Practical and implementable guidelines for governments to select ERC projects:

The Guidelines are designed to provide practical and implementable guidelines for governments to select ERC projects that are most likely to attract high demand and best-value pricing, and identify key elements related to the project’s governance and sales strategy that will enable the project to achieve its value potential. 

They can be applied to review a pipeline of projects, assess the potential of an individual project or program in consideration of its eligibility and viability for ERC generation, or select projects with the most likely value-for-money ERC development opportunities and can be used in parallel with the Guidelines for Country System Assessments and Mobilizing ERC Finance.

Please click here to view Acknowledgements.

To find more, visit the Guidance for Countries in Assessing ERC Projects sections below.

This section is focused on ERC market development, by providing governments with access to knowledge and technical assistance. It incorporates analysis and recommendations around legal and institutional frameworks, governance models, policies, and infrastructural and resource capacity for accessing global ERC markets, as well as ways to synergistically align domestic markets with a global ecosystem.

Please click here to view Acknowledgements.

Through the establishment of an Emission Reduction Program (ERP), the World Bank aims to help developing countries to engage strategically with evolving global Emissions Reduction Credits (ERC) markets, support efforts to generate ERCs to sell into these global markets, and mobilize finance for such transactions. To achieve this objective, the ERP will focus on increasing interest and efforts to develop, implement, and fund ERC-generating projects among countries, businesses, and local communities. By providing support in these areas, the ERP aims to help countries leverage the benefits of ERC markets, including increased revenue streams, reduced emissions, and improved environmental sustainability.

The ERP informs government approach to monetizing ERCs in the global ERC markets. To this end, the ERP is organized around a series of living documents to help governments understand and access global markets for ERCs, specifically:

• Strategic Guidance for Country System Assessments – guides governments through a strategic and holistic assessment of their current legal and institutional frameworks, to help them understand how the global market perceives their country systems and where any gaps or short-comings might be addressed.
• Guidance for Countries in Assessing ERC Projects – provides a comprehensive and adaptable guide to identify and develop ERC projects and investments.
• Mobilizing ERC Finance – assists governments, project developers, and financiers in understanding key transaction-enabling conditions and financial structures to mobilize finance for ERC generation.

List of Contents

To find a full and detailed outline of all sections in ERP visit:

• Contents: Guidance for Countries in Assessing ERC Projects
• Contents: Country System Assessments
• Contents: Mobilizing ERC Finance

The Urgent Need to Reduce Carbon Emissions

As the world continues to grapple with the impacts of climate change, the urgent need to reduce carbon emissions has driven the use of carbon pricing instruments and trading of emissions reduction to create the incentives needed to meet emissions reduction targets established by Governments (eg Nationally Determines Contributions or NDCs under the Paris Agreement) and by businesses (eg Net Zero commitments). Developing countries, in particular, are wrestling with the creation of domestic systems to meet NDCs while also benefiting from the global emission reduction credit (ERC) markets that can help mobilize critical capital to help fund ER projects.

While some countries have made progress in this area, there is still a significant amount of work to be done to meaningfully reduce emissions and meet the increasingly rigorous standards of buyers seeking high-quality Emission Reduction Credits (ERCs). The ERP are focused on countries wishing to access global markets to monetize ERCs, and while there are key synergies between efforts to access global ERC markets and domestic systems to meet climate targets, the ERP focus on the former. For further guidance on domestic systems and markets, please see Partnership for Market Implementation Facility.

Global ERC markets are set to grow in importance in the coming years. According to the Shell-BCG report¹, ‘The voluntary carbon market: 2022 insights and trends’, global ERC demand is expected to grow by 5-20x by 2030, with voluntary ERC demand volume reaching up to 0.5-1.5 GtC02e and the overall market size projected to reach USD 10-40Bn. The Shell-BCG report also reveals that Monitoring, Reporting, and Verification (MRV) is ranked by 91% of corporates surveyed as one of the top three most important criteria for their ERC purchases, driven by the need to manage risks associated with buying ineffective credits. Furthermore, 52% of corporates surveyed expect removal credits to make up most of their portfolio by 2030 to address quality concerns. It is therefore clear that countries must establish reliable and effective frameworks for ERC trading to ensure that credits traded meet the highest standards of quality and transparency.

Find out more by watching this short video or visit the sections below on Country System Assessments, Guidance for Countries in Assessing ERC Projects or the Mobilizing ERC Finance. 

Footnote 1: Shell-BCG report

ERP Video 

This is the main Landing Page for Disruption and PPPs in the Public-Private Partnership Resource Center. Disruption is all around us, and the Disruption and PPPs section display the broader context of disruptions that have in recent years increased, and that present unprecedented worldwide challenges, such as climate change, natural disasters, economic crises, disruptive technology and global pandemics such as Covid-19. This creates new challenges and uncertainties for public-private partnership (PPP) projects, and the sections below explore scenarios, frameworks, legislations, articles, tools, and case stories for approaches to designing and delivering resilient infrastructure through PPPs.

• PPP Contracts in An Age of Disruption - Even though the nature of disruptive events and disruptive technologies differs, useful guidance can be drawn from the global experience of the impact of disruptive events on PPPs; analysis of underlying issues, occurrences, and impacts of risks and ways to address them; and tools that have been developed to deal with the growing number of disruptive events in the context of PPPs. This section examines how disruptive technologies impact public-private partnership (PPP) infrastructure; what this means for the management of existing PPP contracts; and how better ones that are more resilient to such changes, as well as flexible enough to encourage collaboration between the public and private sectors in order to allow implementation of innovative technologies, can be created.

Related Resources:

• Pandemics and PPPs - How a PPP may weather pandemics, such as the COVID-19 storm, depends on many things, including the stage of the PPP, the location, the sponsors and the government or contracting authority. However, it also depends on the letter of the contract, and how it was designed to withstand such shocks. The lessons learned, and approaches that have been discussed or implemented during these pandemics, provide a useful basis for the development of guidelines aiming to enhance resilience of PPP contracts and contract management.
• Climate Resilience and PPPs -  If structured correctly, PPPs can increase climate resilience offering innovative solutions to address both mitigation and adaptation challenges. This section provides links to policies, legislation, project documents, tools and other resources that are relevant for developing, structuring and implementing climate-smart or climate resilient PPP projects to ensure a more sustainable and resilient future for all. 

While there has always been a gap between infrastructure required and what the governments can afford, the infrastructure funding gap has widened significantly over the past few years. Governments are seeking innovative solutions to mitigate this gap and accelerate the delivery of the much-required infrastructure. Asset Recycling has proven to be a very effective and innovative funding model that allows governments to essentially leverage infrastructure assets on their balance sheet to unlock funding for new infrastructure.

Asset Recycling as an Infrastructure Funding Tool

Asset Recycling or AR involves the transfer of existing public infrastructure to the private sector and reinvesting the transfer proceeds into prioritized infrastructure needs — with the intention of creating a robust infrastructure pipeline. This transfer of assets can include brownfield public-private partnerships (PPPs) or concessions, leasing of assets (including land), and/or complete or partial sale of an asset (including shares and other capital market instruments like infrastructure investment funds, Real Estate Investment Trusts (REITs), etc.).

Asset Recycling comprises three distinct steps:
(1) Transfer: Monetizing infrastructure assets through transfer to the private sector.
(2) Reinvestment: Investing transfer proceeds in prioritized (ideally greenfield) infrastructure assets.
(3) Recycle: Monetizing Step 2 infrastructure assets once operational and de-risked to create funding for new infrastructure investments.
Asset Recycling distinguishes itself from other funding or financing approaches by sequestering and investing all asset transfer proceeds from the private sector into infrastructure assets - Asset Recycling is better defined as an infrastructure development funding tool rather than a government financing tool. Therefore, Asset Recycling can complement traditional infrastructure development programs and the respective budget-allocation processes by purposefully and strategically directing proceeds towards infrastructure development.

Implementing Asset Recycling

Before implementing Asset Recycling, it is important to develop an Asset Recycling strategy that will essentially provide an action plan starting from identifying the objectives to be achieved, assessing the available resources, and deciding on the process to be adopted to achieve the goals. The diagram below summarizes the primary components and considerations when developing an Asset Recycling framework. The framework should cover the objectives that are to be achieved with the Asset Recycling initiative, provide guidance on the process of preparing and executing Asset Recycling, and also consider the assessment of key enablers.

Asset Recycling Framework

Setting up an Asset Recycling initiative is a significant undertaking and requires a considerable level of effort. A robust regulatory and legislative environment, existing infrastructure stock, infrastructure project pipeline, dedicated political leadership, effective stakeholder management and transparency are all key ingredients in steering the success of the Asset Recycling initiatives.

“Asset Recycling: Decision maker’s notes” provides practitioners with a well-considered overview of Asset Recycling programs. It identifies the prospective benefits and highlights the requirements for successfully establishing such a program. It also provides case studies to illustrate the implementation of Asset Recycling in different regions, noting the opportunity to tailor such programs to the particularities of local markets and thus their applicability to markets at differing stages of developing their capital markets, in addition to their stock of bankable infrastructure projects.

1 Atkins Acuity. Recycling our Infrastructure for Future Generations. World Economic Forum, 2017

The Guidelines are also supplemented with helpful resources.

Annex 1 provides five generic Worked Examples which help demonstrate how The Guidelines can be applied to real-world projects. All Worked Examples presented in this report are hypothetically recreated solely for the purpose of demonstrating the concept of CVC. 

Annex 2 includes 100+ Case Studies with examples of commercial value capture in various sectors, countries and CVC categories

Annex 3 provides recommendations in drafting tors for pre-feasibility and feasibility studies.

Find a full outline to contents, figures, tables, boxes and sections found in the Innovative Revenues for Infrastructure Guidelines, or download the full report for more.                                                   

Contents

I. Innovative Revenues for Infrastructure (IRI)

• Abbreviations
• Executive Summary
• Overview and Structure of IRI Guidelines
• Introduction to CVC
  • Maximizing revenue for funding infrastructure
  • What is Commercial Value Capture (CVC)?
  • Role of governments in CVC
  • CVC opportunities in infrastructure
  • Core Principles for Applying CVC in Projects
     
• Guidelines for applying CVC in infrastructure projects
  • Identifying potential CVC for projects
  • Assessing readiness of enabling environment to support CVC
  • Conducting Technical Assessment of CVC
  • Assessing commercial feasibility of CVC
  • Planning for Implementation of CVC
  • Assessing and Mitigating CVC Related Risks
     
• Roadmap for programmatic roll-out of CVC
   

II. Annexes

• Annex 1: Worked Examples
  • Wastewater Treatment Plant
  • Urban Transit
  • Public Hospital
  • Affordable Housing
  • Waste Recycling
     
• Annex 2: 100+ Cases Studies
  • Municipal PPP Case Studies by Sector
  • Municipal PPP Project Summaries by Country
  • Municipal PPP Project Summaries by Category
     
• Annex 3: Recommendations in Drafting ToRs for Pre-Feasibility and Feasibility Studies

List of Figures 

• Conventional vs. innovative infrastructure funding
• CVC Concept
• Examples of commercial activities for an urban transit-oriented development project
• Sectors in which CVC can be applied (non-exhaustive list)
• Possibility for CVC
• CVC Category - Commercial activities associated with core-services
• CVC category - Commercial activities within the footprint of the infrastructure
• CVC category - Asset and resource use optimisation
• CVC category - Leveraging green-house gas emissions reduction
• CVC category - Repurposing or adapting/reusing idle assets
• CVC category - commercial activities outside of the footprint of the infrastructure
• Core principles for application of CVC in projects
• Six-step process to consider CVC in infrastructure projects
• Roadmap for programmatic roll-out of CVC

List of Tables 

• Examples of projects in which CVC have been adopted for reference
• Example of how to identify CVC for an urban transit project based on beneficiary and stakeholder needs mapping exercise
• Example of how to analyse project characteristics to identify CVC opportunities (non-exhaustive list)
• Typical policy, legal and institutional challenges and recommendations to address them
• Examples of how to identify, assess and mitigate CVC risks

List of Boxes 

• CVC successfully helped increase funding for mass transit in Hong Kong
• High reliance on commercial revenue and sharp drop in demand led to financial struggle for private urban transport operator
• Community played an integral role in creating commercial value from community-based tourism
• CVC contract is issued separately from core service
• The quality of core services could not be compromised with the introduction of CVC
• Unclear mandate could disincentivise project owner to consider CVC
• Coordination issue can result in missed opportunity to implement CVC
• Market sounding should be conducted to seek private sector inputs on CVC in the early planning stage
• Preliminary financial assessment can indicate net revenue contribution of CVC to the project
• Revenue from CVC directed back to support core services

Find a list of helpful terms used in the Innovative Revenues for Infrastructure Guidelines.

Annex 2 of the Innovative Revenues for Infrastructure Guidelines (IRI) includes more than 100 Case summaries of commercial value capture divided by various Sectors, Countries and CVC Categories. 

Visit the Annex for IRI Guide providing additional resources for practitioners to apply CVC.

Annex 1 of the Annex for IRI Guide:

The Worked Examples are provided to demonstrate to practitioners how the Guidelines can be applied to projects. The Worked Examples are hypothetical project business cases and include hypothetical financial assessments with key project information. 

Worked Examples were selected to cover diverse sectors, including sectors which have proven CVC concepts and sectors which are relatively new to CVC. They were selected to cover different types of CVC opportunities. While the Worked Examples are hypothetical and entirely fictitious, they are drawn from real-world projects to demonstrate practical challenges and concrete CVC opportunities.

Assumptions made in the hypothetical financial assessment in each Worked Example are based on statistical data and the consultant’s estimations from experience in similar projects around the world and are prepared strictly for capacity building purpose. Any similarity to any existing or planned projects is coincidental. It should neither be used for any decision making nor applied to any real or planned projects, without taking into account the specificities of the project being assessed. To avoid any misunderstandings or any adverse influences that this report may have on an actual real project, all names and locations have been anonymized to ensure that the capacity building value of the report is not undermined.  

The structure of the Worked Examples will be as follows: First, the content of the Worked Examples will be provided, and brief project scope introduced. The first section of the Worked Example will demonstrate how the first Guidelines on policy, legal and institutional readiness can be applied. The second section will demonstrate how the second Guidelines on preparing a project to maximize CVC opportunities can be applied. 

As developing CVC activities will incur additional cost, the Project Owner should consider if this additional cost will outweigh the additional revenue generate from CVC. 

Net revenue from CVC is thus hypothetically assumed to be total revenue stream from CVC throughout the project life minus additional CVC-related expenses throughout the project life. In the hypothetical financial assessment, potential net revenue contribution of CVC is calculated as a % of net revenue from CVC to total required revenue. For simplification, it is assumed that total required revenue is the total revenue required to make the project financially viable or to make the project’s return exceed the hurdle rate.

The hypothetical financial assessment only aims to conceptually show a potential revenue structure in the scenario with and without CVC and its potential to help reduce or close the funding gaps.