Testing Ground Facility

The TGF Carbon Fund Makes Good Progress in Regional Joint Implementation (JI) Cooperation

In 2006, following the successful conclusion of a capital raising which exceeded expectations, the Facility was transformed into a Public Private Partnership allowing it to invest in more emission reducing projects. This has been evidenced by the high level of activity in 2007 as the Facility has been one of the most active buyers in the international JI Track 2 process.

During 2007, the principal fund activity has been on the origination and procurement of high quality JI emission reductions within the parameters set by the Investor's Committee (energy related projects, with acceptable risk profiles and pricing) and implementation schedules consistent with the closing JI "window of opportunity" (projects accrue credits in the period 2008-12 and projects starting after than this will have shorter crediting - a limiting factor for smaller projects). The bulk of new project acquisition is now being focused on Russian Federation and Ukraine, given the technical potential in these carbon-intensive markets and limited potential in the other TGF countries of operation due to EU accession and size of economy.

The Russian domestic JI procedures were published in May 2007 and have yet to be fully operationalised . It is within this vast country that the greatest technical potential for JI exists within TGF's countries of operation, but also where the greatest uncertainties remain. For much of the period covered by the TGF's life, this has significantly held back supply of projects as many domestic companies and public organisations have been reluctant to engage in a market with no firm regulatory footing in Russia. Other barriers included financing barriers for publicly owned or affiliated companies, poor levels of awareness in many sectors and widespread scepticism of the bureaucratic and lengthy nature of the process internationally. In expectation of these barriers being overcome, there has been a rapid development of the market overall in Russia during 2007, with an emphasis on larger projects in fugitive emissions and industrial sectors.

Portfolio Overview

Till the end of October 2007, a total of 61 Project Idea Notes (PINs) have been screened by the Fund Manager and submitted as investment proposals to the TGF IC. The breakdown of these projects by project type and geography is presented below:

In keeping with the wishes of the founding investors, there has been a strong emphasis toward renewable energy and energy efficiency projects, with the distribution of the former between wind and biomass/biogas technologies. Similarly, the geographic distribution shows the expected bias toward Russia (62%), and some representation of projects in the Barents region.

In total, the Facility has committed in the form of ERPAs or Option Agreements (conferring the rights to negotiate a final ERPA), 21 projects representing over 4,5 million tCO2e saved. The average project size in the portfolio is ca. 226,000 tCO2e and TGF has supported five small scale JI projects using animal biogas, wind and solid biomass technologies, against a trend in the broader market of ever increasing project sizes, especially in Russia.

Read our operational review of TGF for 2007

Read our operational review of TGF for 2008

Read our carbon finance and funds operational review for 2009