Co-financing Greenhouse Gas Mitigation Projects through

Carbon Revenue
Opening Remarks by
Paul J. Heytens
Country Director, Bangladesh Resident Mission
Asian Development Bank
19 October 2009
Sheraton Hotel, Dhaka
Honorable Secretary for Environment and Forests Dr. Mihir Kanti Mazumder, distinguished
guests, ladies and gentlemen:
Good morning. It is a privilege, for me to welcome you here on behalf of the Asian Development
Bank. This event will help us to work together to mitigate climate change and capture new
business opportunities presented by the carbon market. Your presence here today highlights the
wide interest in, and importance of, today's topic.
Impacts of Climate Change
What is now clear is that the emission of greenhouse gasses from human activities is causing
global warming at a rate that has become alarming and threatening to all of us. Even more so,
rising global temperatures create a compounding effect on forests, water and other natural
resources, which is likely to exacerbate the damage to human lives.
The poorest countries and the poorest people are the first and worst victims of climate change
and the disasters induced by it. The Asia-Pacific region and Bangladesh in particular is expected
to suffer significantly from the detrimental impacts.
For example, about 1.2 billion people could face freshwater shortages by 2020 in Asia; crop
yields in Central and South Asia could drop by 50% by 2050; Asia's numerous mega cities
including Dhaka are vulnerable to flooding and damage from unpredictable weather patterns;
and within this century, citizens of small islands and other low-lying nations and regions may be
forced to become "climate refugees."
In Bangladesh, disasters, including severe floods and cyclones, disproportionately affect the
poor. Damaged municipal and community infrastructure, including waste and sewerage facilities,
raise health risks and many who are dependent on natural resources are left without livelihood
options.
Bangladesh is predicted to be one of the countries most affected by climate change with more
than 70 million people and 20% of the coastal area at risk from direct impacts. Already,
riverbank erosion annually deprives an estimated 100,000 inhabitants of their livelihood. Most of
those affected are extremely poor.
Unfortunately, developing countries like Bangladesh bear the consequences of climate change
though they have contributed least to the build up of greenhouse gases.
Moreover, although average GHG emissions per capita in South Asia are much lower than those
of non-Annex I countries, unmitigated climate change, in the long term, is likely to exceed the
capacity of natural, managed and human systems to adapt. Therefore, even for South Asian
countries like Bangladesh, high-carbon economic development is not a sustainable option
anymore.
So, in the interest of self-preservation, Bangladesh must join global efforts and explore
opportunities to continue economic development on a low-carbon path. Finding financing for low
carbon technologies is often the main challenge and we must look at innovative ways and make
use of market based mechanisms such as the Clean Development Mechanism (CDM) under the
Kyoto Protocol to move forward.
Carbon Market Opportunities
ADB has been working to support the carbon market development in the Asia-Pacific region
because it has shown a significant potential to leverage domestic and international investments.
The carbon market is now estimated at over €90 billion, with CDM representing approximately
one quarter, or about €25 billion, and demands are expected to increase in the near future.
However, the CDM market in Asia has been mostly concentrated in just a few countries such as
the Peoples Republic of China and India.
To date, Bangladesh has only 2 registered CDM projects among the over 1,800 worldwide. The
fact that such few projects have been developed in Bangladesh means that ample opportunity
exists to scale up efforts.
We feel that Bangladesh has significant potential for various CDM projects in the area of
renewable energy, energy efficiency, urban development, and transport. However, we need to be
aware of the issues and challenges of developing CDM projects here. High transaction costs, the
long project cycle, and uncertainty over post 2012 issues are some of the barriers that we need
address. Under CDM, payment for carbon credits is usually made after the project is
implemented, therefore helping the cash flow but not the project financing, which is often the
main barrier for many clean energy projects.
ADB's Response
Here in Bangladesh, ADB is assisting the Government and its line agencies to mainstream
climate change adaptation and mitigation. ADB has developed a country specific Climate Change
Implementation Plan to assist the country to transform to a more climate resilient and low
carbon development path, starting with its own project activities.
Turning to some specific activities, following the unveiling of the Bangladesh Climate Change
Strategy and Action Plan (BCCSAP), ADB approved a $2 million technical assistance grant to
build capacity in relevant government agencies to implement the BCCSAP with a special focus
on project preparation, implementation, and policy formulation. Bangladesh is also participating
in an ADB-financed regional study on the economics of climate change in South Asia. In
addition, ADB, together with the World Bank is also moving ahead with the Pilot Program for
Climate Resilience in Bangladesh, which could provide up to $60 million in financing to pilot test
and demonstrate ways to integrate climate risk and resilience into core development planning.
The main focus of today's event, however, is another ADB program to support climate change
mitigation through the Carbon Market Initiative (or CMI). The initiative provides upfront
financing and technical support to project developers with GHG mitigation benefits that can be
eligible for the carbon market. I would especially like to highlight the Future Carbon Fund that
can provide upfront financing for projects that generate carbon credits beyond 2012, when the
first commitment of the Kyoto Protocol expires.
ADB therefore is strongly committed to assisting Bangladesh to improve its economic growth
aspirations following low carbon path.
We are looking forward to further collaboration, especially for projects with GHG reduction
potential, to maximize the benefits of the carbon market.
Concluding Remarks
We are fortunate to have with us here today the country's key movers of climate change action -
top policy makers, project sponsors and developers, and CDM practitioners.
We encourage you to actively interact and exchange ideas and know-how on making CDM
projects happen. Let us aim to convert our discussions into tangible projects.
We also have ADB staff and CDM experts who will brief you on the ADB project processing cycle
and services offered under the CMI, and will later be happy to meet with you for project specific
consultations.
Climate change and energy security are crucial issues for Bangladesh and the Asia-Pacific region
as a whole. But this challenge is also an opportunity to progress down the path of sustainable
and climate-responsive development. Now is the time to implement sound policies, and to make
programs and projects happen.
Let us work together to identify projects and activities at the country, community, corporate and
personal levels that promote low carbon, sustainable growth in Bangladesh. We look forward to
your fruitful discussions during the day and hope this catalyzes concrete project activities.
Thank you very much.
Asian Low Carbon Green Growth in the Global Context
Opening Address by
Haruhiko Kuroda
President
Asian Development Bank
At the East Asia Climate Forum

29 May 2009
Seoul, Korea
Excellencies, distinguished guests, ladies and gentlemen:
On behalf of the Asian Development Bank, I wish to extend my deepest sympathy at the passing
away of former President, Roh Moo-hyun.
I would like to thank Prime Minister Han Seung-Soo and Professor Kim Hyung-kook, Co-chair of
Presidential Committee on Green Growth for inviting me to this East Asia Climate Forum. I am
delighted to have this opportunity to discuss the challenges we now face in addressing climate
change and generating and financing low-carbon growth in Asia and the Pacific. I am also
pleased to share with you some of ADB's actions and experiences in promoting low-carbon
green growth in the region.
I would like to extend my deepest appreciation to the Government of the Republic of Korea for
hosting the Forum, and to the Korean people for their warm and gracious hospitality. I am also
pleased to see here so many officials from ADB's member countries together with
representatives from our development partners, nongovernment organizations, the private
sector, and other stakeholders. I thank all of you for joining us today for this important event.
Responding to the Global Climate Change Crisis
It is now widely accepted that increased concentrations of human-caused greenhouse gases
(GHGs) in our atmosphere are linked to rising global temperatures. Such rising temperatures
will have adverse consequences on people's health, safety and livelihoods around the world,
with the poor disproportionately affected. The latest scientific evidence suggests that this
process may be occurring even faster than previously predicted. Clearly the entire global
economy must reduce its reliance on the combustion of fossil fuels, or else the negative impacts
of climate change will seriously drag down global economic growth. In Asia and the Pacific,
climate change threatens to undermine the considerable social and economic progress achieved
in recent years. Responding to climate change has therefore become a central element of the
ADB's work.
Intense negotiations are underway towards a new agreement on how the world will collectively
address the climate change challenge. Global greenhouse gas emissions must be cut
substantially. And it is critical to reach a common understanding on transitioning to low-carbon
growth - in both the developed and developing worlds - and preparing for the inevitable adverse
impacts of climate change. Mitigation and adaptation measures must also be backed by
technology transfer and international financing. Unless decisive actions are taken, it is likely that
the effects of climate change will take millennia to reverse, and will threaten the core of our
planet's life support system, upon which we all depend.
But there are promising signs that we will see meaningful progress in Copenhagen later this
year. The European Union has committed to significant emission cuts by 2020; the United States
has rejoined the negotiations and is considering its own measures to greatly reduce emissions
over time. Progress also has been made in the United Nations Framework Convention on
Climate Change (UNFCCC) negotiations - and also through the G20 and other forums - on
identifying the adjustments needed in the energy and transport sectors of developing countries,
as well as ways to reduce deforestation.
World economic leaders have rightly focused their attention on addressing the global economic
downturn. At the same time, a number of countries have sought ways to stimulate demand
while simultaneously laying the groundwork for more climate-friendly development - so-called
"green stimulus" measures. I believe such programs can help countries generate long-term
economic growth and sustainable jobs as they transition towards clean, innovative, resource
efficient, low-carbon technologies and infrastructure. ADB and the other multilateral
development banks have been encouraged to contribute to such efforts.
The Republic of Korea has garnered global attention by choosing such a path through its 'Low
Carbon Green Growth' national development strategy. This new development paradigm is meant
to decouple economic growth from further increases in greenhouse gas emissions. It also seeks
to create jobs and new sources of economic advancement based on the development and
deployment of clean technologies. We commend the Korean Government for its important role in
this area. Our region - and the rest of the world - is watching with great interest your country's
efforts to address these dual crises.
It is encouraging to see that many Asian and Pacific countries have recently developed action
plans to respond to climate change - both for mitigating greenhouse gas emissions, and for
coping with the impacts of climate change on their economies. Such efforts are in keeping with
Asia's vital role in helping to stimulate global and regional economic activity and move
development patterns in more climate-friendly directions.
I highlighted the primacy of addressing the climate change issue to our Board of Governors at
ADB's Annual Meeting in Bali early this month. As Asia assumes a larger role on the world stage,
it must also assume its responsibility for addressing other pressing global problems-like climate
change. Unless proactive steps are taken, developing Asia's share of global carbon emissions
could rise to more than 40% - quickly making Asia the main driver of global climate change.
Thus, at a time when investment is desperately needed to stimulate economies, we need to
target those investments to where they can help establish the basis for economic growth that is
more environmentally sustainable.
We already know what needs to be done. We need to produce and use energy much more
efficiently. Doing so is also a smart policy, because it can immediately lower costs and enhance
economic competitiveness. We need to introduce new modes of transport - such as urban public
transport systems - that will rely less on fossil fuels while encouraging urban development
patterns that reduce our need for mobility. We also need to pro-actively encourage mass, rapid,
and efficient public transport system in our urban centers so as to discourage multiplicity of
private transport, thus, saving energy and effectively arresting proliferation of the use of fossil
fuel. Given the lifespan of new infrastructure, our actions today are crucial, because they will
lock in the region's greenhouse gas emission patterns for decades to come. We also need to look
carefully at rural development patterns and land use change - especially deforestation - to see
how sustainability can be increased. This includes compensation for carbon sequestration and
other ecological services provided by forests, rangelands, wetlands, marine resources, and
improved farming techniques.
With respect to climate change adaptation, we must quickly improve our understanding of the
new risks to development and find the most cost-effective measures to cope. This is a new area
of analysis for all of us, drawing upon a rapidly evolving scientific understanding of the pace and
scope of climate impacts. For example, ADB has joined with the World Bank and Japan
International Corporation Agency (JICA) to sponsor a study on the likely impacts of climate
change on several large Asian coastal cities - Manila, Ho Chi Minh City, Bangkok and Jakarta. We
are also working with the Global Environment Facility, the Governments of the US and Australia
and international nongovernmental organizations to support climate change adaptation analysis
and responses in the six Southeast Asian and Pacific countries participating in the Coral Triangle
Initiative.
Last month, we completed a study examining the likely impacts of climate change on the largest
economies of Southeast Asia. The findings are very troubling. Using analysis similar to that
employed in the groundbreaking Stern report, we found that by the end of this century, the
countries of Southeast Asia will be losing 6.7% of their GDPs to coastal flooding from rising sea
levels, more intense storms, decreased agricultural production, heat waves, higher health risks
and many other adverse impacts.
While it may sound as if these changes are a long way off, that 6.7% fall in GDP will not
suddenly appear in the year 2100! In fact, we are already seeing the consequences of changes
in temperature and weather patterns that can be attributed to climate change, and which carry
very real costs. For example, due to the melting of glaciers in the Himalayas and mountains of
Central Asia, river flows are no longer extending as far into early summer as before. This is
altering patterns of water availability in some of the most densely populated and irrigation
dependent parts of the world.
Climate Change Response a Priority at ADB
Given the urgency of the issue, ADB has made addressing climate change a top priority. We
recognize not only that it represents a threat to development in our region, but also that the
countries in our region can respond and thereby reshape their economies to make them more
competitive and sustainable. Last year, we provided nearly $1.7 billion for projects with clean
energy components, far exceeding our $1 billion target. Among others, our initiatives include
wind power projects in the People's Republic of China and India, more efficient power
transmission in Azerbaijan, green power development in Bhutan, and energy-efficient lighting
for low-income households in the Philippines. With transport as a major area of concern, we are
helping to develop energy-efficient mass transit systems in several Asian cities. And we support
several initiatives that integrate forest protection and sustainable land use while capturing
benefits from carbon sequestration.
A new $40 million ADB Climate Change Fund created from our own resources has already
programmed most of these funds. We have also created a $40 million Asia Pacific Disaster
Response Fund - partly in acknowledgement of the increased risk of damages from weather-
related natural disasters our developing member countries will face as a result of climate
change. To promote the more rapid transfer and diffusion of new, low-carbon technologies, we
are actively pursuing establishment of a low-carbon marketplace to bring together technology
holders and users in our member countries to facilitate such transactions.
Concluding Remarks
In all of these efforts, ADB welcomes partnerships with both developed and developing nations,
as well as with leading institutions around the world. We are confident that shifting to a low-
carbon economy does not mean sacrificing competitiveness and economic growth; but rather, is
an investment in long term energy security and sustainable economic development. We are
confident that through committed and coordinated action, the Asia and the Pacific region can
adopt a more sustainable development pathway and overcome the additional burden to poverty
reduction efforts caused by the climate crisis.
The "Seoul Initiative for Low Carbon Green Growth of East Asia" envisions a new low-carbon
green growth paradigm not only for Korea but other countries in Asia to attain economic growth
while reducing greenhouse gas emissions. ADB supports the success of this initiative. Achieving
our common goals on climate change and low carbon growth will require enhanced cooperation,
tremendous determination, and political will. It will require working together, and ADB is ready
to do its part.
There is much yet to do in the region to address these complex issues. During ADB's annual
meeting in Bali, I announced the establishment of an advisory group of eminent persons who
are internationally recognized climate change experts to help us consider innovative low-carbon
development programs relevant to the region in the medium and long term. But we must
continue to stress that such a massive global challenge can only be addressed through a
concerted, cooperative global effort. We must take every possible action to support successful
conclusion to negotiations at Copenhagen in December of this year.
While the challenges are huge, I believe the climate change is also an opportunity - an
opportunity for our region and the world to fundamentally restructure our thinking about and
investments in economic development to bring about a more sustainable future.
Thank you all very much again.
National Workshop on PRC-ADB Cooperation in Financing Clean
Energy Projects
Opening Remarks by
Robert Wihtol
Country Director, PRC Resident Mission
Asian Development Bank
9 April 2009
Beijing, People's Republic of China
Colleagues, Ladies and Gentlemen,
On behalf of Asian Development Bank, I would like to extend a very warm welcome to all the
participants in this national level workshop on PRC-ADB Cooperation in Financing Clean Energy
Projects. This workshop represents an innovative approach to discussing energy sector
processing and implementation issues among relevant provinces, MOF, NDRC and ADB. I would
like to extend our appreciation to MOF and NDRC, who came up with the idea for this workshop,
and who provided their guidance and support in its design and organization. The presence of
participants from seven provinces clearly demonstrates the relevance of and interest in the
workshop.
The energy sector has been a priority area for ADB since it started its lending operations in PRC
in 1987. So far, ADB has provided lending support of more than $3.8 billion for 32 energy
projects in PRC. Based on a recent country assistance program evaluation, energy is one of the
best performing portfolios. ADB's energy sector operations have evolved from capacity addition
in traditional power generation and transmission projects to advanced technology pioneering
clean energy projects with substantial demonstration effects. There is full convergence of ADB
priorities and the Government's 11th five-year-plan sector priorities.
In the past 5 years, all of the ADB's energy sector operations have aimed at achieving emission
reductions and improving energy efficiency. Sector projects include innovative coalmine
methane and coal bed methane (CMM/CBM) projects in Shanxi and Liaoning, flexible financing
through a multitranche financing facility (MFF) for hydropower plants in Gansu, an innovative
MFF for an energy efficiency project in Guangdong, and multi-component urban environment
improvement projects in Inner Mongolia Autonomous Region and Liaoning. In March 2009, ADB
also approved its first non-sovereign public sector project for a large wind farm in Hebei
province.
Looking ahead, sector priorities will continue to be governed by the energy efficiency, resource
conservation, a scientific approach to development, and emerging climate change mitigation
measures. ADB has formulated its own targeted sector initiatives with funds of about $500
million, e.g. Clean Energy Financing Partnership Facility (CEFPF), and the Carbon Market
Initiative (CMI). The latter includes the Asia Pacific Carbon Fund (APCF) and Future Carbon Fund
(FCF) which are directly relevant to the sector priorities. In addition, the ADB's innovative
Climate Change Fund ($40 million) is operational and is being extensively utilized for targeted
sector interventions in PRC. The $6.2 billion Climate Investment Facility (CIF), involving several
leading donor countries, borrowing countries, and multilateral development banks, has been
operational since early 2009. These funds all provide opportunities to scale up operations in
clean energy.
The ADB's energy sector operations will continue to involve challenging yet innovative projects
of direct relevance to the Government's sector priorities, and which can easily be scaled up and
replicated. Three energy projects with total expected lending of $400 million are already
included in the ADB's 2009 - 2010 country operations business plan. This workshop is timely
and has brought relevant stakeholders together to discuss and improve the quality of these
projects' design and accelerate their processing. This workshop also complements the ongoing
sector study being carried out with NDRC, and is expected to overcome barriers in energy
efficiency projects. This in turn will help to strengthen the sector pipeline.
In closing, I would like to reiterate ADB's commitment to strengthen the energy sector pipeline
and facilitate timely processing of existing projects. I am greatly encouraged by your
participation in the workshop today. I am confident that with your active participation, and with
guidance from NDRC and MOF, we can find suitable approaches to plan more clean energy
projects and implement them more efficiently.
I wish you all success in the deliberations today.
Thank you.
"Low Carbon Growth"
Speech by
Ursula Schaefer-Preuss
Vice President, Knowledge Management and Sustainable Development
Asian Development Bank
At the High Level Event - Ministers of Finance on Climate Change

9 December 2008
Warsaw, Poland
Introduction
Your Excellencies, distinguished guests, ladies and gentlemen: On behalf of the Asian
Development Bank (ADB), I would like to thank Minister Vincent-Rostowski and the Polish
Government for giving me the opportunity to address this extraordinary audience on the
challenges of climate change and ways to find and finance the needed solutions for low-carbon
growth in the Asia-Pacific region.
Yesterday we heard about the urgent need to address the various challenges of climate change
while regaining momentum towards global economic growth and poverty reduction. With the
existing commitments under the Kyoto Protocol expiring in 2012, the world is entering a key
transition period that will determine how nations will address climate change in the coming
decades. Without strong action, the risk of triggering large, irreversible changes to the climate
system will escalate even further.
For ADB, climate change is a major development challenge for the Asia-Pacific region, with the
poor being disproportionately affected. Thus, ADB is strongly committed to support the global
dialogues in this regard, and will further support our Developing Member Countries (DMCs) to
ensure that our common goals can be effectively achieved. To do this, we will continue to forge
new networks and partnerships, contribute towards reducing our global carbon footprints,
promote innovative ideas and best practices, as well as provide financial support for our DMCs.
Common Goals and ADB's Actions
To avoid the worst impacts, the world must work together to keep atmospheric concentration of
the greenhouse gas (GHG) within 450-550 parts per million. The IPCC, in its fourth assessment
report, made concrete recommendations on what needs to happen, and the reference to the
IPCC recommendations was included in the Bali Roadmap. In Poznan, we need to see real
progress of the discussions to reach a comprehensive agreement next year in Copenhagen. ADB
hopes that, as all of us recognize our common destiny, we will quickly build consensus towards a
common set of actions.
One possible way forward is based on the "contraction and convergence" principle, which many
countries and leaders have endorsed. This approach relates to the "equitable" principle and per
capita emission levels discussed yesterday. Essentially, this means that per capita emissions of
developed countries must contract over time, and the developing countries' emissions need to
converge with the lower emissions - so that the aggregate emissions are within the natural
absorptive capacity of our planet.
ADB is fully committed to assist our DMCs, so that their energy, transport, urban, and land use
investments are well balanced and resilient to adverse climate change impacts. Last year in Bali,
ADB President Kuroda highlighted the importance of mainstreaming climate change action into
development financing, and the need for more financial partnerships. I would like to take the
next few minutes to report to you on the progress we've made since.
Concessional Finance
First is on mobilizing concessional resources. One very prominent example is the recently
established regime of the Climate Investment Funds (CIF). Administered by the World Bank and
implemented together with ADB and other regional development banks, CIF will support the
expanded use of clean technologies, help build climate resilient societies, and reduce GHG
emissions from deforestation and other land use changes. As we work towards the launch of the
CIF, we appreciate the support of the countries that have pledged funding so far, and hope that
the CIF partnership will grow.
ADB also advanced the Clean Energy Financing Partnership Facility that uses grants and
concessional loans to help start projects that are smaller than those targeted under CIF, which
can be replicated across many DMCs. Overall, the Facility aims to provide concessional loans for
the incremental cost of efficient technologies and to guarantee services to cover the potential
"first loss" from clean energy investments. Furthermore, in 2008, leveraged investments in
energy efficiency and renewable energy surpassed the established annual target of $1 billion,
with public- and private-sector projects in the People's Republic of China, India, Pakistan, and
the Philippines. Finally, our Board also approved this year $40 million Climate Change Fund
sourced from ADB's net income to be used, on a grant basis, to support sustainable land use,
public transport, and various adaptation measures such as climate proofing our projects.
Private Capital
ADB is also working to overcome present barriers that restrict private capital flows into the
sectors that support climate change mitigation and adaptation. Currently, there is a limited
supply of capital that can be accessed by small and medium-sized clean energy companies in
developing Asia. So this work is essential.
For instance, we are working closely with UNEP to help enterprises access seed capital for
renewable energy and energy efficiency development projects. The early-stage investment is
necessary to ensure that promising energy start-ups are adequately resourced for further
developments.
In addition, to further catalyze private sector investments in clean energy projects, we are also
playing a catalytic role by identifying and supporting fund managers willing to establish clean
energy-focused private equity funds. The aim is to invest in private companies and projects that
are active in any aspect of climate change mitigation. ADB recently selected five funds that will
invest in long-term capital. The aggregate size of the funds is $1.2 billion.
Market Mechanisms
Finally, ADB has been working to support the carbon market development in the Asia-Pacific
region. The Clean Development Mechanism (CDM) has shown a significant potential to leverage
domestic and international investments. The carbon market is now estimated at over €60 billion,
with CDM representing approximately one quarter, or about €15 billion, and demands are
expected to increase in the near future.
In this regard, I am very pleased to inform you that we are commencing the operation of the
Future Carbon Fund, starting in January 2009. The Future Carbon Fund will work with
governments and companies who have already signed up to mandatory or voluntary targets,
independent of what the global framework might look like in the future. The fund will provide
upfront financing against GHG reductions until 2020 and also provide technical support to
enable new project ideas that may be hampered by capital and capacity constraints. The upfront
payment scheme can have a material impact on the financing plans of mitigation projects. For
example, a medium scale hydropower project can receive as much as 7-15% of its total
financing needs by pre-selling their expected carbon credits. Similarly, a geothermal heating
project can use carbon credits to cover as much as one quarter of the funding requirements.
Another area in which ADB is providing innovative ideas is energy security. ADB is currently
studying the merits of establishing a market mechanism to promote alternative urban
development and transport policies, technologies, and fuels. This will complement the carbon
market and help make projects with mutual benefits for both climate change and energy
security more competitive.
Conclusion
In all of these efforts, ADB welcomes partnerships with both developed and developing nations,
as well as with leading institutions around the world. We are confident that through committed
and coordinated action, the Asia-Pacific region can transition to a sustainable development
pathway and overcome the additional burden to poverty reduction efforts caused by the climate
crisis.
We are hopeful that transitioning to a low-carbon economy does not mean sacrificing
competitiveness and economic growth. Rather, we believe that the extraordinary power of the
marketplace can help spur innovation, capitalize on opportunities, and mobilize the investment
needed to tackle the challenges of climate change.
Achieving our common goals of addressing climate change, and achieving a low carbon growth,
will require tremendous patience, determination, and political will. It will require that we are
working together, and ADB is ready to do its part. Thank you very much again.
Carrying the Torch: Carbon Financing in a Period of Uncertainty
Keynote Speech by
Xianbin Yao
Director General, Regional & Sustainable Development Department
Asian Development Bank
At the China Carbon Forum

Beijing, People's Republic of China

16 October 2008
Distinguished guests, ladies and gentlemen, good morning.
I would first like to thank the hosts, the Chinese Energy Association, as well as all the sponsors
for inviting me to speak at this important event.
Yesterday, we heard insightful presentations by senior government officials, policy advisors, and
carbon market practitioners. I highlight two key observations from those presentations, which, I
believe, provide good context for my presentation this morning.
First, we heard that China has a clear strategic vision to move toward a low-carbon economy
and achieve sustainable development. And carbon finance is one of the key instruments to
support reaching that vision. Indeed, we see that CDM projects are gaining great momentum in
China. In the spirit of the Olympic Games that Beijing just hosted so overwhelmingly
successfully, the "torch" of addressing climate change and advancing sustainable development is
already on the way.
The second observation I'd like to make is that many of the presentations yesterday alluded to
the uncertainties surrounding the carbon market beyond 2012. This "post-2012" issue and
especially the implications for ensuring continuity of the market need to be fully addressed. The
torch and its flame must be carried forward without disruption.
This is a key message I will emphasize this morning. I will talk about some of the challenges the
carbon market is facing and introduce what my organization - the Asian Development Bank or
"ADB" - is doing to ensure that no momentum is lost during this critical period.
Brief intro of ADB
Let me first explain just briefly about the Asian Development Bank and what our main role is in
addressing climate change.
The ADB is a multilateral development finance institution established in 1966 under an
international treaty. Our mandate is to reduce poverty in the Asia-Pacific region, and we
advance that mission through providing financial and technical assistance to our developing
member countries. The ADB currently has 67 members and approve between USD6-10 billion of
lending, investments, and guarantees every year. ADB's new long term strategy focuses on (i)
inclusive economic growth, (ii) environmentally sustainable growth, and (iii) regional
integration.
On climate change, we are focusing on catalyzing the development of NEW mitigation and
adaptation projects through capacity building and financing. In particular, we are focusing on
utilizing markets and developing innovative financing schemes to boost the viability of low-
carbon investments.
We understand that as a development organization, we must address climate change. Climate
change can negatively affect many of the efforts undertaken by countries and development
agencies to reduce poverty. On the mitigation side, we focus on pushing four "thrusts" - (1)
clean energy, (2) sustainable transport, (3) urban sanitation, and (4) better land use. We also
have key "thrusts" for adaptation. How do we promote these "thrusts"? As a development BANK,
we focus on mobilizing more financial resources - concessional resources, private sector capital,
and additional finance from market mechanisms such as the carbon market - the main topic of
this conference.
Carbon Market Growth and Uncertainty
Now let me turn to the carbon market. Globally the market has been growing rapidly in the past
few years. The Kyoto Protocol became legally enforcing in 2005, and since, the market has
grown by approximately 5 times in volume and 6 times in financial value.
The carbon market is now estimated at over 60 billion Euros, with CDM representing
approximately one quarter, about 15 billion Euros. However, there's one concern. In 2008, for
the first time, it is estimated that there will be a drop in the volume and financial value of NEW
(primary) CDM credits - from 6 billion Euros in 2007 to 4.5 billion Euros in 2008.
As you can imagine, at ADB we interact with a lot of governments, project developers and
sponsors across Asian countries. After hearing from many of them, in my mind there are two
root causes:
First, as we are all aware, the first commitment period of the Kyoto Protocol will end in 2012
and there is no agreed international framework yet beyond that time frame. This is presenting a
problem with carbon offset projects since there is currently no certain long-term price signal to
make low-carbon alternative investments more attractive.
In the meantime, countries throughout the world are installing massive amounts of new power
capacity with conventional systems, thereby locking the world into many years of voluminous
greenhouse emissions. In other words, the decisions about greenhouse gas emissions in the
next 20-30 years are being made right now, due to the long tenure of energy and transport
infrastructure systems.
Another issue is the inability of the carbon market to provide additional project finance. Most
contracts are done through "pay on delivery" - where no funds flow into the project until the
project is complete and becomes operational. So while this may help with adding cash flow to
projects, it doesn't help projects that have upfront capital or budget constraints in the first
place. Unfortunately, this "cash constraint" is very often the case with projects in new sectors -
for example wind, solar, biogas and renewable energy projects.
Let me elaborate on the first issue. New CDM projects require long gestation times and high
capital costs, but current uncertainties about whether the CDM will continue after 2012 makes it
difficult for worthwhile projects to monetize the emission reductions they could make post-2012.
Thus, the CDM needs an early and credible signal that the mechanism will continue beyond 2012
or else, the viability of many CDM projects will suffer. In Asia, such signals are vital because
activities are just now gaining momentum. Actions must be taken now to help ensure that the
value of Certified Emission Reductions remain intact to attract more project development.
We do see many developments around the world that are quite encouraging. First, a number of
mandatory and voluntary schemes have recently emerged independently of a global regime.
Second, those various regional, national, and sub national schemes are working on harmonizing
the definition of "credits" so that trading can be done across different schemes. Finally, some
type of global agreement appears likely, and this will further boost the market, and there are
some interesting developments happening in the United States.
These are the various regional, national, and sub-national market schemes that are already
established, or close to being finalized - Europe, Australia, New Zealand, Korea, Japan, as well
as many regions within the United States. I won't explain the details, but you can see that there
are so many schemes that have already committed to reductions beyond 2012 with some of
them having clear provisions for importing CDM credits.
The United States could play an important role in driving demand for carbon credits, both in the
short and long term. Perhaps the biggest change on the horizon is that the United States could
soon join the regulated carbon market. The presidential nominees of each of the major parties
are both strong promoters of cap-and-trade legislation, as you can see on this slide.
As key industries become regulated, the US could quickly surpass Europe in carbon trades,
which will have a drastic effect on the global carbon market.
The second issue I would like to elaborate on is the lack of buyers who are willing to share
project development risk. We see very few CDM projects with equity from carbon credit
purchasers, and buyers rather "wait and see" until the projects are complete and carbon credits
are delivered. This has put most or all of the project risk and financial burden on the project
developers, and thus the market has predominantly focused on relatively easy projects with
quick return. Those "low hanging fruit" are now gone - unless we see buyers who are willing to
share some of the project development burden, we are unlikely to see significant growth in CDM
projects in additional sectors or among smaller, newer project entities.
This trend is contrary to the original vision for CDM. When the CDM was introduced 10 years
ago, there was much expectation from developing countries that buyers would first provide the
necessary upfront financial and technical support for new sustainable development projects that
would reduce greenhouse gas emissions.
The reality has been much different. Again, most buyers wait for credits to be delivered from
projects with their own capacity and resources to move forward instead of providing upfront
payments. Such schemes put the risk burden almost entirely on the project sponsors. As a
result, projects are heavily skewed towards sectors and large project sponsors that already have
capital and/or have access to foreign direct investment.
ADB's CMI and Future Carbon Fund
Now let me turn to what my organization is trying to do in the carbon market to help address
these issues. It is a modality that can be replicated by other financing institutions.
Instead of the standard "pay on delivery" modality that helps only the cash flow of projects,
ADB provides financing and technical assistance at the very early stages when it is needed
most. This turns "cash flow" into a "financing" scheme.
Specifically on the issue of post-2012 uncertainty, we are establishing the Future Carbon Fund,
which will purchase carbon credits expected to be generated up to year 2020, and provide
upfront financing and technical support to enable new project ideas that may be hampered by
capital and capacity constraints. We are currently discussing with the potential participants in
the Future Carbon Fund, and expect to make the fund operational by the first quarter next year.
The upfront payment scheme, such as the Future Carbon Fund can have a material impact on
the financing plans of GHG mitigation projects. For example, a medium scale hydropower
project can receive as much as 7-15% of its total financing needs by pre-selling their expected
carbon credits.
Similarly, a geothermal heating project in the PRC can use carbon credits to cover as much as
13-27% of the funding requirements.
A modality such as the Future Carbon Fund can actually be replicated by many multilateral and
bilateral development banks as well as commercial banks (once they recover from the current
credit crisis of course).
Since financial institutions evaluate the various risks of projects when deciding on whether to
provide loans, equity, or guarantees, it makes sense to integrate the valuation and processing
for CDM. For example every project in ADB's portfolio goes through initial project preparation,
appraisal of the financing package, negotiation and Board approval, project implementation, and
impact evaluation. These steps match with the necessary CDM procedures, and by synchronizing
the two...
…additional transaction time and costs can be significantly reduced.
Other assistance in climate change
Along with maximizing the CDM, ADB has also forged partnerships with other development
institutions to pool technical and financial resources to address climate change.
The Climate Investment Funds, currently supported by the governments of Japan, U.K. and the
U.S., aims to scale up assistance to developing countries for climate action in the interim until a
post-2012 climate change regime is effective. The World Bank will act as the trustee, and the
fund will be implemented through the World Bank and regional development banks, including
ADB, African Development Bank, European Bank for Reconstruction and Development, and
Inter-American Development Bank.
ADB also has direct access to the full project resources of the Global Environment Facility. GEF
funds are helping developing countries undertake "win-win" projects to mitigate the effects of
climate change, while also benefiting local economies and helping improve local environmental
conditions.
There schemes are supported by concessional resources such as ODA, and intend to fill the gaps
in areas where market mechanisms cannot address.
Finally, we are supporting additional market incentives other than greenhouse gas reductions.
For example, ADB has been assisting the PRC government to evaluate the merits of its own
sulphur dioxide emissions trading program. The experience in the U.S. has shown that emission
trading can be an effective instrument to reduce emissions at lower cost than traditional
regulatory policies.
Another market mechanism focuses on advancing energy efficiency. This scheme is already
operational in Italy and the U.K. and the credits are called "white certificates". India is one of
the countries currently considering such market mechanisms to promote energy efficiency.
These market schemes, combined with concessional funds, can contribute to attracting private
capital into clean energy and other low-carbon investments.
Conclusion
I would like all of us to step back and take a look at the big picture. Today's carbon market is
primarily a result of the commitments made under the Kyoto Protocol. It has proven to be an
effective and important first step in "internalizing" the cost of emitting greenhouse gases into
the atmosphere, and encourage investments in alternative technologies and policies. Under the
Kyoto Protocol, 38 countries agreed to reductions of a very modest five point two percent
(5.2%) below 1990 levels between the years 2008 and 2012. Subsequently, the United States
decided not to commit to mandatory obligations. Despite this weak framework, carbon trading
has still grown from 9 billion Euros in 2005 to 60 billion Euros today.
The carbon market is, of course, a tool that was developed to help solve a global problem --
climate change. Let's think of what the world's top group of scientists -, the Intergovernmental
Panel on Climate Change (IPCC) - say about this problem. The latest reports of the IPCC,
written by 800 scientists from over 130 countries, tell us that in order to reduce emissions and
stabilize the atmospheric concentration of greenhouse gases to avoid dangerous interference
with the climate system, the world needs to reduce anywhere between 30-85% of emissions in
the next 50 years.
So, if the policy makers and the world are serious about pricing GHG emissions and using
carbon trading as a tool to solve the problem, then one thing is clear - the carbon market must
become MUCH larger.
Therefore, I would like to end my contribution to the Forum on a positive note. I think that you
have made an excellent decision to spend your time here these two days. Despite some
uncertainties today, this market will grow much larger - and you all will likely be right at the
heart of it.
Thank you and I look forward to working with many of you on concrete projects and programs in
the near future. Let me remind to you that we all here are the "torch bearers". Let's make sure
that we successfully carry the torch through to the next phase of the global climate change
framework - and more importantly, hand over this torch to the next generation so we can
successfully address climate change while enabling sustainable growth. Myself, and ADB will do
our part.
Mobilizing Finance to Address Climate Change
Statement by
Ursula Schäfer-Preuss
Vice President
Knowledge Management and Sustainable Development
Asian Development Bank

At the 4th Ministerial Meeting of the Gleneagles Dialogue on Climate Change, Clean
Energy and Sustainable Development

15 March 2008
Chiba, Japan
Introduction
Your Excellencies, distinguished guests, ladies and gentlemen:
I would like to thank the Chairman of Japan for the opportunity to present ADB's views on ways
to mobilize financing to address climate change.
Asia and Climate Change: A Major Development Challenge
There is a growing and clear consensus that climate change is a fact of life, and that its adverse
impacts are increasing. Rising global temperatures create a compounding effect on forests,
water and other natural resources, which is likely to exacerbate the damages to human lives.
The case for action on climate change is particularly strong in Asia and the Pacific, as the region
is expected to suffer many of its most detrimental impacts. About 1.2 billion people could face
freshwater shortages by 2020; crop yields in Central and South Asia could drop by 50% by
2050; Asia's coastal megacities including Bangkok, Jakarta, Karachi, Manila, Mumbai, and
Shanghai are vulnerable to flooding and damage from unpredictable weather patterns; and
within this century, the citizens of Tuvalu, the Maldives and coastal Bangladesh may be forced to
become "climate refugees." The poorest people in the region will suffer first and most. We must
act now to maintain our progress toward the Millennium Development Goals for income poverty,
health, and the environment itself.
In addition to being hit hard by the adverse consequences, Asia is fast becoming a major source
of greenhouse gas emissions - a consequence of rapid and carbon-intensive economic growth.
Thus, the region has a special role to play in the area of mitigation. Today, developing Asia
accounts for 29% of global energy-related carbon dioxide emissions, three times bigger than its
share 30 years ago. With an estimated $6 trillion needed for energy investments by 2030, it is
projected that Asia's share of energy-related carbon emissions could rise to 42%. Total
emissions from Asia are much higher, when one adds those from deforestation and land
degradation. Unless specific policies and actions are taken, the region will quickly become the
main driver of climate change.
ADB's Actions: Three Issues on Improving the Financing Mechanisms
Climate change poses a critical development challenge, but it also provides an opportunity to
promote a transition toward a sustainable growth pathway.
Specifically for today's session, I would like to highlight three key actions to complement and
enhance the existing financing and investment mechanisms:
First, we need to improve existing schemes, such as the Clean Development
Mechanism (CDM). When the CDM was introduced 10 years ago, there was much expectation
from the developing countries that it would provide the necessary upfront financial and technical
support for new sustainable development projects that would reduce greenhouse gas emissions.
Today, due to the lack of buyers willing to share project development and operational risk, it is
mostly functioning to provide additional cash flow to projects that are already able to move
forward with its own financing.
Through ADB's Carbon Market Initiative, our developing member countries receive technical
assistance and financing during the project development stage; afterwards, they deliver carbon
credits once the projects are operational. In addition to the existing $150 million Asia Pacific
Carbon Fund, we are proposing a Future Carbon Fund, which will pay upfront for post-2012
carbon credits to be generated by ADB-assisted projects. We are also striving to make several
critical sectors benefit from carbon trading schemes - for example public transportation projects
(e.g., bus rapid transit) and small energy efficiency projects (e.g., compact fluorescent lights).
Second, we need more partnerships that can pool technical and financial resources to
address both mitigation and adaptation. I would like to congratulate Japan, US, and UK
authorities for leading the establishment of the Climate Investment Facility. It is an important
step towards improving financing on climate change. ADB will be an active supporter and
implementing agency. In addition ADB's Clean Energy Financing Partnership Facility provides
loans and guarantee products that can help companies take more risk when considering clean
energy investments in emerging economies.
Particularly on the adaptation side, there is a need to build up a pool of funds to help reduce the
financial burdens to countries that may be called to accommodate large populations displaced by
climate change. No single country should have to bear the burden of climate-driven refugees on
its own. The UN family, ASEAN, APEC, and other agencies and groups are called to move
forward on the policy dialogue and to prepare the legal framework to support and protect
climate refugees. ADB is prepared to play a role in the financial framework according to our
mandate as a regional development bank. All of us in the international community are called
upon to jointly develop policy guidelines and legal concepts on how to deal with this anticipated
burden for societies in different parts of the world, in particular in Asia and the Pacific.
Finally, we must consider additional market incentives other than greenhouse gas
reductions. For example, some of the incentives in the U.S. that will lead to improving local air
quality are now considered in the PRC - to reduce urban pollution, as well as CO2 emissions. We
should also look at the benefits of public transport and high-efficiency vehicles that contribute to
regional and global energy security, and consider ways to turn those into market incentives.
ADB is scaling up its Sustainable Transport Initiative to support such activities, and will also
ensure that private sector investment - supported by the proper incentives - will be one of the
main pillars for addressing the financing challenges.
Conclusions
Ladies and gentlemen, honored guests, I want to thank you again for inviting me to this
important event. In the context of global collaboration, ADB will continue efforts to achieve our
common goals for the Asia-Pacific region, in particular through strong partnerships, to jointly
spur local actions for global solutions - within the timeframe necessary to avoid the dangerous
levels of climate change that will spell calamity for all people, and particularly the poor. Thank
you.
Signing Ceremony for ADB Grant Project to Clean Up Vientiane's Waste
Management
VIENTIANE, LAO PDR (31 March 2004) - Vientiane Capital City Government and ADB today held a signing ceremony
for a US$1 million Solid Waste Management Project that will help clean up the Lao People's Democratic
Republic's (Lao PDR's) capital city.

Funded by the Japan Fund for Poverty Reduction, financed by the Government of Japan, the grant assistance will
improve the environmental and living conditions of the poor in Vientiane through community-based solid waste
management and income generating activities.

At the signing ceremony, the city government was represented by Sinlavong Khoudphaytoun, Vice-Mayor, Vientiane
Capital City, while representing ADB was James Nugent, Country Director of its Resident Mission in the Lao PDR.
The Ambassador of Japan, Itsuo Hashimoto, representatives from the Lao PDR Government, ADB, civil society
organizations, and various development partners also attended.

The project aims to complement existing efforts by the Lao PDR Government and external donors to manage the
mounting problems of solid waste disposal in Vientiane.

Less than half of the city's 220 tons of daily waste can now be disposed of at the municipal dumpsite. Further, areas that
do not have access to waste collection services face environmental hygiene concerns.

The project will set up community-based solid waste management systems to collect, transport, and dispose of waste in
poor communities, construct waste recycling centers, segregate and recycle solid waste, establish a waste pickers' multi
purpose center, and improve the municipal landfill site.

Aside from enabling the Vientiane City government to collect an additional 20 tons of waste per day, the project will
benefit about 2,900 households, provide training to 500 persons, and improve occupational safety for waste pickers.

"It is hoped that by the end of the project, Vientiane's waste collection and disposal systems will have vastly improved,
and those working at the municipal dumpsite will face better conditions," says Mr. Nugent.

"The project will also provide greater community awareness of the benefits of good environmental hygiene. Likewise, it
is expected that local policymakers will have a greater appreciation of the need for demand-driven social services and
provide more support for community-based initiatives."

The assistance will be carried out over three years, beginning in April 2004 and ending in March 2007.