17th Joint Coordination Workshop I 12 March 2011

Investing in PoAsDr. Francois Beaurain7th CDM Joint Coordination Workshop

12 March 2011

asset management

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CDC Climat Asset Management

► Asset management company incorporated in 2010 specialized in the carbon markets

► 100% subsidiary of CDC Climat and publicly-owned Caisse des Depots (France)

► Several active investment mandates focused on post-2012 credits and non-BRICs

► Strong focus on long-term investments in high quality carbon assets (CERs, ERUs, VERs)

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Why is CDC Climat AM looking at PoA opportunities? asset management

1. PoAs are ideal for micro-activities

2. They are currently many PoA leads in Africa and LDCs

3. Because once registered, PoA can offer opportunities to make future carbon revenues bankable

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Benefit 1: PoAs are ideal for micro-activities

► Absence of practical large-scale methodologies targeting micro-activities (contrast with GS VER meths, e.g. cookstoves).

► PoA is the only option to develop large-scale programme using small-scale methodologies.

Over 50% of PoAs in validation cover household sector (<<1% for stand-alone CDM projects)

From investor point of view, PoA is needed to diversify our project portfolio.

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Benefit 2: PoAs can generate opportunities to invest in Africa

► After 2012, only CDM projects developed in LDCs will be eligible in the EU-ETS

19% of PoAs are in Africa (<3% for CDM projects)

PoAs can offer a means to source EU-ETS eligible carbon credits.

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Benefit 3: Registered PoA could be a safer and scalable investment

►Under registered PoA►Inclusion is faster than validation►inclusion risk is lower than registration risk PoA is a vehicle where investments could be safer and scalable. Free of CDM validation/registration risks, CERs become more bankable. CERs can be used for pre-payments.

From investor point of view, once registered PoA could be safer and scalable investment.

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What are the most critical regulatory barriers to investing in PoAs? asset management

1. DOE liability

2. Unclear additionality guidance

3. Timeline

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Obstacle 1: DOE liabilityasset management

► DOE liability for erroneous inclusion is potentially unlimited since it covers all issued CERs and large upward price risk

► We do not see how these risks can be credibly managed by private entities

Difficulties to appoint a DOE for validation/verification for most PoAs

Can one invest in PoAs without gambling? Most PoAs are currently financed thanks to donors!

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Obstacle 2: Unclear additionality guidance asset management

► Absence of a clear guidance on additionality of PoAs and existence of contradictory guidances

► Absence of “CDM prior consideration“ concept for PoAs► Application of VSSC additionality guidance in the context of

PoAs?

It is currently almost impossible to assess additionality risks ex-ante.

Additionality rules should allow demonstration at PoA and CPA level.

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Obstacle 3: CPA implementation cannot start before PoA validation asset management

► Under PoA rules, there is no “CDM prior consideration“ but CPAs cannot start before PoA validation start.

► PoA preparation has different time requirements than programme implementation

PoA-DD preparation and/or DOE appointment can delay CPA implementation. Some programmes are sometimes not eligible to the CDM because of this rule.

Proposed solution: “PoA start date“ concept needs to be introduced. CPA cannot be implemented before PoA start date

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Other minor regulatory obstacles asset management

CDM PoA Consequence

Sampling among CDM projects is not allowed

Sampling among CPAs is allowed but no guidance exists

Economy of scale during verification are impossible

Combination of methodologies is allowed

Combination of methodologies is limited and has to be consistently applied to all CPAs

PoA types are limited.

2 years limitation in debundling rule

No time limitation for debundling check

Unfair and unmanageable debundling check

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PoA will be fully workable when... asset management

► A time limit to DOE liability issue is introduced.► Additionality for PoAs is clarified.► PoA debundling rules, start date, VSSC guidance, combination of

methodologies and CDM prior consideration are the same as for “normal“ CDM.

We want to invest in PoAs, but CDM regulatory issues are complex – Gold Standard-PoA and VCS grouped projects are strong competitors even in absence of clear price formation mechanism.

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To go further...asset management

► PoA Guidebook available on our website:

http://www.cdcclimat.com/PoA-Developping-programs-of.html

► Submissions from the PD forum for call for inputs on PoAs

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Thank you!asset management

For any other inquiries, do not hesitate to contact :

Dr.François Beaurain, francois.beaurain@cdcclimat-am.com