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UNLOCKING GLOBAL EMISSION REDUCTION CREDIT


Guidance for Countries in Assessing ERC Projects


1. Introduction to Emission Reduction Credits

 The World Bank's Emission Reduction Program

 Emission Reduction Credits

Classification of Emissions Reduction Credit

 Policy Context of Emissions Reduction Credit

2. Objective of the Guidance for Countries in Assessing ERC Projects

 Objective of Project Preparation Guidelines

 Introduction to the Project Assessment Framework

 Process to Conducting Assessments

3. Determining Country Inputs

 S1: Green Economy Priorities

 S3: Article 6 Readiness and Eligibility

4. Conducting the Initial Profiling and Making a Preliminary Decision

 F1: Project ERC Value

 F2: Additional Value Enabled by Project

 C1, C2, and C3: Carbon Integrity and Environmental and Social Risk Management

 S2: Socioeconomic Value

5. Conducting the Project Assessment and Making the Final Decision

 F1: Project ERC value and F2: Additional Value Enabled by Project

 Q1: MRV Infrastructure

 Q2: Marketing, Sales, and Pricing

 Q3: Project Governance and Structure

 C1: Carbon Integrity

 C2: Environmental Risk Management

 C3: Social Risk Management and Benefits

 S2: Socioeconomic Value

6. Further Guidance for Application

 Market-Driven Factors

 Country Context-driven Factors

 Considerations for Future Scope

Abbreviations: Guidance for Countries in Assessing ERC Projects

Appendices: 

• A: Project Profile Template 

• B: Project Assessment Template 

• C: PPP Models for ERP

  - Model 1: MRT Energy Efficiencies Model for ERP

  - Model 2: Rural Electrification Model for ERP

  - Model 3: LED Streetlight Deployment Model for ERP - for Efficient Outdoor and Street Lighting Technologies

  - Model 4: Rooftop Solar Installation Model for ERP

  - Model 5: LED Streetlight Deployment Model for ERP - for Specific Technologies

  - Model 6: E-bus Deployment Model for ERP

  - Model 7: EV Charging Systems Installation Model for ERP

  - Model 8: Biodigesters Deployment Model for ERP

  - Model 9: Waste-to-Power Model for ERP

  - Model 10: Waste Treatment Facility Model for ERP

  - Model 11: Climate Smart Farming Deployment Model for ERP

  -  Model 12: Reforestation Program Model for ERP

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LED Streetlight Deployment Model for ERP - for Specific Technologies

Photo Credit: Image by Freepik

On this page: LED Streetlight Deployment for Specific Technologies leveraging an Existing-Refurbish-Finance-Bulk-Fees model - Model 5 in the ERP Project Guidelines.  Read more below, or visit Strategic Guidance for Country System AssessmentsGuidance for Countries in Assessing ERC Projects, or Mobilizing ERC Finance.  


Project Type: Energy efficiency

Sector: Power

Applicable Project Methodology: AMS-II.C. Demand-side energy efficiency activities for specific technologies

The project activity type seeks to improve the energy efficiency of building lighting systems by substituting existing luminaires with lighting fixtures that use Light Emitting Diodes (LEDs), which are more energy efficient. The reduction in energy consumption will reduce the amount of greenhouse gas (GHG) emissions emitted.

Proposed Structure of this Public Private Partnership (PPP) Model

The project will be leveraging an Existing-Refurbish-Finance-Bulk-Fees model. This will involve the Town Councils, supported by the local municipal governments, contracting an experienced private sector entity to replace the existing lighting in the target locations. The private sector entity will be raising financing given that the assumed payment arrangements from the Town Councils will be a percentage of the power consumption savings resulting from the project through a 10-year period.

Table 1: Model Attributes

Dimension
Attribute
Description
BusinessNewThis model assumes that a competitive bidding among experienced project companies will take place
Existing
ConstructionBuildThe model involves the project company taking over and refurbishing current lighting infrastructure
Refurbish
Private FundingFinanceThe project company will be tasked with raising the funds for the installation of the LED lighting
ServiceBulkThe project company will be collecting payments from the Town Councils for the service of replacing the current lighting
User
RevenuesFeesRevenues in this model will originate from the pre-agreed payments of the Town Councils to the project company for the service of replacing the current lighting
Tariffs

Proposed risk allocation of the Public Private Partnership Model

Key features of PPP structure

  • Private sector entity to design, build, finance, operate and maintain building lighting systems via contractual agreement with the ministry/ government or state-owned entity
  • The private sector entity acts as the implementation partner, and is responsible for all activities related to the implementation, management, monitoring and reporting of the project over the project crediting period
  • In exchange, private sector entity can earn proceeds from emission reduction credit (ERC) sale

Expected ERC end use

  • End use can belong to project developer as part of additional revenue stream

Key considerations/risks for proposed project

  • Extensive stakeholder engagement required to ensure buy-in local stakeholders (e.g., town councils, residents) which may include education sessions, roadshows
  • Need to ensure that there is no regulation that imposes upon the government or state- owned entity partner to reduce emissions from public lighting or through energy efficiency activities in which this project can be reasonably assumed to be within scope
  • Partnering with a service provider for the project’s marketing, sales and pricing is needed to identify potential offset buyers, negotiate contracts, and secure good target price per tonne to enable the financial viability of ERC generation
  • Contracting a monitoring, verification and reporting (MRV) service provider with experience in conducting MRV and preparing the necessary documents for generating ERCs in a voluntary carbon market standard will reduce risk of registration and issuance delays or bottlenecks, and strengthen credibility of project’s carbon integrity quality

Figure 1: Financing and Activity Flows for the Model

Case study: Replacement of existing luminaires with LED lighting luminaires in several buildings across 12 Town Councils, Singapore

Project description

The project aimed to enhance the energy efficiency of building lighting systems by replacing current luminaires with more energy-efficient "Light Emitting Diodes" (LEDs) lighting fixtures in the corridors, staircases, and void decks of numerous existing buildings situated across 12 Town councils throughout the country. To be specific, the project will involve replacing of 668,723 existing luminaires by LED luminaires in the corridors, void decks, and staircases of the existing Housing & Development Board (HDB) buildings. By replacing the current luminaires with LED lighting fixtures, it is possible to achieve a reduction of GHG emissions.

Impact

Expected annual ERCs credits generated from the program will be 13,158 tonnes through a 10- year crediting period. The financing from the voluntary carbon markets was judged to be essential to overcoming the investment barrier of a lower-than-benchmark equity internal rate of return (IRR) if relying solely on the payments provided by the Town Councils, as assessed by DTZ Facilities & Engineering (S) Limited.

Figure 2: Structure of Case Study PPP

A contract has been signed between the 12 Town Councils and DTZ Facilities & Engineering (S) Limited, which outlines the terms and conditions of the project and confirms the ownership of the project to DTZ. DTZ Facilities & Engineering (S) Limited has the rights to manage the project, which means that they are responsible for overseeing the implementation and execution of the project. As the project developer for this project, DTZ is responsible for ensuring that the project meets Verified Carbon Standard (VCS) requirements.

Summary of the model financials

Assuming a similar scale as the case study of replacing ~690,000 luminaries in total, the project’s Net Present Value (NPV) without ERC in- and outflows – only considering non-ERC inflows through other revenue streams or cost savings enabled by the project – is positive at $ 0.01 Million (M)1. With ERC cashflows, the NPV improves substantially to positive NPV of $ 0.4M, which provides added value to make LED lightbulb projects more financially attractive. There is also substantial NPV value for users that benefit from this projecting approximately $ 0.3M for net user benefit. This accounts for the estimated annual net electricity consumption savings.

Table 2: Summary of sources of inflows and outflows and key assumptions

Value component
Assumptions
Sources
ERC revenues or inflows
  • Three issuances across the project’s 10-year crediting period, at year 3, year 7 and year 10
  • $7.35 per tonne today for 43,860 estimated tonnes of ERCs likely generated in the first issuance
  • 10% price increase to $8.09 for 87,720 estimated tonnes of ERCs likely generated for the second and third issuance
Average price of Energy Efficiency project in Asia, VCS
Non-ERC revenues or inflows
  • Estimated annual electricity consumption savings of 31,946 megawatt hours (MWh)
  • Electricity tariff used 0.261 Singapore dollars (SGD) per kilowatt hour (KWh)
  • Expected inflation in electricity tariff of 3.7%
DTZ case study benchmark
Project investment and implementation cost
  • Installation and maintenance of LED luminaires costs of $37,500,000
DTZ case study benchmark
ERC generation
  • $10,000 for the project’s registration and first issuance
  • $15,000 for each verification process across three issuance cycles
  • $0.14 per tonne for subsequent issuances
Verra Fee Schedule

Table 3: Net cashflows summary (in USD)

Components
Sum of initial outlays
Sum of in- or outflows from crediting period
Total cashflow
ERC Component
Revenues/Inflows01,031,5871,031,587
Costs/Outflows0-73,421-73,421
Net value0958,166958,166
Primary/Non-ERC Component
Revenues/Inflows054,675,57954,675,579
Costs/Outflows-37,500,0000-37,500,000
Net value-37,500,00054,675,57917,175,579
Total Net Value
NPV$375,754
NPV (ERC Component)$362,948
NPV (Non-ERC Component)$12,806
NPV (Net user benefit)$7,089,985

 


Footnote 1: All prices are expressed in United States Dollars (USD)

UNLOCKING GLOBAL EMISSION REDUCTION CREDIT


Guidance for Countries in Assessing ERC Projects


1. Introduction to Emission Reduction Credits

 The World Bank's Emission Reduction Program

 Emission Reduction Credits

Classification of Emissions Reduction Credit

 Policy Context of Emissions Reduction Credit

2. Objective of the Guidance for Countries in Assessing ERC Projects

 Objective of Project Preparation Guidelines

 Introduction to the Project Assessment Framework

 Process to Conducting Assessments

3. Determining Country Inputs

 S1: Green Economy Priorities

 S3: Article 6 Readiness and Eligibility

4. Conducting the Initial Profiling and Making a Preliminary Decision

 F1: Project ERC Value

 F2: Additional Value Enabled by Project

 C1, C2, and C3: Carbon Integrity and Environmental and Social Risk Management

 S2: Socioeconomic Value

5. Conducting the Project Assessment and Making the Final Decision

 F1: Project ERC value and F2: Additional Value Enabled by Project

 Q1: MRV Infrastructure

 Q2: Marketing, Sales, and Pricing

 Q3: Project Governance and Structure

 C1: Carbon Integrity

 C2: Environmental Risk Management

 C3: Social Risk Management and Benefits

 S2: Socioeconomic Value

6. Further Guidance for Application

 Market-Driven Factors

 Country Context-driven Factors

 Considerations for Future Scope

Abbreviations: Guidance for Countries in Assessing ERC Projects

Appendices: 

• A: Project Profile Template 

• B: Project Assessment Template 

• C: PPP Models for ERP

  - Model 1: MRT Energy Efficiencies Model for ERP

  - Model 2: Rural Electrification Model for ERP

  - Model 3: LED Streetlight Deployment Model for ERP - for Efficient Outdoor and Street Lighting Technologies

  - Model 4: Rooftop Solar Installation Model for ERP

  - Model 5: LED Streetlight Deployment Model for ERP - for Specific Technologies

  - Model 6: E-bus Deployment Model for ERP

  - Model 7: EV Charging Systems Installation Model for ERP

  - Model 8: Biodigesters Deployment Model for ERP

  - Model 9: Waste-to-Power Model for ERP

  - Model 10: Waste Treatment Facility Model for ERP

  - Model 11: Climate Smart Farming Deployment Model for ERP

  -  Model 12: Reforestation Program Model for ERP

Find Full Outline

Note(s):

This section is intended to be a living document and will be reviewed at regular intervals. The Guidelines have not been prepared with any specific transaction in mind and are meant to serve only as general guidance. It is therefore critical that the Guidelines be reviewed and adapted for specific transactions. Unless expressly stated otherwise, the findings, interpretations, and conclusions expressed in the Materials in this Site are those of the various authors of the Materials and are not necessarily those of The World Bank Group, its member institutions, or their respective Boards of Executive Directors or member countries. For feedback on the content of this section of the website or suggestions for links or materials that could be included, please contact the Public-Private Partnership Resource Center at ppp@worldbank.org.