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What is the MDG Carbon Facility?
The Facility’s compliance activities represent an innovative
collaboration between UNDP and an international financial services provider,
Fortis Bank (“Fortis”), offering prospective emissions reduction
projects a comprehensive "one-stop-shop" package of services.
UNDP and Fortis will each contribute their particular area of expertise,
UNDP providing project development services and Fortis purchasing and
marketing emission offsets. UNDP’s collaboration with Fortis will
encompass an initial pipeline of projects issuing emission offsets during
the first Kyoto commitment period from 2008 to 2012.
Overview of UNDP and Fortis roles in the MDG Carbon Facility
UNDP’S ROLE IN THE FACILITY
UNDP’s role in the Facility is to offer project development services,
including performing due diligence, providing technical assistance for
CDM or JI project approval, and establishing the monitoring system for
the project’s emission offsets. As a development organization, UNDP
does not seek to generate profits from the Facility, however UNDP will
apply a flat-rate cost-recovery fee in order to recover its direct costs.
In providing its services, UNDP will leverage its proven expertise in
environmental project development, its extensive local presence and its
in-depth understanding of each country’s sustainable development
goals.
In order to determine eligibility for the Facility, UNDP, with assistance
from Fortis, will perform the Facility’s due diligence process;
determining the commercial, technical and regulatory viability of the
prospective project. This rigorous, standardized process assesses each
prospective project against criteria in five main areas: carbon potential,
technical feasibility, finance and legal, MDGs and the environment, and
country risk.
For prospective projects that satisfy the Facility’s due diligence
process, UNDP’s technical assistance will then include:
• Assisting with the development of a baseline study
• Assisting with the performance of stakeholder consultations
• Assisting with the preparation of the project design document
(PDD)
• Engaging an independent third party validation or determination
of the project
• Providing strategic advice in relation to obtaining host country
approval of the project
• Assisting with registration or final determination of the project
• Assisting with the development and implementation of a monitoring
plan and its oversight during the project's first year of operation
• Assisting with the project’s pre-verification and engaging
an independent third party to perform the initial verification report
and the first verification
FORTIS’ ROLE IN THE FACILITY
Fortis’ role in the Facility is to provide carbon banking services,
comprised of purchasing and marketing the emission offsets generated by
the Facility’s projects. Fortis was selected by UNDP following a
rigorous and competitive tender process aimed at obtaining the best possible
terms for the Facility’s projects.
A key aspect of the Facility is standardized, competitive pricing across
all its projects, irrespective of their particular characteristics. In
this way, as long as each project satisfies the Facility’s due diligence,
project types will be able to participate in the Facility which - due
to their geography, technology or size - are otherwise currently under-represented
in the broader market place. Importantly, the Facility’s pricing
is fixed at the outset of the project cycle, thereby protecting project
proponents in developing countries from price volatility in the carbon
market.
In addition, UNDP and Fortis will combine in helping project proponents
overcome the capital constraints faced in many developing countries. To
this end, UNDP’s cost-recovery fee will be collected in arrears,
only once UNDP has reached pre-defined service milestones; in parallel,
Fortis will make advance payments to project proponents to cover the cost
of the cost-recovery fee.
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