Verification of purchased ERs (ERs)

Transfer of ERs

Main Elements of Emission Reductions Purchase Agreement

(ERPA)

• Purchase of ERs from the Project Entity / Payment for achieving ERs

• PCF commits to arrange for initial and periodical verification, validation and certification.

• Transfer of ERs