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CARBON FINANCE FOR SUSTAINABLE DEVELOPMENT |
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FAQs |
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1. What is the MDG Carbon Facility?The MDG Carbon Facility is an innovative means of harnessing the vast resources of the carbon market in order to bring long-term sustainable development to a more diverse share of developing countries. Launched in June 2007, the Facility offers emission reduction projects a comprehensive package of project development services. The Facility operates within the framework of the Clean Development Mechanism and Joint Implementation, the market-based mechanisms of the Kyoto Protocol that allow developed countries to meet their compliance targets by financing projects located in countries that contribute to reducing greenhouse gas emissions. As part of the Facility, UNDP provides technical assistance that helps project proponents in developing countries to conceive of projects that reduce greenhouse gas emissions, and ensures that these projects meet the Kyoto Protocol’s agreed standards while delivering benefits to the environment, the Millennium Development Goals, and broader human development. 2. Why is UNDP engaged in Carbon Finance activities?Assisting developing countries with their efforts to cope with the impacts of global climate change and to create more sustainable, less greenhouse gas-intensive development paths is an important focus for UNDP. In the coming years, major new investments will be needed to tackle the wide range of environmental issues that are central to developing countries’ ability to eliminate poverty and achieve the Millennium Development Goals (MDGs). Through the MDG Carbon Facility, UNDP leverages capacity-development expertise and carbon finance to address these environmental issues, and contributes to sustainable development and the achievement of the MDGs. 3. What are the MDG Carbon Facility’s objectives?UNDP has established the MDG Carbon Facility to leverage the significant benefits of carbon finance for the developing world. The core objectives of the Facility are to:
4. What is UNDP’s role in the MDG Carbon Facility?UNDP’s role in the MDG Carbon Facility is to offer project development services, including performing due diligence, providing technical assistance for Clean Development Mechanism or Joint Implementation project approval, and establishing a monitoring system for the project. In providing these services, UNDP will leverage its expertise in environmental project development, its extensive local presence and its in-depth understanding of each country’s sustainable development goals. 5. What is a project proponent?A project proponent — or project developer/operator — originates a project idea. The project proponent is the entity responsible for implementing the Clean Development Mechanism or Joint Implementation project activity, with due diligence and efficiency, and retains overall responsibility for the Project. The following types of organizations can be project proponents: private sector companies; governmental bodies (usually departments of governments); municipalities; foundations; financial institutions; others (e.g., non-governmental organizations, institutions). 6. What services does the MDG Carbon Facility offer?The MDG Carbon Facility offers prospective emission reduction projects a comprehensive “one-stop-shop” package of technical and banking services. UNDP offers project development services, including performance of due diligence, provision of technical assistance for Clean Development Mechanism or Joint Implementation project approval, and assistance in monitoring and reporting during the project’s first year of operation. 7. What is UNDP's approach to carbon finance?UNDP follows a comprehensive, three-step approach to carbon finance in the developing world. On a country-by-country basis, this approach commences with removing policy barriers to direct investments in climate-friendly technologies, then proceeds to assisting in the establishment of effective host country procedures for Clean Development Mechanism or Joint Implementation review and approval. In the final stage, the Facility works to:
The Facility aims to expand the carbon market into under-represented countries and regions, attract substantial direct investment from the private sector, and support emission reduction projects with significant benefits to the Millennium Development Goals (MDGs). 8. What projects are eligible for the Carbon Finance Facility?UNDP invites participation from prospective emission reduction projects in developing countries (Clean Development Mechanism projects) and economies-in-transition (Joint Implementation projects) that have ratified the Kyoto Protocol. In accordance with the MDG Carbon Facility’s objectives, of particular interest are projects in countries that are under-represented in the carbon emission market and projects that make strong contributions to the MDGs. The Facility provides its services to a wide range of project types. These diverse technologies include renewable energy, energy efficiency, fuel switching, agricultural waste management, biomass and biogas usage, and capture of fugitive emissions from landfills and industrial sources. UNDP will perform a standardized due diligence process to assess the commercial, technical and regulatory viability of prospective projects, as well as the projects’ expected social and environmental outcomes. To help prospective emission reduction projects supply the necessary information, UNDP has created a set of tools and templates. Several project categories are ineligible due to their limited contribution to meeting the MDGs or other factors inconsistent with the Facility’s objectives. These categories include nuclear energy, large-scale hydropower, geo-sequestration (including enhanced oil recovery), shifting of electric power loads, and the capture and destruction of industrial gases. 9. Is there a minimum project size?The MDG Carbon Facility does not have a minimum project size, and a particular project’s suitability for the Facility will be determined on a case-by-case evaluation of its overall merits. However, projects are assessed for financially viability and sufficient carbon credits must be generated to be able to recover transaction costs. If a project is small, but it provides significant Millennium Development Goal (MDG) impacts, it may still be eligible for the Facility. 10. What is the MDG Carbon Facility’s Cost Recovery Fee?As part of a development organization, the MDG Carbon Facility does not intend to generate profits. However, to recover direct costs for technical assistance, UNDP will apply a Cost Recovery Fee. The Cost Recovery Fee is a standardized, flat fee that is applied to all projects irrespective of their particular characteristics. 11. Does the MDG Carbon Facility provide underlying finance to its projects?MDG Carbon Facility projects are well positioned to obtain capitalization from third parties. Although the Facility does not provide direct underlying finance to its projects, UNDP, through its technical assistance and networks, can assist in arranging financing. |
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