Carbon Finance in Mongolia
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1 Capacity Building for Development and Implementation of Carbon Finance Projects (CBDICFP) WORLD BANK CARBON FINANCE IN MONGOLIA Mongolia 2011 2 This report “ Carbon Finance in Mongolia “ has been prepared and published within the project on capacity building for development and implementation of carbon finance projects in Mongolia financed by Policy and Human Resource Development Fund of Japan and imple- mented between April 2008- December 2010 jointly by Ministry of Nature, Environment and Tourism, Mongolia and the World Bank. Copyright © 2011, Ministry of Nature, Environment and Tourism, Mongolia Disclaimers The content and views expressed in this publication do not necessarily reflect the views or policies of the Government of Mongolia and the World Bank. Ministry of Nature, Environment and Tourism of Mongolia will not guarantee the accuracy or completeness of any information published herein, and thus will not be responsible for any losses or damages arising from the use of this information or from any errors or omissions therein. This publication may be reproduced in whole or in part in any form for educational or non- profit services without special permission from the copyright holder, provided acknowledge- ment of the source is made. 3 CONTENT Volume 1: The CDM in Mongolia INTRODUCTION .......................................... 10 PDDs under development ................................. 33 BACKGROUND ............................................. 10 Annex 4: PROJECT OPPORTUNITIES .......... 39 Concepts and PINs .......................................... 39 COUNTRY PROFILE ..................................... 11 Programmes of Activity (PoAs) ......................... 40 Political .......................................................... 11 Economic ....................................................... 11 Annex 5: LAWS, RULES AND Social ............................................................. 12 REGULATIONS RELATED TO THE Energy ............................................................ 13 IMPLEMENTATION OF CDM PROJECTS .... 42 Annex 6: CATEGORY OF PROJECTS THAT THE CDM IN MONGOLIA ............................ 15 REQUIRE ENVIRONMENTAL IMPACT Past assistance ................................................ 15 ASSESSMENTxvii ........................................... 47 Asian Development Bank Project ....................... 15 Annex 7: PROJECT TYPES AND World Bank Project ......................................... 15 INDICATIVE LAWS, RULES AND CDM projects ................................................. 16 REGULATIONS ............................................. 48 Project opportunities ........................................ 16 Energy sector .................................................. 48 Public Services ................................................ 49 INSTITUTIONAL STRUCTURE .................... 17 Transport ....................................................... 49 Regulatory Setting ........................................... 17 Mining ........................................................... 50 Institutional Setting ......................................... 17 Chemical and Construction Industries ................ 51 CDM-relevant Structure .................................. 18 Forestry and Agriculture ................................... 51 Annex 8: SUSTAINABLE DEVELOPMENT THE CDM PROCESS .................................... 18 WORKSHEET ............................................... 52 Project Approval Procedure (PIN) ..................... 18 Project Approval Procedure (PDD) .................... 19 Annex 9: LIST OF USEFUL CONTACTS Documentary Requirements .............................. 20 IN MONGOLIA ............................................. 53 Sustainable Development Criteria ...................... 20 Appraisal Committee Members ......................... 53 Government .................................................... 54 INCENTIVES ................................................ 21 Private sector ................................................. 55 Investment ...................................................... 21 Academia ........................................................ 57 Renewable energy ............................................ 22 NGOs ............................................................ 58 Energy ............................................................ 22 Developers/Consultants ................................... 59 Others ............................................................ 23 Private sector .................................................. 60 NGO ............................................................. 60 FINANCIAL SECTOR .................................... 24 Some constraints ............................................. 24 Annex 10: TRAINEES ..................................... 60 Some innovations ............................................. 25 Annex 11: TERMS FROM THE Annex 1: PROJECT TEAM ............................. 26 FINANCIAL SECTOR ................................... 67 Golomt Bank: Business and Project Loan Annex 2: TRAINING PROGRAMMES & Terms and Conditions ...................................... 67 MEETINGS ................................................... 27 Eligibility ........................................................ 68 Annex 3: CDM PROJECTS ............................. 33 Khan Bank ...................................................... 68 Endnotes ........................................................ 69 4 Volume 2: CDM Development in Mongolia ACKNOWLEDGMENTS .............................. 72 5.2 CER pricing ............................................. 114 5.3 How to identify a CER buyer? ................... 115 INTRODUCTION ........................................ 73 5.4 Outline of an ERPA .................................. 115 1. THE CDM PROJECT CYCLE .................. 74 5.5 ERPA: key issues ..................................... 117 1.1 The formal CDM development process ....... 74 6. CDM PITFALLS ...................................... 120 1. Project Design ....................................... 75 2. Validation ............................................. 78 7. KEEPING ABREAST OF 3. Registration ........................................... 79 DEVELOPMENTS ...................................... 123 4. Monitoring ............................................ 80 5. Verification ........................................... 80 Appendix 1. A SIMPLE PROJECT 6. Certification .......................................... 81 SCREENING TOOL .................................... 125 7. Issuance ................................................ 81 Appendix 2. BUNDLING ............................... 128 1.2 CDM development costs ........................... 82 Appendix 3. PROGRAMS OF ACTIVITIES .... 130 1.3 The commercial process ............................ 83 Appendix 4. SAMPLE TERM SHEET (as used) 131 Appendix 5. BIDDING INSTRUCTIONS 2. CURRENT STATUS OF CDM PROJECT (as used) ....................................................... 133 DEVELOPMENT IN MONGOLIA AND 1. Introduction .............................................. 133 CDM OPPORTUNITIES .............................. 86 2. Bidding instructions ................................... 133 2.1 Status of CDM Development in Mongolia .. 86 3. Confidentiality .......................................... 134 2.2 Greenhouse gas emission reduction 4. Fair judgment............................................ 134 opportunities in Mongolia ............................... 87 5. Acceptance of the result of the mini-auction 134 LULUCF ......................................................... 106 6. E-mail addresses ....................................... 134 7. Signatures ................................................ 134 3. CDM PROJECT IDENTIFICATION AND DESIGN – HOW TO IDENTIFY Appendix 6. STAKEHOLDER PROJECTS? ................................................ 107 CONSULTATION PROCEDURE 3.1 What projects are suitable for CDM? ......... 107 SUGGESTIONS .......................................... 135 3.2 Small projects – bundling or programs Appendix 6.1 Stakeholder consultation script. ... 135 of activities (POA) ......................................... 109 Appendix 6.2. Stakeholder consultation 4. PDD DEVELOPMENT – HOW TO announcement ............................................... 137 WRITE A PDD? ........................................... 111 Appendix 6.3 Stakeholder consultation questionnaire outline ...................................... 137 5. COMMERCIALIZATION OF CERs ......... 113 Questionnaire for the proposed CDM project: 5.1 The market for greenhouse gas emission “Name project” ............................................. 139 reductions ..................................................... 113 Volume 3: International Actions to Promote Carbon Finance in Mongolia ACKNOWLEDGMENTS .............................. 144 2.BARRIER REMOVAL ACTIONS BY THE INTERNATIONAL COMMUNITY IN INTRODUCTION ........................................ 145 MONGOLIA ................................................ 152 1. BARRIERS TOWARDS GREENHOUSE 2.1 Introduction ............................................. 152 GAS EMISSION REDUCTION PROJECTS 146 2.2 Analysis of international donor barrier removal actions .............................................. 152 2.3 Conclusions .............................................. 153 1.1 Introduction ............................................ 146 1.2 Side benefits of Mongolian greenhouse 3. NEW INTERNAL ACTIONS ON gas emission reduction projects