The CDM Project Cycle

1. The CDM Project Cycle

2. The first step -- submit a PIN (template on www.carbonfinance.org) • Description of Project Proponent • Type of Project • Location of Project • Expected Schedule • Financing Sought • Technical Summary of Project • Expected Environmental Benefits

3. Project Proposal Review and Upstream Due Diligence Proposal Review and Upstream Due Diligence • PIN reviewed by CFB • Upstream Due Diligence • If PIN is acceptable, sponsor notified with request to prepare CFD; Regional/ Sectoral approval sought • Host Country Endorsement/No Objection sought in some cases where country CDM approval process is not clear • If CFD approved (approval process varies from fund to fund), further work is authorized • Letter of Intent issued after PIN or CFD approval Project completion Up to 21 years 3 months Periodic verification & certification 1-3 years 2 months 3 months Negotiation of Project Agreements Construction and start up

4. Carbon Asset Due Diligence Project completion Preparation and review of the Project Carbon Asset Due Diligence 3 months • Project Design Document prepared (a. Determine whether existing methodology is applicable • b. may require baseline study) • 2 Monitoring Plan prepared • 3. CFB quality control of results • 4. Documents for Validation prepared by CFB and sponsor • 5. Bank region begins technical, financial, environmental and social due diligence Up to 21 years 1-3 years Periodic verification & certification 2 months 3 months Construction and start up

5. Validation Process Project completion Preparation and review of the Project 3 months Carbon Asset Due Diligence Up to 21 years Periodic verification & certification 2 months Validation process 1. CFB contracts the Independent Validator and submits documents 2. Validator studies project design document, including baseline study and monitoring plan where applicable 3. Documents are posted for 30-day comment period 4. Validator issues a report and opinion 5. Registration request is submitted (can be after the ERPA signature) 2 months 1-3 years 3 months Construction and start up Negotiation of Project Agreements

6. Negotiation of Project Agreements Project completion Preparation and review of the Project 3 months Carbon Asset Due Diligence Up to 21 years Periodic verification & certification 2 months Validation process 1-3 years 2 months 3 months Construction and start up Negotiation of Project Agreements 1. CFB prepares term sheets and draft ERPA and negotiations initiated. 2. 3. Project Due Diligence is completed and World Bank internal approvals are secured. 4. Letter of Approval obtained from Host Country 5. ERPA is signed

7. Start of Generation of ERs & Monitoring Project completion Preparation and review of the Project 3 months Carbon Asset Due Diligence Up to 21 years Periodic verification & certification 2 months Validation process 1-3 years 2 months 3 months Negotiation of Project Agreements Construction and start up 1. At construction completion, CFB contracts Independent Verifier 2. Verifier checks that specifications of the monitoring plan are met (“Initial Verification”) 3. Project implementation starts 4. Project entity monitors in accordance to the monitoring plan

8. Verification and Certification Project completion Preparation and review of the Project 3 months Baseline Study and Monitoring Plan (MP) Up to 21 years Periodic verification & certification 2 months 1. Verifier issues periodic verification report 2. CFB pays project sponsor for ERs 3. Certified ERs are issued by the CDM Exec. Board 4. Verification undertaken annually or as deemed appropriate Validation process 2 months 3 months Negotiation of Project Agreements Construction and start up

9. Project Completion Project completion Preparation and review of the Project • Crediting period either • 10 years fixed or • 7 year renewable (maximum 21 years) 3 months Up to 21 years Carbon Asset Due Diligence Periodic verification & certification 2 months Validation process 1-3 years 2 months 3 months Construction and start up Negotiation of Project Agreements

10. Carbon Asset Creation and Maintenance Manufacturing Process and Costs based on Bank experience Preparation and review of the Project Project completion • Upstream Due Diligence, carbon risk assessment and documentation: $ 25K 3 months Carbon Asset Due Diligence Up to 21 years • For new methodologies • Baseline : $30 K • Monitoring Plan: $25K Periodic verification & certification 2 months • Verification: $10-25 K • Supervision: $10-20K Validation process 1-3 years 2 months • Contract, Processing • and documentation: 25k 3 months Construction and start up Project Appraisal and Negotiation • Initial verification at start-up: $25K • Consultation and Project Appraisal: $60K • Negotiations and Legal documentation: $100K Total through Negotiations All expenses: $265 K for regular size projects $150 K for small scale projects

11. What is involved in CFD/ PCN preparation? • Field visits for identification and preparation • Due diligence on: • environmental and social issues, • carbon asset, • status of project financing, • quality and experience of project sponsors and any financial intermediaries • Consultations with Government on the proposed carbon financed project (including relevant discussions needed to obtain a letter of approval), and related legal services review and support