Approach Paper “Cool Markets” for GHG Emission Reduction in a Warming World: Evaluation of World Bank Group’s Support to Carbon Finance 26 June 2017 Background and Context INTRODUCTION TO THE EVALUATION 1. Carbon finance (CF) has been one of the Bank Group’s first and longest engagements for mitigating climate change. Carbon finance as a subcomponent of climate finance is a generic term used for the revenue streams that can be generated by sale of project-based GHG emission reductions or from payments involving carbon sequestration and storage from forests (World Bank 2010b).i The WBG launched CF with interest to support development of a global carbon market that will reduce the cost of achieving GHG emission reductions and facilitate sustainable development (World Bank 2010b). The Independent Evaluation Group (IEG) has not conducted a comprehensive evaluation of CF operations. While IEG has evaluated some climate change related operations (World Bank 2008a; World Bank 2010c; World Bank 2012a), the performance of CF support and the Bank Group’s roles and contributions have not been fully assessed, despite the growing need to integrate climate change into WBG development operations and financing mechanisms. IEG plans to conduct this evaluation to better understand the Bank Group’s roles and contributions relative to the needs and priorities of its clients and draw lessons and provide evidence to inform future directions in CF. The evaluation will focus entirely on the CF component of the Bank Group’s broader climate finance portfolio. DESCRIPTION OF CONTEXT AND ISSUES (THE WORLD BEYOND THE WBG) 2. Climate change is a threat to global development and to the core mission of the World Bank Group (WBG). The emission of greenhouse gases (GHGs) has increased substantially since the industrial revolution and contributes to global warming and climate change (IPCC 2014). ii Globally, the main emissions of GHGs – CO 2, methane, nitrous oxide and industrial gases – result from energy (35%), agriculture and forestry (24%), industry (21%), transport (14%), and construction (6%) (World Bank 2010a) 3. Reducing GHG emissionsiii using various policy instruments is the key for mitigating climate change, protecting livelihoods in vulnerable areas and supporting low carbon development. The effects of unabated emissions and climate change on poverty and sustainable development have particularly attracted attention at the global level. A recent study by the WBG concluded that climate shocks could wipe out hard-won gains in poverty reduction and force more than 100 million people into poverty by 2030, especially in Africa and South Asia (World Bank 2016a). There is growing recognition that the global effort to end poverty will need to reduce carbon emissions and integrate strategic climate actions. 1 4. The Kyoto Protocol (KP) adopted in 1997 provided an international legal framework for carbon markets. The Protocol defined agreed binding emission reduction targets for industrialized countries (Annex B parties)iv. These countries can meet their commitments through domestic actions as well as one of the three market mechanisms: Clean Development Mechanism (CDM), Joint Implementation (JI) and International Emission Trading (IET). The CDM generates Certified Emission Reductions (CERs) through carbon projects in developing countries while JI generates Emission Reduction Units (ERUs) through projects in Annex B countries (mainly economies in transition). Both CERs and ERUs can be transferred through carbon markets to meet compliance needs. Under IET, Annex B countries can trade emission units with other Annex B countries and use them towards meeting their targets. v 5. When the KP entered into force in 2005 the nascent and emerging carbon markets received a boost. Within few years, several thousand CDM projects were registered that have generated over 1.8 billion Certified Emission Reductions (CERs) to date. Due to the unexpectedly large inflow of projects, CDM initially suffered from weak governance and processing delays (Michaelowa and Buen 2012, World Bank 2010a; 2010b). While the additionalityvi of a significant share of CDM projects has been contested (Schneider 2009) there is substantial evidence that the CDM has made significant contributions in stimulating learning, raising awareness and building capacity, and also improved additionality determination (Michaelowa 2009). It has also attracted investment for mitigation actions in developing countries to supply emission credits for compliance markets vii (Ellis et al. 2007; World Bank 2010a). CER prices reached a peak of 27 USD/t CO 2e at the height of the market in 2007 (Lecocq and Ambrosi 2007). However, the completion of the first commitment period of the Kyoto Protocol (KP I)viii and failure to agree on the post-2012 regulatory framework, and CER import restrictions in Annex B countries following the financial crisis, led to a CER price collapse between 2011 and 2013, with prices oscillating between USD 0.4 and 0.9 since then. 6. The signing of the Paris Agreement (PA) in 2015 has re-ignited interest in market mechanisms. The PA established that every country will contribute to global mitigation efforts through Nationally Determined Contributions (NDCs). ix The agreement also allows parties to use internationally transferred mitigation outcomes (ITMOs) towards fulfilment of the (NDCs), though the way this will be done remains unspecified and is subject to debate. x This opens a possibility that the WBG could contribute in piloting and operationalizing a new generation of carbon finance instruments under the Paris framework. However, key features of these instruments and the detailed rules and procedures of the Paris framework are still being developed (Hoch and Michaelowa 2016; DEHSt 2016) and the Marrakech conference of 2016 has set a deadline of 2018 for finalizing these negotiations. This evaluation will generate evidence based on review of the WBG’s strategic roles and contributions and its general experience in CF and its specific experience with carbon markets which could provide useful lessons for the future. 2 WBG POLICIES AND INTERVENTIONS 7. The WBG’s involvement in CF started in the late 1990s immediately after the Kyoto Protocol had been negotiated in the context of shifts at the global level towards environment and sustainable development.xi The first carbon fund - the Prototype Carbon Fund (PCF) – was launched in 2000. Progressively, the WBG recognized the challenge of climate change and developed strategies (World Bank 2008b; World Bank 2016b) to integrate mitigation and adaptation into its development assistance and financing mechanisms. The mainstreaming of climate change issues in the WBG was formalized in 2008 when the first comprehensive Strategic Framework on Development and Climate Change (SFDCC) xii was developed based on the request by the Development Committee during the World Bank/IMF Annual Meeting in 2007 and endorsed on October 12, 2008 (World Bank 2008) xiii. The need for increasing global commitment for reducing emissions and combating climate change was reflected in the 2010 World Development Report on Development and Climate Change (World Bank 2010a). In 2016, the WBG developed its new Climate Change Action Plan which aims to provide customized action and support to developing countries to accelerate their efforts to tackle climate change and implement the Paris Agreement (World Bank 2016b). 8. The WBG conceptualized carbon funds to experiment, pioneer and demonstrate a “proof of concept” for a carbon market as an instrument for climate change mitigation and global public good in support of the Bank Group’s larger development goals. This aimed to catalyze private and public sector action towards a global carbon market that reduces the cost of achieving emission reductions and supports sustainable development (World Bank 2010b). 9. The CF strategy and the main objectives varied over time. The WBG prepared its first carbon finance strategy in 2003 which outlined three objectives: (a) expand support for carbon market development and increasing the viability of project-based mechanisms, (b) extend the benefits of carbon finance to the smallest, poorest countries and poor communities, (c) demonstrate carbon finance for carbon sinks (sequestration) (World Bank 2003). The CF strategy was revised in 2006 with a focus in the following areas: (a) ensure that carbon finance contributes substantially to sustainable development; (b) assist in building, sustaining, and expanding the international carbon market; (c) further strengthen the capacity of developing countries to benefit from the emerging markets (World Bank, 2006). The CF strategy was further updated in 2012, targeting the following objectives: (a) support countries in their domestic carbon pricing/market programs and policies to mitigate the impact of the global market crisis, and (b) move from a project by project to an integrated programmatic approach to manage risks and support scaling-up of emission reductions (World Bank 2012b). 10. The WBG progressively assumed four key roles in implementing its CF activities (World Bank 2010b). 3  Catalyzing and developing carbon markets – create, build and expand international carbon markets; enhance access to and stability of carbon markets; and leverage private and public investments into projects that reduce carbon emissions.  Innovating carbon finance – develop new tools, methodologies and financial instruments that increase stability or reduce other market or delivery risks;  Building capacity – provide technical and advisory services to clients to benefit from carbon markets and carbon pricing instruments; and  Strengthening global and national partnerships for carbon markets, and carbon pricing more generally. In addition, the WBG served as the “trustee” and “convener” as crosscutting functions for carbon finance activities across funds and facilities.xiv 11. The WBG launched several funds, facilities and initiatives at different times primarily supported through multi-donor trust funds. Following the launching of the PCF which aimed to “operationalize the Kyoto market mechanisms”, multiple funds were progressively developed to acquire emission credits for Annex B government compliance with Kyoto targets and private company compliance with domestic emission trading system requirements. Currently, the WBG has over 25 different CF vehicles supporting its multiple roles. Many of the initiatives support more than one of the WBG’s roles. xv Some of the initial funds were designed to “catalyze” carbon markets, followed by the next generation of carbon funds and instruments aiming to “build and expand” carbon markets (World Bank 2010b). Progressively, new funds targeting ASA activities for capacity building in market-based mitigation (e.g. Partnership Market Readiness), providing ‘insurance’ against price risks using put options (e.g. Pilot Auction Facility), supporting forest-rich countries reduce emissions through forests and landscapes (e.g. Forest Carbon Partnership Facility), and strengthening global and national partnerships for carbon pricing (e.g. Carbon Pricing Leadership Coalition) were launched. For a full list and overview of the CF vehicles (funds, facilities, instruments) see Attachment 11. 12. The WBG CF interventions can be broadly classified into two major components:  Carbon market activities: development of the essential architecture for the functioning of carbon markets and the identification and design of projects for buying carbon credits through Emission Reduction Purchase Agreements (ERPAs); xvi and  ASA activities: Advisory services and analytics for capacity building and strengthening global and national partnerships for carbon pricing. The CF activities however also include non-project activities such as targeted efforts for innovation, convening or strengthening global and national partnerships. The detailed portfolio is presented under the “Evaluation Scope”. 13. The synthetic results framework and causal chain briefly describes the underlying “theory of change (ToC)” for this evaluation . The synthetic framework is developed around the four roles (first column) and the main activities (second column) defined in terms of ERPA and ASA projects activities and some non-project activities. The framework links the various CF interventions with expected outputs and intended sequence of outcomes (Figure 1). 14. Several outputs and outcomes could emerge from CF interventions in this framework. 4  Activities related to “catalyzing and developing” carbon markets contribute to piloting and operationalizing the Kyoto market mechanisms, which together with investments in low carbon alternatives and up-scaling of emission reductions and expanded access to carbon finance would lead to increased private and public sector participation and further development of international carbon markets and generation of co-benefits for sustainable development. xvii  CF innovations and development of new methodologies, tools and financing instruments would support further development of carbon markets and market-based climate mitigation actions.  The increased transfer of knowledge and technologies through technical assistance and advisory services also contributes to improving capacity and institutional and technical readiness in client countries for carbon pricing and market-based mitigation policies.  The WBG’s convening and thought leadership role in CF manifests itself through project and non-project activities targeted for strengthening global and national partnerships for carbon pricing and help establish collaborative systems and platforms for knowledge sharing, networking, outreach and advocacy. These in turn contribute to building domestic political support and wider acceptance of carbon markets and market-based climate mitigation actions in national climate policies.  These outputs, conditional on domestic and external factors, produce a set of outcomes which culminate in the three eventual results that contribute to the twin goals of the WBG: (a) Sustained and stable carbon markets, (b) Low cost climate change mitigation, and (c) Environmentally sustainable social and economic development. 15. While this broader results framework shows the different interventions and the potential outputs and outcomes at an aggregate level for WBG support to CF, a more detailed causal theory of change with the causal pathways and underlying assumptions will be developed for selected intervention category(ies) to guide data collection and analysis as part of the case studies (discussed under the Evaluation Design section). PREVIOUS EVALUATIONS 16. Three previous IEG evaluations relevant to CF include the Prototype Carbon Fund (World Bank 2004), the Climate Change and the World Bank Group – Phase II: The Challenge of Low-Carbon Development (World Bank 2010c), and Global Program Review: Forest Carbon Partnership Facility (World Bank 2012c). A brief description of the findings from the IEG evaluations is given under Attachment 9. In addition, the evaluation will benefit from external evaluations of the CF vehicles. xviii Purpose, Objectives and Audience PURPOSE AND OBJECTIVE 17. The purpose of this evaluation is to assess the role and contributions of the WBG in CF in relation to the needs and priorities of its clients and its potential comparative 5 advantages and draw lessons to inform the WBG’s strategic direction in CF. Understanding comparative advantages in CF requires careful analysis of the four dimensions: (i) the Bank Group’s past experience, resources and expertise; (ii) the needs and priorities of its clients; (iii) unique role and contribution and how its activities relate to the work of others; and (iv) its effectiveness in delivering results. The evaluation is expected to inform the WBG’s plan to develop a new carbon markets strategy. The new strategy is conceived to support the next generation of carbon markets under the framework of the Paris Agreement. xix The lessons and evidence from this evaluation are also expected to be relevant to the broader strategic direction of the WBG in CF and will support efforts to develop a new set of priorities and interventions in the future. Figure 1: Synthetic theory of change for WBG carbon finance activities Source: IEG EVALUATION SCOPE 18. The evaluation will look at the four dimensions described above to assess the potential comparative advantages of the WBG in CF. xx On the WBG portfolio, the focus will only be on the CF portfolio and will not include the broad scope of climate finance. xxi Whereas the term “carbon finance” in the WBG mainly covers resources that are provided for the purchase of carbon credits or payments for maintaining forest cover under REDD+ (World Bank 2006; 2010b),xxii “carbon finance” under this evaluation, mirroring on the broadening of 6 the carbon finance portfolio itself, will span all financial flows that influence generation of carbon credits including support for capacity building, technical assistance for “market readiness” and carbon pricing and global and national partnerships. Other climate finance projects and activities to support climate mitigation and adaptation (including Green Bonds, investments for clean energy, etc. which do not involve carbon markets) are out of scope for this evaluation. 19. The evaluation under the WBG portfolio will cover the two main categories or components of CF interventions – carbon market development and ERPA activities for purchase of emission credits from projects,xxiii and ASA activities targeting capacity building and partnerships. The ASA activities are either: (i) supported under the specific GHG mitigation technologies for emission reduction or targeted efforts for developing national institutional and private sector capacity (“market readiness”) for pricing carbon or participating in carbon markets (e.g. REDD+), or (ii) under general technical assistance or advisory services. The WBG project portfolio for CF is summarized in Table 1 (for details on the initial portfolio analysis see Attachment 6). xxiv Table 1: Overview of WBG’s carbon finance portfolio WBG Amount 2000-2005 2006-2011 2012-2016 Total (US$M) ERPA ASA ERPA ASA ERPA ASA ERPA ASA World 4,288.7 28 152 72 24 94 204 166 Bank IFC 505.12 3 13 2 1 1 17 3 MIGA 50.6 1 1 2 Total 4,844.42 31 0 166 74 26 95 223 169 *There are 223 Emission Reduction Purchase Agreements (ERPAs) (204 World Bank +17 IFC+2 MIGA) but 179 emission reduction projects, indicating that some projects contract more than one entity to supply the required volume of carbon credits. Advisory Services and Analytics (ASA) include capacity building and advisory activities such as technical assistance, training and analytical studies. The amount shown for MIGA is the value of the gross exposure for the guarantees (portfolio data not confirmed). Source: IEG based on initial analysis (see Attachment 6 for more details) 20. The evaluation will include CF related project and non-project activities of the WBG. For activities defined as projects, the key interventions for this evaluation include 181 carbon credit projects (implemented through 223 ERPAs) (including 17 projects supported by IFC and 2 projects by MIGA) and 169 projects for capacity building, including TA and advisory services implemented through various initiatives (see Table 1). IFC had four funds and instruments (some including own capital) and implemented 16 ERPA and 3 ASA projects, accounting for about 10% of the CF budget and 5% of the projects. Its activities in creating and developing carbon markets continued until the market crisis in 2012 but launched a Forest Bond providing support for one carbon market (REDD+) project in 2016. Some WBG activities however are not captured in the project portfolio as they are not implemented through a defined project. This includes activities related to CF innovations (e.g. developing new tools and methods or price insurance for carbon provided through zero coupon puttable bonds issued by the treasury) or knowledge sharing and networking activities (e.g. through regional and global partnerships). 7 STAKEHOLDERS AND AUDIENCE 21. The primary audience for this evaluation is the WBG’s Board of Directors, senior management and staff involved in carbon finance, climate mitigation policy and related operations. The program managers and technical staff involved in the design, implementation and management of various carbon finance operations and initiatives will benefit from the evaluation insights which could inform their current and future activities. 22. Other stakeholders include the donor sponsors providing trust funds to the WBG. These stakeholders will have an incentive to know about the performance and effectiveness of the carbon finance activities, the key drivers of success, how those drivers changed over time, and how future operations can be improved. The evaluation will also be of interest to climate policy evaluation specialists and researchers as well as policymakers and regulatory agencies who want to understand the impact of WBG operations on international carbon finance and how carbon finance operations or similar GHG mitigation policies could be made more effective. Bilateral and multilateral institutions may also be interested to know about what works in carbon finance. Host country governments, civil society and NGOs will also have an interest in this evaluation, especially in terms of how such interventions contribute to reducing GHG emissions and create opportunities for sustainable social and economic development at different levels. Evaluation Questions SPECIFIC QUESTIONS 24. The overarching question that IEG needs to answer in this evaluation is: What has been the strategic objective, nature of engagement and contribution of the WBG in supporting Carbon Finance? And going forward, what lessons can be drawn from this to inform the WBG’s strategic direction in supporting the next generation of market-based carbon mitigation activities given its potential comparative advantage? 25. This overarching question will be addressed by answering selected evaluation questions (EQ) identified to understand the strategic opportunities and comparative advantages of the WBG in carbon finance, with special emphasis on the four dimensions: (i) Interventions, experience, and capacity: Question 1: What has been the nature and extent of engagement of WBG support to CF since its inception around 2000? - 1.1. What has been the nature and the evolution of the WBG’s support to CF over time? - 1.2. What has been its strategic objective and to what extent has the support been underpinned by and aligned to relevant WBG strategies? (ii) Needs and priorities of clients: Question 2: What have been the evolving needs and priorities in CF for stakeholders at global and national levels from Kyoto to Paris and how did the WBG respond to these? 8 - 2.1. How have stakeholder needs and priorities at global and national levels evolved over time and how is it likely to evolve in the near future? How have markets and global regulatory regimes evolved over time? - 2.2. How and to what extent did the WBG adjust or respond to changes and uncertainties in markets and in the global regulatory regime? How and to what extent has the WBG been responsive to the evolving needs and priorities of its clients (funders and countries)? (iii) Results achieved: Question 3: To what extent and in what ways has the WBG contributed to developing and innovating carbon markets and building capacities through its multiple roles and support to carbon finance? - 3.1. How effectively has the WBG been able to fulfill its role in: o catalyzing and developing carbon markets and leveraging private investments; o innovating carbon finance, o building capacity of its clients, and o convening and thought leadership at the global and national levels? - 3.2. What does the existing and new evidence tell us about the effectiveness of the main CF interventions in reducing GHG emissions and generating co-benefits for sustainable development? (iv) Role and value added relative to other actors: Question 4: To what extent and in what ways does the WBG support to Carbon Finance distinguish itself from support provided by other institutional actors and contribute to its own operations?  4.1 How has the WBG positioned itself relative to other major institutional actors in its carbon finance support?  4.2 How and to what extent has the WBG been able to leverage carbon finance internally to augment its operational core business and scale up results (e.g. through ‘blending’ or more coherent programmatic integration of carbon finance with other WBG operations)? Evaluation Design and Evaluability Assessment 26. The evaluation can be characterized as a multi-level, multi-site evaluation . The multi- level dimension of the evaluation refers to the different data collection and analysis activities conducted at global (portfolio), country, and intervention category levels. The multi-site aspect concerns the purposive selection of countries for in-depth data collection. The detailed methods for multi-level data collection and analysis are first developed around each of the evaluation questions (see Attachment 8) and described further under an overview presented below. IEG will apply its protocol for confidentiality of data and sources, consistent with its Access to Information Policy.xxv OVERVIEW OF MAIN METHODS 27. On the basis of the foregoing, we can identify the following main methodological approaches: case study design for in-depth causal analysis, PRA, desk reviews and structured 9 literature reviews, stakeholder interviews, Delphi expert panel and project evaluations (PPARs)xxvi. The case study design in itself encompasses multiple methods and will therefore merit a more elaborate discussion. 28. Case study design for in-depth causal analysis. Taking into account considerations of time and available resources, the evaluation team will design and conduct a case study analysis on effectiveness for one or two selected intervention categories (one carbon market or ERPA and possibly one ASA; Question 3). The case study design will encompass the following main elements:xxvii  Development of a causal theory of change of the intervention category, which captures in detail the main causal pathways as well as underlying assumptions for each of the causal steps. The detailed causal theory can be ‘nested’ in the broader more general theory of change of the entire WBG support to CF (discussed above).  Data collection and analysis at the intervention type or category level. A PRA will be conducted on the population of projects pertaining to the selected intervention category (ERPA/ASA). The main focus will be on the identification and description of the main activities, the contextual factors influencing implementation and processes of change and different types of outcomes. Parallel to this, a structured literature review will be conducted (covering the policy and academic literature on effectiveness of the type of intervention under study).  Data collection and analysis at the level of specific interventions under selected categories or sub-categories (see below for criteria for choice of sub-categories) in selected countries. Interviews with different project-level stakeholders will be undertaken (WBG, government, implementing partners, carbon credit suppliers and buyers). In addition, a desk review of WBG documents and covering all selected interventions will be conducted to support the theory-based causal analysis (see below).  The methodology for causal inference will rely on theory-driven causal analysis, whereby the causal theory of change will continuously be refined and populated with new empirical evidence to eventually support a grounded causal narrative on “what works under what circumstances”. The evaluation will potentially explore the use of particular case-based methods for causal inference such as Process Tracing and Qualitative Comparative Analysis (QCA). Regarding the latter, the evaluation will ensure that all data collected for the selected interventions are amenable to feed into a QCA template for analysis. Where quantitative data on carbon emission reductions (or other outcome variables of interest) are available, the evaluation may consider conducting statistical analyses to assess the key determinants of effectiveness.  Selection and sampling issues are described below. 29. Portfolio review and analysis (PRA). Different PRA exercises will be conducted sequentially and in parallel. The main PRA exercise concerns the overall mapping and description of the global CF portfolio, including mapping of implemented activities under each of the main roles of the WBG in CF, and WBG project-level results frameworks (questions 1.1 and 1.2). Subsequently, the evaluation will include a number of additional PRA exercises:  WBG responsiveness to needs/priorities (global/portfolio level; question 2.2) 10  The effectiveness of relevant CF activities (globally and country level; question 3.1)  (more in depth) The effectiveness of selected interventions in selected countries (intervention category level, selected countries question 3.2)  The nature and extent of CF reinforcing other WBG operational activities (question 4.2) 30. Desk reviews (DR) and structured literature reviews (SLR). All SLRs are based on protocols that specify (in a concise manner) the search, identification, information extraction and synthesis processes of the literature reviews. The following DRs and SLRs will be conducted:  DR on architecture of WBG CF initiatives, strategic objectives and activities (global/portfolio level; question 1.2)  SLR on evolving stakeholder priorities at global and national levels as well as changes in markets and regulatory regimes in the field of CF (global/portfolio level; question 2.1)  DR on national strategy documents relating to CF needs and priorities in selected countries (country level; question 2.1)  DR on the WBG’s role in catalyzing and developing markets, innovating CF, capacity building and convening and thought leadership in key global debates/platforms/during major events related to CF within the evaluation period (global/portfolio level; question 3.1)  SLR on the effectiveness of the selected intervention sub-categories on reducing emissions or generating sustainable development co-benefits. xxviiiThis review will be covering all the relevant policy-oriented and academic literature on the subject (intervention category level; question 3.2)  DR on the global institutional landscape in CF (websites and strategy documents of key institutions) (global/portfolio level; question 4.1) 31. Interviews will be conducted at all levels of analysis. For each set of interviews (represented by one bullet point in the list below) at least one template with questions/topics will be developed which will be consistently applied across interviews and settings. More specifically, the following stakeholder groups and levels will be covered by the evaluation:  WBG staff (global/portfolio level) on the nature and extent of the WBG’s activities and main roles in CF, alignment between strategies and activities, country needs and priorities in selected countries, effectiveness of the main roles, WBG responsiveness to evolving trends (markets, regulatory regimes, priorities); and how WBG has been able to leverage CF to reinforce its operations (question 1.1, 1.2, 2.1, 2.2, 3.1, 4.2).  WBG stakeholders (country level) on country needs and priorities, WBG responsiveness to evolving trends (markets, regulatory regimes, priorities) in CF, effectiveness of the main roles the WBG has been playing in CF, effectiveness of selected interventions, the institutional landscape of CF in selected countries, and the nature and extent of CF in reinforcing other WBG operational activates (questions 2,1, 2.2, 3.1, 3.2, 4.1, and 4.2).This will be supported by interviews of selected global stakeholders (private, public sector, environmental community) on “needs and priorities” at the global level and responsiveness of the WBG to the evolving needs of its clients. 11 32. Global Delphi expert panel. The evaluation will establish a global panel comprised of leading experts in CF and related fields. The panel will be subject to a Delphi process that will involve anonymous responses to one or more standardized surveys and subsequent consensus- building (or “consolidated opinion” -building) on the following topics:  Global emerging needs and priorities in CF (markets, regulatory regimes, client needs and priorities) (global/portfolio level; question 2.1)  The effectiveness of the WBG’s global (potential) convening role and thought leadership (in relation to other key institutions in the field) (global/portfolio level; question 3.1)  The global institutional landscape in CF and the role of the WBG therein (global/portfolio level; question 4.1) 33. PPARs will be conducted on selected IDA/IBRD attached CF projects which have been validated by IEG.xxix CF currently does not have any project level verified evidence (no PPARs conducted). The PPARs will be selected to supplement case studies with project level evidence on issues related to effectiveness in demonstrating and promoting new technologies, the driving factors and constraints for delivering carbon emission credits or social and environmental co-benefits (questions 3.1 and 3.2) and the practical challenges and opportunities in combining CF to augment IDA/IBRD operations (question 4.2). (Multi-level) Sampling/selection considerations 34. To ensure acceptable levels of generalization of findings as well as trade-offs between depth and breadth of analysis, the evaluation carefully considers the following sampling/selection issues at multiple levels:  Selection of countries for in-country data collection and analysis. The countries for in- country data collection and analysis are purposively selected based on screening criteria to identify a set of countries that will give the best combination and diversity of carbon finance cases (both carbon credit and ASA activities in the same country) to capture the relevant heterogeneity of the interventions and the socio-economic, policy and biophysical context which could affect the outcomes. In the first criteria-based selection, 55 countries (out of 77 total) with at least one ERPA activity during the first 10 years were retained. In the 2nd stage, 31 countries which hosted at least one ASA activity during the first 10 years were retained. The next level of screening retained 25 countries that hosted at least three projects during that past 10 years (2006-2016). Additional criteria were used to narrow the sample considering:  Presence of ICR reports;  Presence of the most common CF operations (e.g. sector, technologies used);  Potential to generate socioeconomic and environmental co-benefits;  Coverage and depth of capacity building (e.g. PMR, CF Assist and Forest Funds);  Distribution of cases across regions and income-groups; and  Presence of interventions pertaining to the selected intervention category(ies) for in- depth causal analysis. Applying these additional considerations to the 25 eligible countries led to the purposive selection of six countries (two from Africa, Latin America and Asia) for potential inclusion in case studies (see Table 2). xxx This leaves out MENA and ECA regions mainly 12 because of the limited diversity of CF activities (especially carbon market/ERPA and ASA activities in the same country) in these regions. However, considering the available budget, only four countries are expected to be included for case studies which will be decided after careful review of the country portfolio for potential intervention types and sub-categories that will be considered for the detailed theory-based analysis. The proposed PPARs may slightly contribute to improve the coverage of regions and countries, but will only provide data on the performance of the specific project implemented in that country. See Attachment 10 for details on the CF activities in the countries proposed for Case Studies and for the proposed PPARs. Table 2: Proposed case studies in selected countries Main intervention types China India Ethiopia Kenya Colombia Chile (categories) and sub-categories 1. Carbon market/ERPA (Markets, Innovation, Convening) activities  Renewable energy X X X X X X  Energy efficiency X X X  Forestry/Agriculture X X X X X X  Waste management X X X X /methane 2. ASA activities (Capacity building, Partnerships, Convening)  Market readiness X X X X  Forestry/Agric readiness X X X X Note: ASA = Advisory Services and Analytics include ESW = Studies (Economic and Sector Work); TA= Technical Assistance (workshops, technical advice, etc.) and TE= external training [related to capacity building and global and national partnership activities].  Selection of intervention sub-category(ies) for in-depth causal analysis. The intervention sub-category selected for in-depth analysis will be based inter alia on the following criteria: volume in portfolio, stakeholder demand, innovative nature of work, existing evidence on effectiveness.  Selection of specific interventions (project and non-project activities under the selected sub-category) in the framework of the in-depth causal analysis of the selected intervention category(ies). In the selection of countries for in-country data collection and analysis the prevalence and diversity of different interventions under the selected intervention category(ies) will be taken into account. Giving due consideration to the challenges arising from the status of the interventions (time period, open/closed) and the time and resources available for identifying documents and/or key stakeholders for interviews, the evaluation will attempt to cover the entire population of interventions (of the selected intervention category) in a particular country. In practice, it is likely that this will be too difficult as the number of stakeholders may be too large to cover and staff turnover may affect availability. As a result, the evaluation will anticipate a bias toward more recent interventions. A minimum coverage of interventions (under the selected intervention sub-category) at country level will be ensured to strengthen the overall external validity of findings. 13  Selection of stakeholders for interviews at global and country levels. Purposive samples of relevant stakeholder groups will be developed for each interview exercise at global, country or intervention category level (see above). Taking into account time and resource constraints, the number of stakeholders interviews will be optimized to allow for the largest diversity in coverage and coverage of key stakeholders at a minimum cost. The principles of triangulation and reaching the “point of theoretical saturation” will be used to inform a decision on the amount of interviews to be conducted.  Selection of PPARs will be based on the potential to supplement case studies with project-level evidence from different regions/countries and/or effectiveness of selected interventions on reducing emissions or generating co-benefits (question 3.2) or on how the WBG leverages CF to support its operations (question 4.2). DESIGN LIMITATIONS 35. Despite its strength, the design faces certain limitations. Whereas the CF portfolio is narrow and implemented by well-defined units in the WBG, it remains complex and difficult to identify mainly due to lack of fully harmonized data, protocols and procedures, including limited independent and external evaluations. The proposed design is also complex and wide in terms of its multiple levels of analysis to answer key questions that go beyond the WBG portfolio. The theory based causal analysis of case studies requires detailed information on the causal chain for intervention categories within the context of multiple contributing and conditioning factors (Stern et al. 2012; Befani and Mayne 2014). xxxi Such data may be difficult to gather because of weak responses, reluctance to share “sensitive” information or fatigue and lack of incentives to participate. Because of decisions taken in design (e.g. fewer countries, in- depth analysis of just one or two intervention types) the evaluation may be limited in terms of its portfolio coverage (especially on ASA activities) and may not offer conclusive evidence on the effectiveness of all key CF interventions. The Delphi expert panel approach may not also lead to consensus-building and convergence. While the evaluation will draw from review of several carbon funds and facilities, it will not provide evidence on the effectiveness of specific vehicles or instruments. The effect of programmatic integration of carbon finance on continued innovation will not also be fully covered while issues around the trustee role, including hosting and fund governance will not be covered because of the decision taken on the scope. Quality Assurance Process 36. This Approach Paper has been peer reviewed by experts to ensure relevance of evaluation questions, scope and issues covered, and appropriateness of the methodology. Peer reviewers come from outside IEG: Dr Regina Betz (Joint Head of Energy Policy Analysis Group, Zurich University of Applied Science); Dr Massamba Thioye (Manager, Sustainable Development Mechanisms Program, UNFCCC Secretariat); Dr Michael Toman (Lead Economist and Manager, Development Research Group, Development Economics Vice Presidency, World Bank). Expected Outputs, Outreach and Tracking 37. Planned reporting vehicle. A final report that summarizes the findings of the evaluation regarding the performance of the WBG will be the primary output to the Board’s Committee on 14 Development Effectiveness (CODE). It will be tailored to strategic decision makers within WBG and contain key lessons learned and recommendations. At the same time the evaluation will be disseminated publically in the form of internal and external publications, working papers (technical background papers), learning products, blogs, presentations, audiovisuals and social media. The evaluation team will solicit feedback during the evaluation through ongoing engagement of key stakeholders in order to enhance relevance and accuracy and inform the process. Feedback particularly from the WBG practitioners, managers and project leaders, carbon market actors, and government agencies will enhance the evaluation’s quality and accuracy. 38. Outreach strategy. The preliminary outreach plan specifies activities and timelines for disseminating results. Once it is approved by CODE, IEG will launch the report in Washington DC in the presence of internal and external actors and institutions. A preliminary selection of relevant stakeholders will include WBG management and staff, policy makers, carbon market and climate policy experts, governments, bilateral and multilateral banks and the civil society with insight into the outcomes of the evaluation. Other venues with effective outreach potential are the Innovate 4 Climate (I4C) launched in May 2017, regional Carbon Fora for Latin America, Africa and Asia and a side event at UNFCCC meetings. Efficient outreach in collaboration with the Knowledge and Communication (KC) team of IEG to key stakeholders using various outlets will maximize the value of the evaluation findings and recommendations. Resources 39. Timeline and budget. The evaluation will be submitted to CODE by the end of Q4 FY18. The budget for the study is estimated at $1.0 million, an amount consistent with other major IEG sector studies. The budget for PPARs will be separately covered. 40. Team and Skills Mix. The skills mix required to complete this evaluation includes expertise in climate change; GHG mitigation economics and policies; evaluation experience and knowledge of methods, including statistical and portfolio analysis; familiarity with the policies, procedures, and operations of IFC and the World Bank; and knowledge of the Bank Group and external sources. 41. The evaluation will be conducted by a team led by Bekele Shiferaw (task manager ), Andrew Stone (co-task team leader), April Connelly (evaluation specialist, environment), Stephen Hutton (senior evaluation specialist), Victoria Alexeeva (evaluation specialist, energy), Mari Noelle L. Roquiz (evaluation analyst), and Axel Michaelowa (senior climate policy and carbon markets consultant). The evaluation team will be supported by additional subject matter experts (being identified) and advisors: Jozef Vaessen (methods advisor), Rasmus Heltberg (lead evaluation specialist, partnerships advisor) . The team has substantial knowledge and experience around the issues and the respective institutions of the Bank Group. It will build methodological skills in new areas. The report will be prepared under the direction of Midori Makino, Manager, IEGSD; and Jose Carbajo Martinez, Director, IEGSP. 15 Attachment 1: Bibliography Baptist, C. and Befani, B. (2015): Qualitative Comparative Analysis – A Rigorous Qualitative Method for Assessing Impact, London: Coffey Befani, B., and Mayne, J. (2014): Process Tracing and Contribution Analysis: A Combined Approach to Generative Causal Inference for Impact Evaluation. IDS Bulletin Volume 45 Number 6 November 2014 CDM Policy Dialogue (2012): Climate Change, Carbon Markets and the CDM: A call to Action; Luxembourg; retrieved on 21.12.2016 from http://www.cdmpolicydialogue.org/report/rpt110912.pdf Chassard, J. (2007): The role of other major stakeholders in the post-2012 regime: Industry, financial institutions and NGOs. Paper presentation at the Forum on the Global Climate Change Strategies Beyond 2012 - The Route Ahead, Madrid, Spain, April 11- 13, 2007. DEHSt (2016): International market mechanisms after Paris. German Emissions Trading Authority (DEHSt) at the German Environment Agency, Berlin, Germany Dell, M., Olken, B., Jones, B. (2008): Climate Change and Economic Growth: Evidence from the Last Half Century. NBER Working Paper No. 14132. National Bureau of Economic Research (NBER), Cambridge, Massachusetts. Ellis, J., Winkler, H., Corfee-Morlot, J., Gagnon-Lebrun, F. (2007) CDM: Taking stock and looking forward. Energy Policy 35: 15–28 Gold Standard (2012): Gold Standard Requirements. Version 2.2, Geneva Hoch, S. and Michaelowa, A. (2016): Built on Experience - How to transition from the CDM to the Sustainable Development Mechanism under the Paris Agreement. Carbon Mechanisms Review 1: 28 - 31 IFC (International Financial Corporation) (2016): IFC Issues Innovative $152 Million Bond to Protect Forests and Deepen Carbon-Credit Markets. Washington DC. http://ifcextapps.ifc.org/ifcext/pressroom/ifcpressroom.nsf/0/594A016A78A7B14E8525805D00461397 IPCC (2014): Climate Change 2014 - Synthesis Report. Contribution of Working Groups I, II and III to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change [Core Writing Team, R.K. Pachauri and L.A. Meyer (eds.)]. IPCC, Geneva, Switzerland, 151 pp. Lecocq, F. and Ambrosi, P. (2007): The Clean Development Mechanism: History, Status, and Prospects. Oxford University Press, Oxford Michaelowa, A. (2009): Interpreting the additionality of CDM projects: Changes in additionality definitions and regulatory practices over time, in: Freestone, D. and Streck, C. (eds.): Legal aspects of carbon trading, Oxford University Press, Oxford, p. 248-271 16 Michaelowa, A. and Buen, J. (2012): The CDM gold rush, in: Michaelowa, A. (ed.): Carbon markets or climate finance?, Routledge, Abingdon, p. 1-38. Michaelowa, A..; and Michaelowa, K. (2011): Climate business for poverty reduction? The role of the World Bank. Review of International Organizations 6: 259-286 Schatz, F. and Welle, K. (2016): Qualitative Comparative Analysis: A Valuable Approach to Add to the Evaluator’s Toolbox? Lessons from Recent Applications . CDI Practice Paper. Number 13 January 2016. Institute of Development Studies, Brighton BN1 9RE, UK. Schneider, L. (2009): Assessing the additionality of CDM projects: practical experiences and lessons learned, Climate Policy 9:242–254 Stern, E., Stame, N., Mayne, J., Forss, K., Davies, R., and Befani, B. (eds) (2012): Broadening the Range of Designs and Methods for Impact Evaluations. DFID Working Paper 38, London. UNFCCC (1992): Adoption of the United Nations Framework Convention on Climate Change. United Nations Framework Convention on Climate Change, Bonn, Germany. World Bank (2003): A Note on Status and Strategic Directions of Carbon Finance Operations in the World Bank. Final Draft June 24, World Bank, Washington, D.C. World Bank (2004): The Prototype Carbon Fund - Addressing Challenges of Globalization: An Independent Evaluation of the World Bank’s Approach to Global Programs. Operations Evaluation Department, World Bank, Washington, D.C. World Bank (2006): The Role of the World Bank in Carbon Finance: An Approach for Further Engagement. World Bank, Washington, D.C. Retrieved on 12 Feb 2017 https://wbcarbonfinance.org/docs/Role_of_the_WorkBank.pdf World Bank (2008a): Climate Change and the World Bank Group - Phase I: An Evaluation of World Bank Win-Win Energy Policy Reforms. Independent Evaluation Group, World Bank, Washington, D.C. World Bank (2008b): The Strategic Framework on Development and Climate Change. The World Bank, Washington, D.C. World Bank (2010a): Development and Climate Change. World Development Report 2010. World Bank, Washington, DC. World Bank (2010b): Ten years of experience in carbon finance - insights from working with the Kyoto mechanisms. World Bank, Washington, DC. World Bank (2010c): Climate Change and the World Bank Group - Phase II: The Challenge of Low- Carbon Development. Independent Evaluation Group, World Bank, Washington, D.C. World Bank (2011a): A Note on Status and Strategic Directions of Carbon Finance Operations in the World Bank. Washington, DC. 17 World Bank (2011b): Strategic directions for carbon finance. Presentation at the SDN council meeting. World Bank, Washington, DC. World Bank (2012a): Adapting to Climate Change: Assessing World Bank Group Experience - Phase III of the World Bank Group and Climate Change. Independent Evaluation Group, World Bank, Washington, D.C. World Bank (2012b): Carbon Finance: Five Year Business Outlook. World Bank, Washington, D.C. World Bank (2012c): Global Program Review: Forest Carbon Partnership Facility. Independent Evaluation Group, World Bank, Washington, D.C. World Bank (2015): Quality Standards for Approach Papers for Major Evaluations. Independent Evaluation Group, World Bank, Washington, D.C. World Bank (2016a): Shock Waves: Managing the Impacts of Climate Change on Poverty. World Bank, Washington, DC. World Bank Group (2016b): World Bank Group Climate Change Action Plan. World Bank, Washington, DC. World Bank (2016c) State and Trends of Carbon Pricing 2016, World Bank, Washington, DC. World Bank (2017): Advisory Services and Analytics (ASA)/Advisory Services: Evaluation Criteria. Discussion Draft. Independent Evaluation Group, World Bank, Washington, D.C. 18 End Notes i For the purpose of this evaluation, carbon finance includes activities and support for implementing carbon market mechanisms (including the creation and operationalization of the carbon market architecture, carbon pricing and associated capacity building and TA and advisory services) for GHG mitigation. This is different from the umbrella concept of climate finance which includes public support for interventions to promote climate mitigation and/or adaptation with or without revenue from the sale of emission reductions. ii The Intergovernmental Panel on Climate Change (IPCC) in its fifth assessment report clarifies that “human influence on the climate system is clear” and “warming of the climate system is unequivocal” (IPCC, 2014). iii We use the term “carbon emissions” to denote all GHG emissions. ivThe emission targets were expressed in terms of allowed emissions or “assigned amounts” for the first commitment period (2008-2012), collectively amounting to a reduction of 5.2 percent against 1990 levels. vUnder IET, Annex B countries can acquire emission units (called assigned amount units, AAU) from other Annex B countries and use them towards meeting their targets, or sell unused AAUs to Annex B countries that are exceeding their targets. viAdditionality refers to a requirement under the Kyoto Protocol that emission reductions resulting from CDM projects have to be ‘real, measurable and long-term’, and they have to be ‘additional to any that would occur in the absence of the certified project activity’ (UNFCCC 1997). The CDM and JI projects therefore seek to demonstrate additionality through procedures that have evolved over time. While an attractive concept in theory, the demonstration of additionality has turned out to be very challenging to implement and evaluate objectively in practice. Many different approaches to additionality determination have been developed over the past three decades, but continues to be a subject of debate between project entities and CDM regulators as well as among stakeholders. viiCarbon markets can be domestic, regional or international in scope. These markets have generally emerged under two different systems: compliance schemes or voluntary programs. Compliance markets are created and regulated through mandatory national, regional or international emission reduction regimes (e.g. cap-and-trade schemes). On the other hand, voluntary carbon markets function outside of the compliance market and enable corporations, governments, and non-state actors to voluntarily offset their emissions by purchasing carbon credits that were created either through the CDM (e.g. CERs) or in the voluntary market (e.g. using Verified or Voluntary Emissions Reductions, VERs). Trading volumes in the voluntary market are much smaller than the compliance market because demand is mainly created through voluntary buyers (businesses, institutions and individuals). VERs cannot be used in compliance markets. Because of this and the limited demand, VERs for a long period tended to be cheaper than carbon credits sold in the compliance market, but this has no longer been the case after 2011. Voluntary markets therefore serve a niche market and can be especially suitable to small projects that cannot afford the full regulatory costs under the CDM or JI for validation and certification of carbon emission reductions. The second commitment period of the Kyoto Protocol for 2013-2020 (Doha Amendment) has not yet viii been ratified. As of 12 April 2017, 77 countries have ratified the Doha Amendment out of a total of 144 instruments of acceptance required for its entry into force. http://unfccc.int/kyoto_protocol/doha_amendment/items/7362.php 19 ixArt. 6 of the Paris Agreement introduced two new market mechanisms: Cooperative Approaches (CAs) under Art. 6.2 and a “Mechanism to contribute to mitigation and sustainable development” (often called sustainable development mechanism, SDM) under Art. 6.4. x The ITMOs are the new market-based mitigation crediting provisions established under the Paris Agreement. The new trading provisions are open to all countries; both developed and developing countries are able to host the crediting mechanism and use credits generated towards meeting their NDCs (Nationally Determined Contributions) – voluntary mitigation actions deposited by each county under the Paris Agreement. A future mechanism for ITMOs is expected to be designed to achieve net global emission impacts rather than purely serve as an offsetting mechanism as conceived under the Kyoto Protocol. xiAt the Earth Summit in 1992 several important global frameworks were created: (a) Agenda 21, (b) UN Convention on Biodiversity (CBD), (c) UN Convention to Combat Desertification (UNCDD), (d) United National Framework Convention on Climate Change (UNFCCC). xiiThe 2008 Strategic Framework identified six priority action areas each providing tools for supporting both adaptation and actions with mitigation co-benefits: (a) Support climate actions in country-led development processes; (b) Mobilize additional concessional and innovative finance; (c) Facilitate the development of market-based financing mechanisms; (d) Leverage private sector resources; (e) Support accelerated development and deployment of new technologies; and (f) Step up policy research, knowledge, and capacity building. Of these, the third, fourth and six priory actions were directly relevant to carbon finance. Nine major initiatives were proposed to implement the new strategic framework (SFDCC), xiii including the following four directly relevant to carbon finance: (a) Operationalize, execute, and share lessons from CIF, CPF and FCPF and work with partners to improve monitoring of climate- related finance and its “additionality”; (b) Support carbon market development through investments in longer-term assets and currently by-passed reduction potentials, financial and quality enhancements of carbon assets, methodology development, and sharing lessons of experience; (c) Promote packaging of its development finance instruments with instruments provided by Carbon Finance, GEF, and the CIF; and (d) Enhance the knowledge and capacity of clients and staff to analyze and manage development-climate linkages at the global, regional, country, sector, and project levels. xiv The “trustee” role includes the hosting, fiduciary, governance and program implementation roles. However, this evaluation will mainly look at the “convening” role with emphasis on the thought leadership and effectiveness of the global and national partnerships to support carbon markets and carbon pricing instruments. A “convener” is an entity for bringing different stakeholders and players together to address an issue, problem, or opportunity. A convener uses its knowledge and authority (thought leadership), resources, and unique position (e.g. as trusted neutral broker) to influence desired change by bringing different stakeholders and players together (e.g. common platforms, networks, conferences, funding partnerships, etc.) to deliberate on specific issues and collaborate in finding solutions. Depending on circumstances, the WBG may have played different roles: main convener, joint convener or collaborator. 20 xv The initial classification into the four roles is summarized in Table 3A (Attachment 6). The full cycle for developing and implementing CDM/JI projects involves multiple steps for xvi due diligence that go from the Project Idea Note (PIN) to Project Concept Note (PCN) to Project Concept Document, baseline and monitoring methodologies, risk assessment, validation by UNFCCC, project design and contracting, periodic supervision, verification by external authorized entities, payments and transfer of credits and completion of the proect. xviiThe Kyoto Protocol’s flexible mechanisms were developed with the aim of mitigating climate change while at the same time contributing to sustainable development in host countries. Accordingly, the co-benefits from CF include the additional benefits beyond climate change mitigation in terms of improvements in public health, education, energy security, increased income from employment or higher productivity, and environmental sustainability gains that contribute to sustainable development in host countries. The co-benefits linked to CDM projects may include: (i) enhanced local infrastructure (e.g., roads, health clinics, schools, water, parks, community centers, etc.); (ii) access to cleaner and affordable energy for heating and/or cooking; (iii) improved income and employment; and (iv) improved access to electricity and/or energy- efficient lighting. The external evaluations include PMR which had one independent evaluation and annual xviii reviews (2012-2016) conducted by one of the donors (the UK); FCPF which had two external evaluations (2011, 2016) as well as an IEG Global Program Review (2012); and the CF-Assist mid- term evaluation (2009). IEG will carefully review the external evaluation reports and other relevant information as part of the performance assessment and complement the available information, to the extent possible, through this evaluation. xixThe newly established Carbon Markets and Innovation Practice of the Climate Change CCSA is coordinating the development of the new carbon markets strategy and roadmap, which is expected to be implemented over the next three to five years. Following several discussions with the Carbon Markets and Innovation Practice, the new strategy is expected to benefit during its process of development from the findings and recommendations of this evaluation. xxThe WBG had different CF business models, mandates, clients and market contexts. The World Bank (IBRD, IDA) conceptualized carbon funds as a global public good for climate change mitigation. The Bank aimed to catalyze private and public sector funds to pioneer, expand and develop global carbon markets. The Bank continued to leverage and crowd in private sector clients through: (i) private sector participation in the carbon funds (on the ER buyer side), and (ii) the private sector participation as project entities (on the ER seller side). The Bank’s business model also included extending carbon markets to the “smallest, poorest countries and poor communities” and “demonstrate carbon finance for carbon sinks (sequestration)”. Along with capacity building and technical assistance, its business model included developing and piloting new tools, methodologies and financing mechanisms for increasing quality, access, efficiency, stability and predictability of carbon markets. IFC initially participated in the creation of carbon markets by collaborating with the World Bank under two European trust funds but progressively experimented with its own specific CF products, e.g. the CDG which aimed to provide risk cover (using its own AAA balance sheet) for companies who are unwilling to take ER supply risks in emerging markets. It also launched the post-2012 carbon facility, mobilizing private capital for forward purchasing ERs produced by client companies, and aiming to create a new pathway to 21 future carbon markets given the regulatory uncertainties beyond 2012. It also launched “Forest Bonds” in 2016 leveraging private capital to test and develop a new business line using bonds in voluntary REDD+ markets. MIGA’s business model was limited to providing few guarantees that cover non-commercial risks in CF investments (expropriation, war and civil disturbance and breach of contract, including government commitment under a letter of approval for the undertaking CDM projects). xxi There are several reasons why this evaluation was conceived to focus on Carbon Finance (CF). (i) The WBG is currently transitioning from its long time support to carbon finance under the Kyoto mechanisms into supporting client countries in achieving their Nationally Determined Contributions (NDCs) under the Paris Agreement. Hence, the evaluation is key and timely and will inform the WBG’s plan to develop a new strategy for the next generation of carbon markets; (ii) Whereas CF constitutes one the Bank Group’s first and longest engagements for mitigating climate change since 2000, IEG has not undertaken a comprehensive evaluation of the complex and long-time support to CF. The CF portfolio has expanded over time with commitments reaching about $5 billion and including over 25 different CF vehicles (trust funds, facilities and instruments). However, despite the scale of the Bank’s involvements, CF projects (except when part of a larger IDA/IBRD lending) are not evaluated by IEG through the existing accountability mechanisms (ICRR/XPCR/EvNote) – leaving a wide gap in the overall performance of these longstanding activities; (iii) Careful review and understanding of the lessons from the multiple roles played by the WBG in creating and developing markets is essential to determine the comparative advantages of the WBG in CF in the future. A climate finance evaluation will need to include both mitigation as well as adaptation aspects (many of which have an emerging portfolio and not ready for evaluation) and will significantly reduce the ability to generate timely and relevant evidence on the CF experience that is under the risk of being lost if not documented and highly relevant in the current process of transitioning to the Paris mechanisms. The 2006 Annual Report of Carbon Finance at the World Bank “Carbon Finance for Sustainable xxii Development” (World Bank 2006) defines carbon finance as “resources provided to projects generating (or expected to generate) GHG (carbon) emission reductions in the form of the purchase of such emission reductions.” The ERPA activities could also encompass the related non-project activities for developing xxiii new baseline and monitoring methodologies for accounting GHG emissions required for implementing CDM/JI registered projects and effecting transactions in carbon assets. xxivThe portfolio shows that about 61% of the activities were launched during the height of CF (2006-2011 period), including 75% of the ERPAs. About 8% and 31% of the activities were initiated during the pre-2006 and post-2011 period, respectively. The main carbon market (ERPA) activities are in renewable energy (32%), waste management & methane (29%), energy efficiency (14%) and forestry/agriculture (14%). Most of the ASA activities include initial REDD+ activities undertaken by the Forest Funds (39%), TA (30%) and country “market readiness” supported mainly by PMR (19%). xxv“IEG will not act in a way that contravenes the policies on Disclosure or Access to Information of any of the WBG entities. This policy is guided by, and fully consistent with, the second principle set out in the World Bank’s Access to Information Policy—a clear list of exceptions.” Independent Evaluation Group. Access to Information Policy, July 1, 2011 p. 3. 22 xxviSince IEG does not validate standard CF self-evaluations, there are only 8 ICRRs on CF activities attached to IDA/IBRD operations. Project Performance Assessment Reports (PPARs) will be conducted only on a selected set of the existing ICRRs. For simplicity, we refer to the complex carbon market activities for establishment of ERPAs xxvii that involve development of the required market architecture for carbon credit transactions to occur as “ERPA”. The signing of the transaction agreement (ERPA) on its own does not however capture the associated activities involved in establishing the institutional architecture for creating and operationalizing the underlying carbon markets, especially at the early stages where significant learning and experimenting could be involved to catalyze carbon markets. The structured literature review will not attempt to isolate the effects of carbon credit xxviii activities on emission reductions or co-benefits. It will look at the literature on “additionality”and how it was used to ensure ‘environmental integrity’ of carbon credits (i.e. project level emission reductions), the level of emission reducrions acheived for CDM projects and review the existing evidence on social and environmenal co-benefits associated with CF projects. This will supplement data from case studies and PPARs. Based on the availability of the self-assessment reports, the potential choices include Brazil xxix (municipal waste management), Mali (Hydropower), Kenya (geothermal - renewable energy), Bulgaria (energy efficiency), Tunisia (municipal waste management), and Niger (agriculture/forestry). In addition to time and resources, the choice will depend on the potential evidence that the micro evaluation will provide to supplement case studies and answer specific questions related to effectiveness of selected sub-categories of interventions on reducing emission or generating co-benefits (question 3.2) and on how the WBG leverages CF to support its operations (question 4.2). xxxWithin the limited resources available, the selected countries allow us capture the existing diversity of the key carbon finance interventions (ERPA/ASA activities) in the same country and generate comparable data using similar and consistent methodologies from different socio- economic and policy environments. xxxiIn the context of multiple causation, interventions work as part of a “causal package” in combination with other ‘helping factors’ such as stakeholder behavior, related interventions and policies, institutional capacities, cultural factors or socio-economic trends (Stern et al. 2012). The factors might also combine in complex ways to produce certain results, making it difficult to draw an inference between one single factor and an outcome. The “causal package” and the combination of factors produces the outcomes (Befani and Mayne 2014). 23 24 Attachment 2: Detailed evaluation design matrix Data collection Evaluation Questions Information required Information sources Data analysis methods Limitations methods Overarching question What has been the strategic objective, nature of engagement and contribution of the WBG in supporting Carbon Finance? And going forward, what lessons can be drawn from this to inform the WBG’s strategic direction in supporting the next generation of market-based carbon mitigation activities given its potential comparative advantage? 1. What has been the nature and extent of engagement of WBG support to Carbon Finance since its inception around 2000? 1.1. What has been the nature and 1. Information about the 1. Data from WBG internal 1. Data extraction from 1. Portfolio analysis Portfolio data on the evolution of the WBG’s support different types of CF reporting systems and Portfolio and involving mapping CF are limited; to Carbon Finance over time (stand- facilities, funds and portfolio databases. external (UNEP and description of lack of instruments (initiatives or 2. WBG documents on CF DTU, IGES) the main categories harmonized alone and blended)? vehicles) managed by WBG funds, facilities and databases. (ERPA and ASA) information since 2000and their instruments (e.g. annual 2. Review of identified and sub-categories as storage may limit attributes. reports and external CF documents and relevant. access to relevant review reports). selected literature 2. Desk review of documents. 2. Information on how WBG 3. Meeting with relevant relevant to the CF relevant CF manages and implements WBG Task-Team Leads portfolio. 3. Semi-structured these facilities, funds and and Managers in WBG 3. Purposive sample of interviews with instruments and how it Task-Team Leads relevant WBG staff. interacts with its clients and and Managers operational units? relevant to the CF evaluation. 3. Detailed project-level data on carbon credit (ERPA) and Advisory Services (ASA) projects supported by different initiatives since 2000 1.2. What has been its strategic 1. Information on the strategic 1. WBG carbon finance 1. Mapping the 1. Desk review of CF strategy objective and to what extent has the objectives of CF in WBG as strategy documents or activities or WBG strategic documents and support been underpinned by and documented in various CF business plans since 2000 objectives of WBG documents and business plans aligned to relevant WBG strategies? strategies and business plans 2. WBG sectoral and CF initiatives to the carbon funds and may not be well and its evolution over time corporate strategy WBG CF strategies facilities. documented; 2. Alignment of WBG’s work documents and action during the period. Strategic and support on CF to alignment alone 25 relevant sectoral and plans (e.g. environment 2. Mapping the 2. Desk review of does not provide corporate WBG’s strategies and climate change) Objectives of WBG WBG sectoral and the full picture on CF strategies to corporate strategies relevance. corporate and sectoral strategies and action plans during the period. 2. What have been the evolving needs and priorities in Carbon Finance for stakeholders at global and national levels from Kyoto to Paris and how did the WBG respond to these? (2.1). Needs and priorities in 1. Evolution of needs and 1. Literature, relevant 1. Desk review of 1. Synthesis from Recall interviews response to changes in markets and priorities of global clients, documents and relevant literature review of literature may lack depth; regulatory regimes: including regulatory websites from global and documents from and other relevant expert panels agencies, funders and agencies like UNFCCC UNFCCC and other documents (global may not converge  How have stakeholder investors and national institutions national institutions and country level or reach priorities at global and 2. Evolution of needs and from selected countries. and private sector including private consensus on few national levels (including priorities of national clients stakeholders sector. core issues or private sector) evolved over under the Kyoto Protocol 2. Stakeholders from global- 2. Purposive sample regularities in time and how is it likely to (Annex B &Annex A level stakeholders (e.g. global-level 2. Analyze data from trends/priorities evolve in the near future? countries) and Paris UNFCCC, Carbon stakeholders (e.g. semi-structured Agreement. Market Participants etc.) commercial banks interviews 3. Evolution of needs and and selected national and multinational priorities of private sector level respondents companies invested 3. Summarize findings clients. in WBG CF etc.). from global expert panel. 3. Global expert panel 3. Purposive sample national-level (e.g. designated authorities, regulatory agencies 4. Triangulate and etc.) summarize key 4. Probe global expert findings panel (including public and private sector stakeholders) (2.1). Needs and priorities in 1. Information on evolution of 1. Structured review of 1. External 1. Synthesis of External response to changes in markets and international carbon markets existing literature publications, literature reviews on literature on regulatory regimes: and global regulatory including information relevant WBG evolution of carbon carbon markets regimes since 2000 from relevant websites documents and markets and global expected to be (challenges, risks, (e.g. UNFCCC). websites. regulatory regime. narrow and dated 26  How have markets and global uncertainties and 2. Information on various 2. Information from regulatory regimes evolved opportunities). Conferences of the Parties carbon market over time? (COPs) from UNFCCC service provider sources websites, e.g. on carbon credit prices and volume levels. (2.2). Adjusting to changes and 1. Information on WBG 1. Portfolio review to see 1. PRA showing project 1. Portfolio analysis Limitations of CF responsiveness to client demand: responses to risks and how WBG adjusted to trends in relation to involving content portfolio data; uncertainties faced in changes and uncertainties major events analysis, including lack of IEG micro  How and to what extent did carbon markets. 2. Relevant staff and 2. Interview of relevant carbon credit prices level evidence; the WBG adjust or respond to management of WBG WBG TTLs and paid by WBG at interviewees may changes and uncertainties in 2. Information on WBG (e.g. TTLs, Managers of Managers and Senior different times. not provide markets and in the global responses to changes and Carbon Finance). Management 2. Analysis of data from desired details regulatory regime? uncertainties in the global semi-structured based on recall regulatory regime since 3. Data extraction from interviews with 2000. Portfolio. relevant WBG staff. (2.2). Adjusting to changes and 1. Information on the 1. Portfolio review at 1. PRA content analysis 1. PRA Limitations of CF responsiveness to client demand: responsiveness of the WBG country level at country level 2. Desk review of portfolio data; to the evolving needs and 2. WBG Country Assistance 2. Mapping the WBG WBG strategic lack of IEG  How and to what extent has priorities of its clients in CF. Strategies, and other strategies to the client documents and validated the WBG been responsive to relevant documents (e.g. priorities carbon funds and evidence; the evolving needs and carbon funds and 3. Interviews with facilities. interviewees may priorities of its clients (fund facilities). purposive sample of 3. Analysis of data not provide participants, both public and 2. Relevant WBG staff and WBG staff and from semi- desired details private sector, CF grant donors management mangers structured based on recall and client countries)? 3. Interviews with selected 4. Purposive sample of interviews country level WBG clients (via case stakeholders studies) 3. To what extent and in what ways has the WBG effectively contributed to developing and innovating carbon markets and building capacities through its multiple roles and support to carbon finance? 3.1. How effectively has the WBG 1. Information on the 1. Relevant annual reports 1. Desk review of 1. Portfolio analysis Country level been able to fulfill its role in: effectiveness of WBG and data from different existing external involving content data needs to be  catalyzing and developing interventions through its periods on tradable literature and internal level analysis of supported by carbon markets and various facilities, funds and carbon assets (e.g. documents CER/ERU and desk review of leveraging private instruments in catalyzing reports from 2. Data extraction from verified carbon credit related carbon investments? and developing carbon PointCarbon/ThomsonR Portfolio. transactions, prices, markets data and markets and how this euters on volume and 3. Semi-structured volumes, etc. from interviews to changes over time. prices of international interviews with different periods. better understand carbon market) relevant WBG staff. WBG’s role and 27 2. Level of new public and 2. WBG Task-Team Leads 4. Semi-structured 2. Drawing lessons from contributions in private sector investment of CF units in WBG. interviews with desk review of ‘catalyzing and leveraged through CF into 3. Stakeholders at global purposive sample of literature and internal developing’ projects that reduce GHG and national-level for stakeholders and reports international emissions and how this selected countries market players at the markets ( changed over time. global and national 3. Analysis of carbon level. market data 4. Analysis of data from semi-structured interviews  innovating carbon 1. Information on the 1. Literature and internal 1. Desk review of 1. Compiling main Methodologies finance? effectiveness of various WBG CF reports external literature findings from may have been interventions in developing 2. Data from WBG internal and internal CF literature reviews revised after important baseline and reporting systems and reports 2. Analysis of internal initial approval, monitoring methodologies Data on CDM and JI and external data on thus WGB role and other tools for developing methodologies provided 2. Data extraction from CDM&JI may change over or expanding carbon markets by UNEP DTU internal reporting methodologies and time; limited to new sectors (www.cdmpipeline.org), systems and external their level of use information on 2. Information on the as well as IGES ( http: databases. supported by WBG. some “financial effectiveness of various WBG //www.iges.or.jp/en/cli 3. Analysis of case instruments” instruments in bringing mate/database.html) 3. Interviews with studies after the carbon innovation in carbon markets 3. CER price trends and purposive sample of market crisis (e.g. increasing quality, access, market data from WBG TTLs and 4. Analysis of data from (post 2012). efficiency, and reduce risks in PointCarbon/ThomsonR managers of CF semi-structured carbon markets). euters interviews 4. Interviews with 4. WBG Task-Team Leads purposive sample of of Carbon Finance units main stakeholders at in WBG. the National and 5. Stakeholders at national- project level. level for selected countries  building capacity of its 1. Information on the 1. Literature and internal 1. Desk review of 1. Compiling main Requires closer clients? effectiveness of WBG’s CF reports external literature findings from desk understanding capacity building activities. 2. Data from WBG and internal CF reviews and knowledge of internal reporting reports 2. Portfolio analysis the country systems. 2. Data extraction from involving content context to see the Portfolio. level analysis. effect of capacity building 28 3. WBG Task-Team 3. Interviews with 3. Analysis of case interventions; Leads of Carbon WBG TTLs and studies portfolio data on Finance units in WBG. managers of CF ASA activities 4. Analysis of data from can be narrow 4. Stakeholders at 4. Interviews with semi-structured National-level for main stakeholders at interviews selected countries the national and project level  convening and thought 1. Information on WBG’s role 1. External and internal 1. Desk review of 1. Triangulate and Expert panels leadership at the global and influence as convener or literature external literature and extract main findings may not converge and national levels? thought leader in key global 2. Global-level expert panel internal reports from global expert on few issues debates and platforms and at (e.g. UNFCCC, CDM- 2. Facilitate a global panel, literature (familiarity with national level in building Board, COP participants, expert panel. review and interviews the WBG’s CF support for carbon pricing WBG, donors, 3. Interviews of of selected activities and instruments. participants, etc.) purposive sample of stakeholders from roles would be 3. National stakeholders main stakeholders at case study countries useful) from Annex A and B the national-level countries. (part of case study) 3.2. What does the existing and new 1. Information on project-level 1. Review of existing 1. Structured review of 1. Extracting evidence External evidence tell us about the GHG emission reductions external literature and existing evidence on from structured literature and effectiveness of the main CF achieved through WBG’s CF annual reports from emission reduction reviews country level interventions in reducing GHG facilities, funds and funds targeting LICs and and co-benefits 2. Analysis of information on emissions and generating co- instruments. co-benefits (e.g. CDCF, 2. Descriptive statistics CERs/ERUs data at co-benefits benefits for sustainable BioCF, CI-DEV, etc) of CERs/ERUs project level (including development? 2. Information on project-level 2. Data on CER / ERU issuance for generated from 3. Analysis of case negative impacts) the CDM and JI project pipeline environmental and social co- provided by UNEP DTU (www. WBGs, facilities, funds studies and PPARs might be limited benefits derived from WBG’s cdmpipeline. org), as well as and instruments since 4. Triangulation of especially in LICs CF facilities, funds and IGES (http:// www.iges. 2000. evidence and identify instruments in support of or.jp/en/climate/database.html 3. Interviews with key findings and the ) sustainable development in 3. Reports on sustainable purposive sample of main drivers of client countries. development of CDM projects of main stakeholders at success WBG on UNFCCC website ( the project level. http:// cdmcobenefits.unfccc.int/Pages /SD-Reports.aspx) 4. Stakeholders at National-level for selected countries 4. To what extent and in what ways does the WBG support to Carbon Finance distinguish itself from support provided by other institutional actors and contribute to its own operations? 29 4.1. How has the WBG positioned 1. Information about the work 1. Strategy documents of 1. Desk review of 1. Synthesis of results Institutional itself relative to other major and support provided by other institutional actors strategies of relevant from desk reviews of actors are not institutional actors in its carbon other institutional actors (e.g. MDBs and market institutional actors strategies of selected tightly defined finance support? including MDBs and market participants). MDBs and market institutional actors group; global participants (e.g. large 2. Purposive sample of participants. 2. Analysis of responses expert panels commercial banks) stakeholders in selected 2. Interviews with from semi-structured may lack the case study countries relevant stakeholders interviews incentive or 2. Information on the 3. Global expert panel in selected countries 3. Triangulation of knowledge to distinguishing features and and WBG senior staff findings with results reach consensus; complementarities of the and management from the global expert solid evidence on WBG’s CF activities 3. Probe global expert panel WBG’s compared to the activities panel on how the comparative undertaken by other WBG support to CF advantages may institutional actors. distinguishes itself require other from others (e.g. studies, creating value going including beyond support interviews of provided by others) actors. 4.2. How and to what extent has the 1. Information on the extent to 1. Portfolio data 1. Portfolio review 1. Analysis of portfolio The WBG WBG been able to leverage carbon which CF has been 2. WBG Task-Team Leads (content analysis data experience in finance internally to augment its mainstreamed into WBG across relevant units of and mapping by 2. Analysis of responses blending or operational core business and scale projects and programs to WBG sector and GP) to see from semi-structured programmatic up results? facilitate integration and 3. ICRRs and PPARs from ties with operations interviews mainstreaming scaling up of mitigation CF activities attached to 2. Semi-structured 3. Triangulation of approaches outcomes. WBG lending operations interviews with findings with micro- could be limited, 2. Information on risks, purposive sample of level evidence from especially for challenges and opportunities Task-Team Leads ICRRs and PPARs landscape/ from mainstreaming CF into and Managers across jurisdictional WBG operations relevant units of initiatives WBG 3. Desk review of existing ICRRs and new PPARs from blended operations 30 Attachment 3: Detailed time line Draft AP circulated to IEG and Peer Reviewers May 2 2017 prior to One Stop Comments from ELT + Peer Reviewers due in 7 business days/ Virtual one stop May 11, 2017 Team reviews comments and creates matrix May 12 2017 Circulate final minutes to IEG May 13 2017 Circulate revised AP to Mgr., Director May 14 2017 Send revised AP to DGE for clearance May 15 2017 AP submitted to Bank Management for Comments May 16, 2017 (15 business days to comment) Meeting with Management TBD June 6 2017 Comments due from Management June 13 2017 Incorporate comments from Mgt. June 20 2027 Circulate AP to Mgr., Director for clearance June 22 2017 Send AP to DGE for clearance June 26 2017 Circulate final AP to Bank Mgt. for info June 28 2017 AP finalized and e-Submitted to CODE June 30 2017 31 Draft Report circulated to IEG and Peer April 16 2018 Reviewers prior to One Stop Team reviews comments and creates matrix April 24 2018 Mgr./TTLs meet with FO April 25 2018 Send Agenda and Comments to IEG and Peer April 25 2018 Reviewers One Stop meeting for Evaluation Report April 26 2018 Send draft One Stop minutes to DGE May 1 2018 (3 bus. days after One Stop) Circulate final minutes to IEG May 2 2018 Report is revised by team post-One Stop May 5 2018 meeting Circulate revised Report to Mgr., Director May 6 2018 Send revised Report to DGE for clearance May 7 2018 Report submitted to Bank Management for May 10 2018 Comments (15 business days to comment) Meeting with Management TBD May 29 2018 Comments due from Management June 4 2018 Incorporate comments from Mgt. June 12 2018 Circulate Report to Mgr., Director for clearance June 14 2018 Send Report to DGE for clearance June 21 2018 Circulate final Report to Bank Mgt. for info June 22 2018 Report finalized and e-Submitted to CODE June 26 2018 Attachment 4: Detailed Budget 32 Attachment 5: Team skill mix Skill areas Main responsibility EQ3 (1 case study) + EQ4 Evaluation specialist (Agriculture/Forestry April Connelly (interviews and report) + main evaluation) report EQ3 (1.5 case study) + EQ1 Victoria Alexeeva Evaluation specialist (Infrastructure) (interviews and report) + main report Mari Noelle L.Roquiz Portfolio Review All Panel reviews, advise field Stephen Hutton Senior evaluation specialist (Environment) missions, development of survey instruments, etc. Case study in India/Ethiopia; Literature review evolution of markets and regulatory systems Carbon markets and climate policy (EQ2); Literature review on Paris Axel Michaelowa specialist Agreement and future of market-based mechanisms (EQ2): Literature review on CF innovations (EQ3.2) Stakeholder consultation; Subject matter expert Stakeholder consultation/interviews (AP Literature review on capacity (TBD) stage was supported by Shilpa Patel) building (EQ3.3) and Convening (EQ3.4) Stakeholder interviews on needs and priorities of clients (EQ2), Carbon finance and climate Subject matter expert Institutional mapping and markets/business analysis (EQ4), WBG positioning (EQ4) Literature review on carbon Carbon capture Forests and Landscapes Subject matter expert capture through forests and (REDD+) landscapes (EQ3.3 and EQ3.5) Qualitative comparative analysis; Process Subject matter expert Theory-based causal analysis Tracing Advise on methods across all Jozef L. Vaessen* Methods advisor (IEG) areas Advisor on “partnership” Rasmus Heltberg* Lead evaluation specialist evaluation Co-TTL and advise on Bank Andrew Stone Advisor to Director portfolio and macro evaluation approach  Dr Mike Toman (DEC, WBG), Peer reviewers All areas  Dr Masamba Thioye (UNFCCC), 33  Prof Regina Betz (Zurich University of Applied Sciences and Centre for Energy and Environmental Markets, University of New South Wales, Australia) Manage and coordinate tasks and Lead evaluation specialist (Agricultural Bekele Shiferaw (TTL) lead data collection, analysis, and and Environmental Economist) report writing Note: (*) advisory role only 34 Attachment 6: Preliminary Portfolio Review Carbon Finance Preliminary Portfolio Identification 1. World Bank Group Support for Carbon Finance, FY00-16 The primary instrument of World Bank Group (WBG) support for carbon finance is through multi-donor trust funds (Attachment 11). Unlike other standard WBG lending portfolio, the carbon finance portfolio does not follow all the WBG standard procedures and protocols for harmonized documentation, reporting, self-evaluation and independent verification. As a result, is not fully structured for quick identification, coding and analysis and a conventional portfolio review and analysis will not be performed until all the information at the project level is collected and coded. However, the identification of the portfolio follows a similar methodology as other IEG macro- evaluations, complemented by information gathered from the relevant units managing the carbon finance activities. The first step in defining the scope of the carbon finance evaluation was to identify all WBG interventions that have involved support for carbon finance activities between fiscal years (FY) 2000 and 2016. Based on literature review and consultations with stakeholders and relevant WBG units, the carbon finance activities were broadly categorized into two groups: i) Group 1: These are projects involved in carbon markets and the purchase of carbon emission reduction credits and for which there are Emission Reduction Purchase Agreements (ERPAs) outlining the legal conditions underpinning the carbon transactions. ii) Group 2: These are non-lending projects, either ASA or Advisory Services, primarily targeting provision of technical assistance and capacity building for client countries to develop and adopt carbon pricing instruments or support to prepare carbon projects that will help them access carbon markets and generate revenue in support of sustainable development. 2. Methodology and data sources Given the absence of a harmonized system for tracking all the WBG support for carbon finance activities, the portfolio was constructed through a multi-stage process involving sourcing and triangulation of data from the different sources listed below: 2.1 WB Carbon Finance Portfolio (A) Group 1 – carbon market projects targeting purchase of carbon credits 35 Step 1: Project portfolio from the World Bank’s Business Intelligence database : All World Bank carbon finance projects approved as of July 1, 2016 were extracted from the Business Intelligence (BI) database using a screening criteria. An initial screening of relevant projects from the eligible universe was performed with the use of World Bank theme code classifications available in the BI system. 1 The first stage involved was the identification of all World Bank projects that supported climate change relevant activities. These projects were identified on the basis of an assigned World Bank theme code : climate change theme code 81. Out of the 8,778 projects2 approved between FY00 and FY16, 733 projects were assigned with the theme code 81 (Table 1A). The second stage involved identifying the subset of climate change projects that supported carbon finance activities. This set of projects was identified on the basis of an assigned product line in BI for carbon finance: carbon offset. The above two stages resulted in a list of 138 carbon finance projects with unique project identification numbers (PID). Using the FY00-16 approved project universe, a carbon offset product line filter was performed. An additional 9 projects with carbon-offset product line but were not assigned the theme code 81, were added to this list. This resulted in a preliminary portfolio of 147 carbon finance projects. Step 2: Project portfolio from the Carbon Finance Unit: The above list of 147 projects was supplemented with project data compiled and provided by the World Bank’s Carbon Finance Unit (CFU) which maintains basic data on World Bank carbon finance projects, and the associated ERPA contracts. In order to ensure accuracy and consistency of the carbon finance portfolio, the data from CFU was compared with the data obtained from the BI system. Combining both data sets, IEG realized 162 unique projects and an additional 42 ERPAs which consisted of the purchase of emission reduction credits. There are 18 projects not reported in the BI system but were identified from the CFU database. This exercise resulted in a preliminary carbon finance portfolio consisting of 162 projects. (B) Group 2 – Advisory Services and Analytics (ASA) Step 1: Project portfolio information from the World Bank’s Business Intelligence database: To identify these capacity building projects, the IEG team conducted a similar comprehensive assembly of the relevant World Bank analytical work that addresses carbon markets and related emission activities during the same time period. The first stage involved the screening of relevant projects available in the BI system under Analytic 1 The Bank’s thematic and sector coding system forms the basis for analysis of and standard reporting on the nature of Bank interventions. Thematic codes are meant to capture Bank support to corporate priorities such as Millennium Development Goals and global public goods. Each WB projects is assigned up to five, separate theme classifications, which can be assigned any percentage weights by relevance, that add up to 100 percent. The theme code classifications assigned, are not mutually exclusive implying that a single project can be cross listed in different themes. 2 The 8,778 World Bank projects include all IBRD/IDA projects as well as projects financed by World Bank trust funds. 36 and Advisory Activities (AAAs). There were 486 projects assigned climate change theme code 81 out of the 9,562 World Bank AAA projects approved between FY00 and FY16. The second stage was combining capacity building portfolio with additional information related to size, trustee nature, sectors and disbursement process to cover the universe of selected projects in sufficient detail and depth. The main source for this exercise was the Trust Fund database and Operations Portal. Step 2: Project portfolio information from the Carbon Finance Unit : Since the capacity building projects were not classified in the Bank system as carbon finance relevant projects, the CFU provided a list of carbon finance capacity building projects supported by the World Bank’s different carbon facilities and funds. The Carbon Finance Unit provided a list of 118 projects targeting capacity building through technical assistance, analytic and advisory services related to carbon finance (Table 1A). Combining these two steps resulted in 166 relevant carbon finance ASA projects to be examined further in the evaluation. 2.2 IFC Carbon Finance Portfolio A similar methodology was applied on IFC projects in order to realize trends across the WBG portfolio. Step 1: Project portfolio information from the Management Information System (MIS) and Advisory Services Operational Portal (ASOP) Database: Project portfolio data on relevant projects was extracted from the IFC MIS database for Investment projects and ASOP for Advisory Services as of July 1, 2016. There were 4,125 IFC Investments and 2,730 IFC Advisory Services. However, IEG did not initially find any carbon finance relevant investment projects using sector and industry group filters as well as a project name search. By expanding this, using simple text analytics on development objectives and project descriptions revealed 22 Advisory Services projects that seemed relevant to carbon finance. However, after reviewing these projects, they do not seem to have carbon finance as the primary objective and do not involve generation of emission reductions or carbon credits. Hence, these projects were initially excluded from the portfolio. This was verified by IFC in Step 2. Step 2: Project portfolio information from IFC: A set of 17 projects and 3 advisory services projects was provided by the IFC Carbon Finance Unit for comparison with the IEG portfolio list. All of these projects involved the purchase of carbon credits and constitute the entirety of carbon finance activities managed by IFC. 3 These projects (except for one) are not disclosed in the MIS database because they are Non-Investment Project Related projects and most are classified as Confidential. Further, IFC provided 3 3The IFC managed carbon facilities include (i) IFC-Netherlands Carbon Facility (INCaF); Netherlands European Carbon Facility (NECaF); (iii) Carbon Delivery Guarantee; and (iv) P12C Facility. 37 AS projects which were part of the initial 22 projects IEG extracted. The rest of the projects were beyond implementation of the carbon credit projects and were therefore excluded from the portfolio. 2.3 MIGA Carbon Finance Portfolio A quick review of the MIGA portfolio consisting of 499 projects from FY00-16 revealed two possible carbon finance related project guarantees against the risks of expropriation, war and civil disturbance, and breach of contract. 3. Validation of Carbon Finance datasets The final step in the portfolio identification and selection process involved cross-checking the list of projects identified by IEG with the list provided by the Carbon Finance Units of the World Bank, IFC and MIGA. For the Group 1 projects targeting purchase of carbon credits (ERPA), the IEG list of 138 carbon finance projects was first cross-checked with the list of ERPA projects shown on the Bank’s carbon facilities websites. A comprehensive list of the World Bank’s carbon funds and facilities was retrieved from the Carbon Finance Unit website4 along with a list of carbon markets/ERPA projects funded under each facility. The expanded list was then compared and matched against 162 projects provided by CFU. The cross-checking and triangulation confirmed the 162 carbon market (ERPA) projects identified through the multi-step process (Table 1A). However, IEG found that the ERPA project list shown on the carbon finance website was not complete and did not include all of the relevant projects (see Figure 1A). The ASA projects identified through several filters including theme code, keyword search and compared to the CFU list helped identify the preliminary carbon finance ASA portfolio of 166 projects. A thorough review will be performed during the course of the evaluation. For IFC, none of the 16 carbon market projects in the IFC portfolio are currently active. However, one additional carbon credit project developed in 2016 (IFC Forest Bond) which signaled the return of IFC to the carbon finance business was added with interest to assess its design features and strategic future opportunities. This give a total of 17 IFC carbon credit projects. Two of the 3 AS projects are related (one is still active and the other was terminated) and the third project is closed. [Pending confirmation from MIGA] Lastly for MIGA, both of the projects are not active. Consultations with IEG MIGA staff and review of project documents, annual reports and news articles were used to validate these first-ever support for projects that will sell carbon credits gained by reducing greenhouse gas emissions. 4 https://wbcarbonfinance.org 38 4. Preliminary Analysis Based on the selection criteria outlined above, the following set of WBG carbon finance interventions were identified: Carbon market or ERPA related projects consist of activities that aim to mitigate GHG emissions by purchasing carbon credits through interventions that deploy clean low- carbon technologies or replacing or modernizing activities and processes that improve energy efficiency or environmental performance and reduce GHG emissions. Carbon finance ASA activities consist of technical assistance, training or ESW that aim to strengthen regulations, build capacity for specific technology development and national readiness strategies, and piloting of carbon pricing policy instruments. The usual outputs for such projects include “How-To” guidance notes, workshops, knowledge sharing forums and best practices, sector or thematic studies and training. The World Bank is the predominant player in the design and implementation of carbon finance and has been involved in both development of carbon markets and delivery of advisory services and capacity building in developing countries. The preliminary analysis shows that out of the estimated 223 carbon market activities for purchase of carbon credits (ERPAs), the World Bank undertakes about 204 ERPAs (91.5%). Similarly, the World Bank is also involved in 166 ASA projects (98%) for delivery of advisory services and capacity building (Table 1A). These activities are supported through several carbon finance funds and facilities implemented across many developing countries. In terms of the total carbon finance support, the World Bank accounts for about 88.5%, followed by IFC (10.4%) and MIGA (0.1% unconfirmed) (Table 2A). The IFC carbon finance investment portfolio consists of 17 carbon credit projects (mostly renewable energy) that enable clients sell carbon credits to IFC under the Kyoto mechanisms and three advisory services. IFC also had a carbon finance-specific product, Carbon Delivery Guarantee (CDG), which provides risk cover for companies who are unwilling to take risks in emerging markets for buying carbon credits and for companies in developing countries selling carbon credits an opportunity to access a wider range of potential buyers. The IFC advisory services (AS) projects provide technical assistance and capacity building to clients for acquiring new skills and tools to expand their internal procedures to incorporate carbon finance or to support use of new approaches and broaden market participation in carbon markets. The MIGA portfolio (which currently is narrow and unconfirmed) consists of two projects - solid waste management project and agribusiness project in LAC - providing guarantees that cover risks of expropriation, war and civil disturbance and breach of contract, the former including the breach of the government’s commitments under a letter of approval for the undertaking the carbon emission reduction project under the CDM of the Kyoto Protocol. The guarantee holder has completed the validation process and has agreed to 39 sell carbon credits to a private carbon fund on delivery of the CERs. Both projects have a gross exposure of up to US$50.6 million5. Collectively, 52% of the total carbon finance projects are closed in which 74 projects have ICRs/PCRs and only 10 were validated by IEG. More than a quarter of the total number of carbon credit contracts are in the LAC region, mostly in Brazil, Mexico and Columbia. About 24% are in EAP, especially in China, Indonesia and the Philippines. About 17% are in Africa and 14% in South Asia. For ASA activities, the Africa region (26%) and LAC region (25%) account for more than half of the total number of activities (Figure 1A). In terms of total carbon finance commitments, about a quarter of the total funding is used in the LAC region, followed by Africa region (22%) and EAP region (21%) (Figure 2A). About 8% of the total number of ERPA (carbon market) and ASA activities is blended with WBG lending operations. This increases to about 13% for ERPA activities alone, but only 3.6% of the ASA activities are blended. For IFC, all of the projects are standalone activities. Table 2A lists the funds/facilities tallying the total funding, total number of ERPA and ASA activities. Table 3A presents the preliminary grouping of carbon finance initiatives according to the main role of the WBG in carbon finance (based on initial review of the main objectives of the different carbon finance vehicles or initiatives). A breakdown by fund and facility of the total volume of carbon credits delivered as of September 2016 is listed in Table 4A with the Umbrella Carbon Facility (UCF) delivering the most at 62.73M CO2e. Table 5A presents the distribution of the carbon finance activities by sector/technology based on preliminary analysis of data from the available carbon portfolio. About a third of the activities are in the renewable energy sector, followed by waste management (methane reduction) (29%), and forestry/agriculture (14%), and energy efficiency (14%). These sectors jointly account for about 90% of the carbon credit projects (numbers). Table 6A presents the distribution of the ASA activities based on initial analysis of the limited ASA data. Further refinements are required after proper coding of project-level ASA activities from all the funds using the standard ASA classifications. 5The Agribusiness MIGA project guarantee contains two contracts (original plus an extension) with gross exposures of US$27M and US$21.8M respectively. The waste management project has a gross exposure of US$1.8M. 40 Table 1A: World Bank Group Climate Change and Carbon Finance Commitments by GP/Sector, FY00-16 World Bank IFC MIGA Non- Carbon Carbon Non- Carbon Carbon Climate lending Global Practice /CCSA credit credit lending and credit credit Change and non- projects (P- activities non-ERPA activities activities projects a ERPA Codes) (ERPAs) b projects c (ERPAs) d (ERPAs) f projects e Agriculture/Agribusiness 54 8 10 10 1 1 Climate Change 9 11 17 24 Education 3 - - Energy & Extractives 305 58 75 19 16 1 Environment & Natural Res. 229 64 79 105 Finance & Markets 2 - - 2 Macro-Economics & Fiscal Mgt 5 - - Social Protection & Labor 1 - - Social, Urban, Rural and Resili. 62 15 16 6 Trade & Competitiveness 2 - - Transport & ICT 40 3 4 - Water 18 2 2 - Not assigned 1 - Other 2 1 1 1 1 Total 733 162 204 166 17 3 2 a) WB projects relevant to climate change with theme code 81. Carbon finance portfolio includes carbon market activities including purchase of carbon credits (ERPA activities) and other activities targeting capacity building and partnerships (non-ERPA activities). The latter group includes ASA activities – technical assistance (TA), external training (TE) and analytical studies (ESW). b) Emission Reduction Purchase Agreements (ERPAs) c) Non-ERPA ASA activities include projects targeting capacity building and technical assistance and advisory services d) IFC Investment projects provided by IFC. e) IFC Advisory Services validated by IFC. f) MIGA portfolio based on projects identified through expert consultation (still under discussion and to be confirmed by MIGA). 41 Figure 1A: Process for Identification of the Carbon Finance Portfolio (unique P-codes) Project ERPA non-ERPA Status WB IFC MIGA WB IFC Active 96 1 65 1 Closed 99 11 2 45 1 Pipeline 5 44 Dropped 4 5 15 1 Evaluations: ICR/XPSR/PCR: 74 projects ICRR/PES/PER/EvNote: 8 lending projects covering 10 carbon finance projects Source: Business Intelligence; Carbon Finance Unit, IFC, and MIGA. Figure 2A. Total Carbon Finance Projects and Total Carbon Finance Commitments in US$M by Region (aggregate) 42 Table 2A: Carbon finance portfolio by facility, fund or initiative Total Total funding 2000-2005 2006-2011 2012-2016 emission Total ASA Funds and facilities (millions US$ Non- Non- reduction activities equivalent) ERPAs ERPAs Non-ERPA ERPAs ERPA ERPA ERPAs 1. Prototype Carbon Fund (PCF) (2000) 185.4 17 0 7 1 0 0 24 1 2. IFC Netherlands CDM Facility (INCaF) (2002) a 89.2 3 0 7 0 0 0 10 0 3. WB Netherland CDM Facility (2002) a 93.7 6 0 11 2 0 0 17 2 4. Community Development Carbon Fund (CDCF) (2003) 92 3 0 33 5 0 1 36 6 5. Italian Carbon Fund (ICF) (2003) 155.6 0 0 5 0 1 0 6 0 6. Spanish Carbon Fund (SCF) T1 and T2 (2004) 290 1 0 28 1 5 0 34 1 7. Bio-Carbon Fund (BioCF) – Tran. 1 and 2 (2004) 90.4 1 0 31 24 4 7 36 31 8. IFC Netherlands European Carbon Facility (NECF) (2004) a 35.8 0 0 2 0 0 0 2 0 9. ·Netherlands European Carbon Facility (NECF) a (2004) 22.3 0 0 4 0 0 0 4 0 10. Danish Carbon Fund (DCF) a (2005) 69.6 0 0 9 0 0 0 9 0 11. CF-Assist (2005) 22.09 0 0 0 20 0 25 0 45 12. Umbrella Carbon Facility (UCF) (2006 /10 Tran 1 & Tran 2) a 1,113 0 0 13 0 4 0 17 0 13. IFC Carbon Delivery Guarantee (CDG) (2007) 21.5 0 0 3 0 0 0 3 0 14. Carbon Fund for Europe (CFE) a (2007) 32.5 0 0 7 0 2 0 9 0 15. Forest Carbon Partnership Facility (FCPF) (2008) 1,100 0 0 0 15 0 18 0 33 16. Carbon Partnership Facility (CPF) (2009) a 133.7 0 0 4 1 4 3 8 4 17. Partnership for Market Readiness (PMR) (2010) 127 0 0 0 2 0 32 0 34 18. Carbon Initiative for Development (CI-DEV) (2011) 125 0 0 0 1 4 2 4 3 19. IFC Post 2012 Carbon Facility (2011) a 205.1 0 0 1 0 0 0 1 0 20. Bio-Carbon Fund (ISFL) – Tranche 3 a(2013) 353.7 0 0 0 0 0 4 0 4 21. Pilot Auction Facility (PAF)b (2013) 53 0 0 0 0 0 0 0 0 22. Transformative Carbon Asset Facility (TCAF) (2016) c 220 0 0 0 0 0 0 0 0 23. IFC Forest Bond (2016) d 152 0 0 0 0 1 0 1 0 24. Carbon Pricing Leadership Coalition (CPLC) (2016) 3.9 0 0 0 0 0 1 0 1 25. Networked Carbon Markets (2016) 5.81 0 0 0 0 0 1 0 1 IFC Advisory Services 1.52 2 1 3 MIGA Guarantees 50.6 1 1 2 0 Total 4,844.42 31 0 166 74 26 95 223 169 World Bank Total 4,288.7 28 0 152 72 24 94 204 166 IFC Total 505.12 3 0 13 2 1 1 17 3 MIGA Total 50.6 0 0 1 0 1 0 2 0 Source: IEG summary based on WBG data. (a) Euro denominated funds (including adjustments for exchange rate movements, extra fees, and changes in capitalization) (b) Final target is to reach $100 million; (c) Final target is to reach $500 million; and (d) includes total capitalization of the Bond (not amount allocated to REDD+ credits). TCAF, IFC Forest Bond and NCM are included in the portfolio mainly to look at their strategy and design features as part of this evaluation but were developed after the signing of the Paris Agreement to support the relaunching of carbon markets. Similar to PCF for the Kyoto Mechanisms, TCAF in particular is expected to pioneer new tools and financing approaches for implementing the Paris Mechanisms. The IFC Advisory Services portfolio are not linked to a particular Fund/Facility because they are implemented primarily for IFC business development activities. The MIGA portfolio is based on IEG search and identification of projects that seem to be relevant to CF (consultation is underway to confirm the portfolio). 43 Table 3A: Preliminary grouping of carbon finance initiatives according to the four role of the WBG (based on initial review of the main objectives of the different initiatives). Roles (see codes) Amount ERPA Non-ERPA Funds/facilities 1 2 3 4 5 (US$ million) projects projects Yes Yes Yes Yes PCF, CDCF, BioCF 367.8 96 37 ICF, CFE, INCaF, IFC-NECF, Yes 1,539.5 60 0 WB-NECF, DCF, UCF1, UCF2 Yes Yes Yes Yes CPF, CI-DEV 258.7 12 7 Forest Bond, IFC-CDG, Yes Yes 202.6 3 0 MIGA Guarantees Yes Yes Yes WB-NCDM, SCF 383.7 51 3 Yes Yes Yes IFC-P12CF, TCAF 425.1 1 0 Yes Yes Yes Yes FCPF, BioCF-ISFL 1,453.7 0 40 Yes PAF 53 0 0 Yes Yes Yes CF-Assist, PMR 149.09 0 77 Yes Yes CPLC, NCM, IFC AS 11.23 0 5 4,844.42 223 169 Codes: 1= Catalyzing and developing carbon markets; 2= Innovating CF; 3= Capacity building; 4=Strengthening global and national partnerships; 5=Convening Source: IEG based on initial literature and portfolio review Table 4A: Contracted Volume and Carbon Credits Delivered as of September 2016 (tons of CO 2e) Fund/Facility Last Contracted volume Total Volume Delivered Sept 2016 Umbrella Carbon Facility 68,661,346.00 62,725,681.00 Prototype Carbon Fund 16,049,648.00 12,510,746.00 Spanish Carbon Fund 15,750,277.00 7,917,928.00 Netherland CDM Facility 11,312,306.00 6,286,009.00 Bio-Carbon Fund 10,607,586.00 4,412,955.00 Community Development Carbon Fund 7,975,305.00 3,463,211.00 Italian Carbon Fund 7,013,689.00 4,701,049.00 Carbon Partnership Facility 4,639,774.00 800,550.00 Danish Carbon Fund 4,231,879.00 1,907,877.00 Carbon Fund for Europe 3,519,293.00 2,574,019.00 Carbon Initiative for Development 3,508,242.00 0.00 Netherlands European Carbon Facility 2,846,254.00 2,598,814.00 Grand Total 156,115,599.00 109,898,839.00 Source: Data available from the Carbon Finance Unit 44 Table 5A. Carbon market/ERPA and ASA Activities by Technology/Sector (preliminary analysis) ERPA activities (number) ASA Activities (projects) Sectors or technologies World TA and Advisory World IFC MIGA Total IFC MIGA Total used Bank services Bank Energy efficiency (EE) 30 1 31 Energy efficiency 4 4 Renewable energy (RE) 65 6 71 Renewable energy 10 10 Forestry/Agriculture 31 1 1 33 Forestry/Agriculture 65 65 Waste Mgt /Methane 57 6 1 64 Waste Mgt /Methane 5 5 Industrial gases 9 2 11 Industrial gases 1 1 Fuel switch 6 6 Fossil fuel switch 2 2 Mixed (EE+RE) 5 1 6 TA-Market readiness 32 32 Transport 1 1 TA/ TE/ESW 47 3 50 Total 204 17 2 223 166 3 0 169 Source: IEG (preliminary analysis). Table 6A. The ASA activities by funds and facilities IFC ASA Category BioCF CDCF CF-ASSIST Ci-Dev CPF FCPF ISFL NCDMF PCF PMR SCF Total AS TA – Forests/REDD+ 31 33 1 1 66 TA – Market 32 32 Readiness TA/AS – Other 6 28 3 4 3 2 1 3 50 Carbon Finance TE – External Training 16 16 PA - Programmatic 2 2 4 Approach ESW - Carbon Finance 1 1 Grand Total 31 6 47 3 4 33 4 2 1 34 1 3 169 Note: Programmatic Approach (PA) is an umbrella product line allowing for the combination of more than one ASA activity under one common development objective. Source: IEG (preliminary analysis based on available information). 45 Attachment 7: Outline of evaluation report 1. Evaluation summary 2. Introduction – The role of carbon markets for GHG mitigation a) Reducing GHG emissions – role of carbon markets and pricing instruments b) The WBG’s role in carbon finance c) Objectives and key evaluation issues d) Evaluation approach and methods 3. The nature and extent of engagement of WBG support to CF a. WBG in CF – evolution of the vision and strategic objectives b. Structure and architecture of funds – Kyoto to Paris i. Testing and operationalizing Kyoto market mechanisms ii. Catalyzing international markets for carbon iii. Building, expanding and sustaining markets in times of crisis iv. Relaunching markets after Paris c. CF and alignment with relevant WBG strategies d. CF and links with WBG operations e. Lessons 4. Evolving needs and priorities at the global and national level a. Evolution of needs and priorities of at the global level b. Evolution of needs and priorities of Annex A and B parities c. WBG responsiveness to the evolving needs and priorities of its clients d. Evolution of markets and global regulatory regimes e. WBG response to changes and uncertainties in markets and in regulatory regimes f. Lessons 5. Effectiveness of WBG roles a. WBG performance in catalyzing and developing carbon markets i. The early 2000s: Catalyzing international carbon markets ii. Post 2005: Building and expanding carbon markets iii. Post 2012: Sustaining markets in times of crisis iv. Crowding in the private sector v. Technology transfer to low income countries vi. Emission reductions vii. Co-benefits for sustainable development b. WBG performance in innovating in carbon finance i. Development of baseline and monitoring methodologies for CDM/JI projects in different sectors ii. Uptake of tools and methodologies by the market iii. New financing instruments iv. Contributions to enhancing access to, quality and predictability of carbon markets 46 c. WBG performance in building capacity i. Building capacity for carbon market readiness ii. Building capacity for carbon capture through forests and landscapes iii. Other technical support and advisory services d. WBG performance as “convener” in carbon finance i. Enhancing efficiency in implementation of the Kyoto mechanisms ii. Rallying the private sector in CF iii. Influencing through knowledge sharing and networking - coalitions, fora and platforms for carbon markets iv. Influencing through global and national partnerships 6. Global positioning of WBG in CF and leveraging internal synergies a. Landscape of major institutional actors b. WBG positioning relative to other actors i. Role and value added relative to other actors ii. Capacity and expertise iii. Risks and opportunities c. Leveraging CF internally to augment its operational core business 7. Future of carbon finance in the WBG a) Comparative advantages in supporting the next generation of carbon markets b) Relaunching markets after Paris – challenges and opportunities c) Programmatic mainstreaming and scaling up CF – risks and opportunities d) Leveraging CF for sustainable development e) Lessons and implications for strategic direction of the WBG 47 Attachment 8: Overview of Questions and Corresponding Methods Question 1: What has been the nature and extent of engagement of WBG support to CF since its inception? To address this question and underlying sub questions, the evaluation will explore the use of the following methods:  1.1. What has been the nature and the evolution of the WBG’s support to CF over time? (Global/portfolio level) A portfolio review and analysis (PRA) will be conducted to identify key characteristics of the WBG CF portfolio, by the different funding modalities and types of interventions (carbon market/ERPA and ASA), technologies and sectors, volumes and evolution over time, by regions and country typologies. Portfolio mapping will be structured so that the magnitude and the nature of the WBG’s work in CF is adequately captured and described under the four different roles. Interviews with WBG staff on how CF engages with operational units.  1.2. What has been its strategic objective and to what extent has the support been underpinned by and aligned to relevant WBG strategies? (Global/portfolio level) This question will be addressed using mainly desk review of relevant WBG strategic documents (ENV, climate change, carbon finance). The main strategic priorities from WBG strategy documents will be compared to WBG CF strategies, activities and results frameworks (identified through PRA).  (Global/portfolio level) Interviews with WBG staff will be conducted to further elicit details on both questions. Question 2: What have been the evolving needs and priorities in CF for stakeholders at global and national levels from Kyoto to Paris and how did the WBG respond to these? To address this question and underlying sub questions, the evaluation will explore the use of the following methods and data sources:  2.1. How have stakeholder priorities at global and national levels evolved over time and how is it likely to evolve in the near future? How have markets and global regulatory regimes evolved over time? (Global/portfolio level) A Delphi expert panel will be established to analyze global trends and issues. Recognizing that the stakeholders are not a fixed and well-defined group, a structured literature review will be conducted to capture the main trends in needs and priorities (including private sector) within the evaluation period. (Country level) Interviews with relevant stakeholders, supported by desk review of (strategic) documents, will be conducted in selected countries.  2.2. How and to what extent did the WBG adjust or respond to changes and uncertainties in markets and in the global regulatory regime? How and to what extent has the WBG been responsive to the evolving needs and priorities of its clients (funders and countries)? (Global/portfolio level) PRA will be used to analyze how WBG activities respond to global and country trends. Interviews with WBG staff and 48 selected stakeholders (private, public) will be conducted to further explore these issues, supported by interviews with relevant stakeholders in selected countries (Country level). Question 3: To what extent and in what ways has the WBG effectively contributed to developing and innovating carbon markets and building capacities through its multiple roles and support to carbon finance? To address this question and underlying sub questions, the evaluation will use a two-pronged approach: (1) For the full portfolio a broad data collection strategy will be applied to assesses the effectiveness of the WBG’s different roles in supporting carbon markets and (2) One or two intervention types or categories (carbon market/ERPA and possibly ASA) will be selected and subjected to an in-depth causal analysis. The two approaches will strengthen each other. In particular, the in-depth causal analysis on a well-defined selected part of the CF portfolio will include an in- depth exploration of different pathways of change in the framework of the WBG’s main roles in CF for selected countries and interventions. Subsequently, the findings can be set in a broader perspective to support the overall analysis of effectiveness of the WBG’s main roles in supporting CF. The two approaches are described under the following two questions:  3.1. How effectively has the WBG been able to fulfill its role in: catalyzing and developing carbon markets; innovating carbon finance; building capacity of its clients; and convening and thought leadership at the global and national levels? (Global/portfolio level) The effectiveness around the key roles will first be assessed through desk review of existing documents on each role. In addition, a Delphi expert panel will be probed on the convening role of the WBG in relation to other key institutional players at the global level. (Country level) PRA on CF activities in selected countries focused on performance-related information will be conducted. Interviews with relevant stakeholders in selected countries will also be conducted. Finally, project level evaluations (PPARs) on selected projects will be conducted.  3.2. What does the existing and new evidence tell us about the effectiveness of key selected CF interventions in reducing GHG emissions and generating co-benefits for sustainable development? (Global) The effectiveness of selected key interventions will be assessed first using structured literature review. (Intervention category level and country level) A detailed case study analysis will be conducted which will include data collection and analysis activities at the level of the portfolio of the selected intervention category(ies) and in selected countries. The case study design is discussed below. The case studies will be supported by selected project evaluations (PPARs – see below). Question 4: In what ways does the WBG support to Carbon Finance distinguish itself from support provided by other institutional actors and contribute to its own operations? To address this question and underlying sub questions, the evaluation will explore the use of the following methods and data sources: 49  4.1. How has the WBG positioned itself relative to other major institutional actors in its carbon finance support? (Global/portfolio level) Institutional mapping through desk review of key institutions engaged in CF will be conducted (websites and strategy documents). In addition, a Delphi expert panel will be probed to explore this issue. (Country level) Institutional mapping through standardized surveys or interviews with relevant stakeholders from other institutions that support CF in selected countries will be undertaken. 4.2. How and to what extent has the WBG been able to leverage carbon finance internally to augment its operational core business and scale up results? (Global/portfolio level) Interviews with WBG staff. (Country level) PRA on CF activities in selected countries focused on how the WBG leverages CF to support its operations. In addition, interviews with relevant stakeholders in selected countries and PPARs will be conducted to gather relevant information. 50 Attachment 9: Previous Evaluations A. IEG carbon finance related evaluations The Prototype Carbon Fund – The IEG study conducted as part of the Global Programs evaluation analyzed the performance of PCF in regard to its relevance and efficacy (World Bank 2004). It concludes that the PCF has played an important demonstration role in catalyzing markets for emission reductions through innovative public- private partnerships. It highlighted the need for the WBG to formulate a board-approved carbon finance strategy to reflect its early lessons and address implications for operations and implementation risks.6 Climate Change and the World Bank Group – Phase II: The Challenge of Low- Carbon Development (World Bank 2010c). The evaluation looked at the performance of the WBG’s mitigation activities in the key sectors energy, forestry and transport. The early performance of carbon finance was assessed briefly as a special topic. It concludes that while the WBG played a crucial role in demonstrating the idea of carbon markets it failed to transition from its initial role as carbon offset buyer to innovations in higher risk areas. It also concludes that carbon finance had a mixed success as a vehicle for catalytic finance to enhance project bankability and technology transfer; much of the support has gone to energy technologies (e.g. hydropower) with low financial leverage factor.7 The evaluation also noted that while the WBG was expected to relinquish its role as carbon offset buyer as the private market began to flourish, it continued to build up its lower-risk Kyoto-oriented business after that market was already thriving (Michaelowa and Michaelowa 2011). But, the Bank pushed for expanding carbon markets into new sectors like avoided deforestation (e.g. FCPF) and increase access to carbon finance for low income countries (e.g. Ci-DEV) (World Bank 2010b). Global Program Review: Forest Carbon Partnership Facility (World Bank 2012c). The review concludes that FCPF has contributed to the development of global REDD+ modalities and roadmaps for countries to achieve readiness. However, concerns remained around the uncertain global regulatory framework and the prospects for large-scale compliance markets in REDD+ credits. It proposed a strategic approach to 6The World Bank developed a carbon finance strategy in 2003 seemingly in parallel with the IEG evaluation but this was not approved by the Board. 7The report concludes that much of the CFU’s support for energy technologies has gone to projects where its financial leverage - and hence it’s catalytic impact in terms of enhancing the bankability of the project - was relatively small. For examples, the study finds that carbon finance revenue has little impact on the bankability of wind power and hydropower, but significant impact for landfill gas projects. 51 REDD+ for the WBG that will minimize risks while also moderating stakeholder expectations and own commitments. B. IEG Micro-evaluations The CF facilities largely operate outside of the WBGs normal procedures and this has implications for the type of information that is documented and its accessibility. IEG does not review the project Implementation Completion Reports (ICRs) of carbon finance operations unless when it is part of a blended Bank lending operation (IDA/IBRD). As a result, for the entire CF portfolio, there are no published Project Performance Assessment Reports (PPARs) with field level IEG project verifications and only 8 lending projects with CF components have received an IEG validation - Implementation Completion and Review Reports (ICRR)– but half of them were on municipal waste management and methane emission reduction. 8 In addition, some 89 ERPAs (72 projects) have self-evaluation reports (ICRs/XPSR), while 129 projects have Implementation Supervision Reports (ISRs). In addition, two of the IFC Advisory Services (non-ERPA) projects have Project Completion Reports (PCRs) but do not have IEG validation. The IEG team will capture relevant information from the self- assessment reports, IEG validations and others and use all available reliable and robust studies and sources to assess performance. C. External evaluations The carbon finance operations of the WBG confirmed that there are only three completed external evaluations on the CF funds and facilities. These include PMR which had one independent evaluation and annual reviews (2012-2016) conducted by one of the donors (the UK); FCPF which had two external evaluations (2011, 2016) as well as an IEG Global Program Review (2012); and the CF-Assist mid-term evaluation (2009). IEG will carefully review these external evaluation reports and other relevant information as part of the performance assessment and complement the available information, to the extent possible, through this evaluation. 8The 8 ICRRs cover 10 carbon finance projects. In some cases, two projects were covered in one (blended IDA/IBRD project) ICRR. For example, Carbon Finance projects PIDs P09970 and P09972 were evaluated under IDA/IBRD project P095012. The other project was CF Project P088002 and P094573 were evaluated under IDA/IBRD project P070899. The 10 projects include China (agriculture/forestry), Bulgaria (energy efficiency), India (renewable energy), Jordan (municipal waste/methane), Latvia (municipal waste/methane), Madagascar (agriculture/forestry), Niger (agriculture/forestry), Tunisia (municipal waste/methane), Brazil (solid waste/methane); and Egypt (municipal waste/methane). 52 Attachment 10: Proposed PPARs and Case Studies I. Proposed field level evaluations or PPARs (based on available ICRRs on IDA/IBRD linked carbon finance operations): a) Brazil: Brazil Integrated Solid Waste and Carbon Finance (P106702, P124663) . The project combined a financial intermediary loan (FIL) to the second largest development bank in Brazil (CAIXA), a technical assistance package and a carbon finance operation. A Financial Intermediary Loan of US$50 million was signed between IBRD and Caixa Economic Federal with a guarantee from the Federal Republic of Brazil, with 33% of the loan disbursed at closure (US$16.7 million). A carbon finance operation (P124663) was linked to the project, under which the Emission Reduction Purchase Agreement was signed between IBRD and CAIXA on December 5, 2011; the carbon finance operation is ongoing with the scheduled closing date of December 2019. A field level evaluation with a PPAR would verify on the ground the performance of the project in terms of its demonstration of landfill gas as clean technology option to reduce emission of methane from solid municipal waste and landfills in Brazil. The assessment would focus on the aspects of additionality and how carbon finance revenue can be strategically leveraged, identifying the enabling factors at the project and country level; if there has been any contribution towards replication of the model to other similar conditions in Brazil; the schedule for delivery of certified emission reductions (CERs) and any risk factors that affect future delivery; and document the specific experience and evidence in the project registration and verification process as well as generation of social and environmental co-benefits. b) Kenya: Energy Sector Recovery Project (ESRP - P083131 and P103458). The renewable geothermal energy project (blended with Bank lending for Energy Sector Recovery) supported through CDCF aimed to reduce emissions (0.9 million tCO 2e) by supply renewable energy from Olkaria Geothermal power plant to Kenya's grid. The project’s development objectives were: (a) enhance the policy, institutional and regulatory environment for sector development, including private sector participation; and (b) increase access to electricity in urban and peri-urban areas while improving the efficiency, reliability and quality of service to customers. The ESRP’s carbon finance (CF) component (Kenya Olkaria II (Unit Three) Geothermal Expansion) was designed in 2006 and aimed at reducing carbon emissions by generating additional geothermal energy at the existing Olkaria II geothermal plant (Unit Three), displacing electricity that would otherwise be generated by fossil fuel- based power plants equivalent to about 149,632 tCO2e a year. Part of the carbon revenues received from the CDCF was earmarked to implement a Community Benefits Plan (CBP) for poor communities living in the vicinity of the CF project. The PPAR will verify the performance of the project with field level data and explore the extent to which the lessons from the ICRR have been implemented. 53 c) Mali: Félou HEP Hydropower project (OMVS Felou - P075994, P094916, P114935, P099312, P094919): The OMVS Felou is a regional power pooling project among three African countries (Mali, Mauritania, and Senegal) and allows a unique opportunity to draw multiple lessons on how a transboundary river like Senegal can be used to generate cleaner energy for the benefit of three countries in the region and provide development co-benefits through selling of carbon credits. The project was registered on May 6, 2010 as a CDM project activity and has the potential to generate 1,342,355 CERs for the first seven years of operation. The revised ERPA aims to generate 701,665 CERs from July 2, 2013 to December 31, 2018. In June 2015, the Félou HEP was issued its first carbon credits of about 90,000 CERs. The proceeds are to be earmarked for electrification of rural communities that reside along the transmission “right of way” of the OMVS Power System. At the time of the ICR, the second verification was completed and the issuance of about 172,000 CERs for the second reporting period was expected by end of September 2015. The PPAR will check the extent to which revenues from carbon finance were able to generate co- benefits for the indicated communities in Mali and how it has contributed to enhancing the capacity of Mali as an FCS country to participate in the CDM markets and the capacity of OMVS to strengthen regional cooperation in utilizing transboundary water resources for regional hydropower generation. The PPAR will provide evidence to two planned macro evaluations: (i) carbon finance, and (ii) renewable energy. Additional options being considered for PPAR:  Bulgaria (energy efficiency)  Tunisia (municipal waste management), and  Niger (agriculture/forestry). 54 II. Proposed case studies (based on selection criteria) China: China has the largest carbon finance portfolio in terms of the number of projects and the diversity of activities – covering all the common sectors and technologies and the largest transactions on destruction of industrial gases. There were a total of 30 carbon transactions or ERPAs in China. As of September 2016, a total volume of 127,201,675 tons of carbon dioxide equivalent (CO2e) had been delivered. The portfolio is diversified across energy efficiency, renewable energy, industrial gases, waste management, agriculture and forestry. This included operations to sequester carbon dioxide and improve the local ecological environment, expanding electric power generation capacity in an economically and environmentally sustainable manner and enhancing the efficiency of the electricity sector, reducing greenhouse gas emissions by capturing of coal mine methane for power generation and replacing grid electricity generated by coal-fired power plants. The five technical assistance activities included creating an enabling environment for the generation of emission reductions; piloting and testing new concepts for market instruments, both for domestic schemes and new international offsetting mechanisms; creating a platform to enable policy makers from both developed and developing countries, practitioners, and public and private entities to share experiences and information regarding elements of market readiness, to learn from each other, and to explore and innovate together on new instruments and approaches; as well as enabling China to design a national carbon emissions trading scheme. China is expected to launch its national Emission Trading System (ETS) in 2017. The national ETS will cover power generation, petrochemicals, chemicals, building materials, steel, non-ferrous metals, paper and aviation. India: A total of 19 carbon transactions or ERPAs were done in India with most of them in renewable energy and energy efficiency, followed by waste management, fuel switch, agriculture and forestry. As of September 2016, a total volume of 4,130,784 tons of carbon dioxide equivalent (CO2e) were delivered. The activities aimed at reducing emissions of greenhouse gases by improving energy efficiency of street lighting applications, by increasing the market penetration of a more climate-friendly brick manufacturing technology, by reducing losses and energy consumption of agriculture feeders, and by supplying electricity generated from wind power to the grid, among others. In addition, India has received capacity building support through six ASA projects mostly linked to the ERPA activities but also technical assistance for piloting domestic carbon pricing instruments, in particular support for market-based instruments provided through PMR. India also hosts the India Climate Policy and Business Conclave supported by CF-Assist which provides opportunities for policy dialogue, South ‐South Knowledge Exchange and development of carbon business. 55 Colombia: Provides a rich and diversified carbon finance portfolio in the LCR, covering renewable energy, energy efficiency, forestry/agriculture and waste management/methane. There were eight carbon transactions in Colombia, and as of September 2016, a total of 1,001,830 tons of carbon dioxide equivalent (CO2e) were delivered. The projects were to contribute to the reduction of greenhouse gas (GHG) emissions from the “panela” (brown sugar) sector, through reforestation and avoided deforestation, from the wastewater treatment sector in Colombia through the modernization of the wastewater treatment plan, and from the power sector. Advisory activities included promotion of participatory territorial planning and adoption of sustainable land management practices in selected areas and develop the emission Reduction program for the selected region, as well as supporting a participatory and inclusive process with key stakeholders for the preparation of Colombia's REDD+ strategy. Table 7A: Summary of carbon finance interventions in selected countries for case studies Country Project 2000- Total (income Region 2006-2011 2012-2016 type 2005 (ERPA/projects) group) China ERPA 3 20 + 4 (IFC) 3 30 EAP (UMIC) ASA 4 1 5 India ERPA 1 (IFC) 12 + 5 (IFC) 1 19 SAR (LMIC) ASA 6 6 Ethiopia ERPA 1 2 3 AFR (LIC) ASA 2 3 (+REDD+) 5 ERPA 5 1+1 (IFC) 7 Kenya AFR 4 (+1 (LMIC) ASA 5 REDD+) ERPA 2 4 2 8 Colombia LCR 2 (+1 (UMIC) ASA 3 (+1 REDD+) 7 REDD+) ERPA 3 4 7 Chile (HIC) LCR ASA 2 2 4 ERPA 9 55 10 74 Total Global ASA 0 22 10 32 Chile: A total of 7 carbon transactions or ERPAs were initiated in Chile with most of them in renewable energy, followed by waste management, and agriculture and forestry. As of September 2016, a total volume of 3,035,644 tons of carbon dioxide equivalent (CO2e) were delivered. In addition, Chile has received support for four ASA activities. This includes technical assistance linked to ERPA projects in specific sectors as well as advisory services and technical support to the Government of Chile for designing and 56 piloting domestic carbon pricing instruments, in particular PMR support for market- based instruments to implement the National Climate Change Policy and to facilitate the achievement of voluntary GHG emissions reductions targets in ways that are consistent with the country development priorities. Chile is also a participating country for FCPF and involved in the Forestry sector ‘readiness’ initiative to build capacity for implementing REDD+ as a market-based mechanism for avoided emissions from forests and landscapes. Table 8A: Summary of carbon finance interventions by key sectors/technologies in selected countries for case studies. Country Region Project Energy Renew. Agric/ Fuel WM/ Indust- Other TA Total type efficiency Energy Forestry switch Methane gases (PMR+CF Assisit) China EAP ERPA 7 8 2 5 8 30 (UMIC) ASA 1 2 2 5 India (LMIC) SAR ERPA 5 7 2 2 3 19 ASA 1 1 2 2 6 Ethiopia AFR ERPA 2 1 3 (LIC) ASA 1 4 5 Colombia LCR ERPA 1 3 3 1 8 (UMIC) ASA 1 0 5 1 7 Chile (HIC) LCR ERPA 4 1 2 0 7 ASA 1 2 0 1 4 Kenya AFR ERPA 4 3 7 (LMIC) ASA 1 3 1 5 Total ALL ERPA 13 28 12 2 11 10 0 74 ASA 4 3 18 0 0 0 7 32 Note: the case studies are not planning to cover all these projects but instead identify a purposive sample of the main interventions to assess and draw broadly relevant conclusions. Ethiopia: There were three carbon transactions in Ethiopia- two in renewable energy and one in agriculture. As of September 2016, a total volume of 113,048 tons of carbon dioxide equivalent (CO2e) were delivered. The activities included purchasing carbon emission reductions generated from nationwide clean cooking activities under IDA credit line of market development of off-grid renewable energy technologies. Ethiopia joined the Forest Carbon Partnership Facility and submitted a Readiness Preparation Proposal in April 2010. All three stages of the ongoing REDD+ (Reducing Emissions from Deforestation and Forest Degradation) process are supported by the World Bank, i.e., readiness, investments, and payments for performance. Advisory services and technical 57 assistance included strengthening the capacity of the ministries and agencies engaged with implementing Ethiopia's Climate Resilient Green Economy (CRGE) strategy and CRGE Facility to attract, manage and implement results-based financing of operations in the area of land use and REDD+; as well as improving the enabling environment for sustainable forest management and investment in the selected regional state (Oromiya). Technical assistance included building national capacity for implementation of comprehensive coastal management approach in the country, and piloting the integrated coastal zone management approach in selected states; establishment of an integrated data management system for India’s GHG emissions, including tracking various types of carbon assets. India’s engagement in the Partnership for Market Readiness aimed to promote north-south and south-south knowledge exchange of the design and performance of market instruments to increase energy efficiency and promote renewable energy. Kenya: A total of seven transactions or ERPAs were delivered in Kenya in the following two sectors: renewable energy, agriculture and forestry. The projects aimed to reforest degraded public land (public land and private land with community access) in major watersheds; carbon sequestration through the adoption of sustainable agricultural land management practices in Western Kenya; and reducing greenhouse gas (GHG) emissions by displacing fossil fuel-based electricity generation in the Kenyan grid with clean hydropower. In addition, Kenya is a REDD+ country where financial and technical assistance focuses on reducing emissions from deforestation and forest degradation, forest carbon stock conservation, the sustainable management of forests, and the enhancement of forest carbon stocks in developing countries. As of September 2016, a total volume of 355,704 tons of carbon dioxide equivalent (CO2e) were delivered. 58 Attachment 11: Brief on Carbon Finance Funds and Initiatives Fund or Facility Launch Main Objectives Special Features year Prototype Carbon Fund 2000 Pioneer carbon markets and Kyoto  Carbon markets innovation (PCF) mechanisms.  Public and private sector Define project cycle and MRV processes. participation Develop CDM and JI projects  Fellowship program for Host PCF Plus as a technical assistance vehicle Country representatives and participants IFC-Netherland Clean 2002 Assist Netherlands’ Ministry of Infrastructure  First carbon finance facility Development Mechanism and the Environment to purchase managed by IFC. Facility (INCaF) approximately €100 million worth of Emission  Plan to purchase a target of 16 Reductions (“ERs”) from eligible private sector million CERs projects in Non-Annex I Countries on or before  Played a role for IFC to establish December 31, 2006 its own Carbon Finance Unit. Netherlands Clean 2002 Assist Netherlands to meet its obligations  The Netherlands government Development Mechanism toward Kyoto. negotiated a “first right of refusal” Fund (NCDMF) Complement the PCF in attending the demand clause, that gave the fund project from host countries. selection priority over all funds launched after the NCDMF. Italian Carbon Fund (ICF) 2003 Assist Italy to meet its obligations toward  Helped to respond to the Kyoto. demand from WB country clients Access to additional resources to attend the to develop projects under the demand from host countries CDM or JI rules. Community Development 2003 Develop small scale CDM projects in poor  Launched to meet a specific Carbon Fund (CDCF) developing countries that would generate niche of the market not covered some volume of ERs. by PCF and the other funds.  Strong co-benefit or development component.  CER price may have reflected co- benefits Carbon Finance Assist (CF 2003 Provide capacity building to the WB country  Important component of the CFU Assist) clients on carbon markets, CDM and JI outreaching and advocacy projects. strategy. Disseminate knowledge on carbon markets.  Carbon Expo and State and Trends of the Carbon Markets are co-financed by CF Assist IFC & IBRD-Netherlands 2004 Assist Netherlands’ Ministry of Economic  First carbon finance facility European Carbon Facility Affairs in acquiring a target of 10 million tons managed by both IFC and IBRD. (“NECaF”) of ERs by 2012. The Government of  Helped to foster and build the JI Netherlands committed a total of €47.72 market, particularly in the Eastern million. Europe. Bio Carbon Fund (Bio CF) 2004 Develop CDM projects in afforestation and  First fund launched by the CFU reforestation exclusively. to attend forest related projects. Develop and pilot rules for afforestation and  Deal with “temporary” credits reforestation. and offer replacement credits to participants. Spanish Carbon Fund 2004 Assist Spain to meet its obligations.  Helped to respond to the (SCF) Access to additional resources to attend the demand from WB country clients demand from host countries toward Kyoto. to develop projects under the CDM or JI rules. 59 Fund or Facility Launch Main Objectives Special Features year Danish Carbon Fund 2005 Assist Denmark to meet its obligations toward  Helped to respond to the (DCF) Kyoto. demand from WB country clients to develop projects under the CDM or JI rules. Carbon Fund for Europe 2005 Assist several European countries to meet  Helped to respond to the (CFE) their obligations toward Kyoto. demand from WB country clients to develop projects under the CDM or JI rules.  Participants are governments from several EU countries and the European Investment Bank (EIB) Umbrella Carbon Facility 2006 The UCF was created to inject large volumes of  Develop specific methodology (UCF) ERs to the market. for HFC23 projects. Pilot industrial gases projects  The UCF was created at a time Concentrate a large number of buyers (Private when there was high demand and public) to purchase emission from two from buyers. projects. IFC-Carbon Delivery 2007  Instrument to provide a delivery guarantee  New instrument using the concept Guarantee (“CDG”) to buyers (e.g. Commercial Banks) who are of Financial Derivatives unwilling to take emerging market projects  IFC underwriting the risk using its and credit risks. own balance sheet to guarantee  IFC would take the project and credit risk delivery of CERs to Buyers. on its AAA-rated balance sheet.  Potential to improve Market  IFC to procure CERs based on projects Access to Buyers and Sellers of procured from developing countries CERs. offering them prices based on market  Maximize value of Sellers CERs. conditions  Buyers willing to pay premium prices for CERs, which in-turn enable IFC to offer better prices to project owners in developing countries. Forest Carbon 2008  assist WB country clients to materialize  First facility dedicated to pilot Partnership Facility their REDD Plus efforts. activities in the REDD field. (FCPF)  Contribute to the definitions of REDD Plus  Changed the governance pattern activities and disseminate knowledge on in the CFU funds of facilities, REDD Plus. incorporating host countries to  It focuses on reducing emissions from the governance of the facility deforestation and forest degradation, forest carbon stock conservation, sustainable management of forests and enhancement of forest carbon stocks. Carbon Partnership 2009  The CPF was launched with the ambition  The CPF promoted the Facility (CPF) to scale up the size of the projects or development of activities under activities. CPF aimed to develop large the POA approach. scale projects and activities using KP  Incorporate host countries to the rules, including Program of Activities governance of the facility. approach.  It targets areas that were not reached effectively by the CDM. 60 Fund or Facility Launch Main Objectives Special Features year Partnership for Market 2010  To support country clients to asses,  Provides support to countries to Readiness (PMR) prepare and implement carbon pricing develop carbon pricing policy instruments. choices and their future  Technical assistance on the countries implementation. carbon pricing policies. Carbon Initiative for 2011  To implement performance-based  Develop standardized baselines Development (CI-Dev) payments for ERs in low income countries. and suppress accounting  Influence on the penetration of carbon standards in key energy related markets as a tool to expand energy access areas. in poor countries.  Focused on energy.  Uses performance payments to support  Payment for additional co- projects that use clean and efficient benefits. technologies in low income countries to reduce GHG emissions. Post-2012 Carbon 2011  Address carbon market concerns related  First facility on Carbon Finance (“P12C”) Facility to uncertain regulatory regimes after that was established by an MDB. 2012  Create a new pathway to markets  The price would be indexed to SPOT (or by mobilizing funds from utilities Market) price available at the time of CER and other energy companies. delivery, subject to FLOOR (a pre-  Aimed at helping to: (i) reduce determined lowest price) and a CAP (a pre- GHG emissions; (ii) extend carbon determined highest price). markets; and (iii) increase access  Forward purchase CERs produced by IFC to finance. client companies until 2020 Initiative for Sustainable 2013  Strengthen the capacity of government  Jurisdictional ‘landscape’ level at Forest Landscapes (ISFL) institutions engaged with developing and scale programs implementing land use activities under  Blended climate and REDD+ development impacts  Improve the understanding of how  Aligning public and private financial incentives for reducing GHG sector interests emissions from REDD+ can help forest- rich countries seeking to promote rapid, large-scale investments to achieve economic development Pilot Auction Facility 2014  Pay for performance mechanism which  Provides carbon price (PAF) uses auctions to allocate funds to projects guarantees through a put option that generate emission credits from to project developers. methane, using the existing CDM  ERs will be retired by infrastructure. participants.  Pilot a global pay-for-performance approach to stimulate the implementation of shovel-ready projects that reduce methane emissions. Networked Carbon 2015  Pilot and test a post 2020 scenario when  The NCM analyzes the Markets (NCM) multiple markets will co-exist. multimarket global environment  Linking different jurisdictions allowing the and help countries to understand communications and potential how to position themselves and transactions among them. define their own strategies.  The NCM is a CB and TA instrument. 61 Fund or Facility Launch Main Objectives Special Features year Carbon Pricing 2015  A convening instrument to advance the  Participation of government and Leadership Coalition knowledge and experience on effective private sector entities from both (CPLC) carbon pricing systems. developed and developing countries.  It is a coalition and the bank acts as a Secretariat. Forest Bond 2016  Leverage IFC’s decade long experience in  Designed as a CSR activity for a the Carbon Finance business to test and private company underwriting develop a new business line using bonds implicit put option (buy any in REDD+ credits tendered)  IFC will purchase Carbon Credits from a  Treasury product with proceeds REDD+ project in Kenya through a applied to general IFC portfolio voluntary market  PV of coupon used to structure  Leverage private sector resources to an ERPA for an independent reduce emissions and prevent forestry project deforestation in developing countries  Gives investors the option of getting paid in either Carbon Credits or cash. Transformative Carbon 2016  Support activities for purchase carbon  The TCAF is assisting countries Facility (TCAF) credits from transformative mitigation to develop mitigation activities programs in countries (e.g. through scaling that will generate CERs at a up existing experiences going beyond the much larger scale (Beyond traditional project based CDM approach). POAs),  Includes a new approach on policy crediting. 62