OFFICIAL          !        0 Jo<o
DOCUMENTS i
DONOR PARTICIPATION ARRANGEM          T
TF072095
between
HER MAJESTY'S GOVERNMENT OF THE UNITED KINGDOM OF GREAT BRITAIN AND
NORTHERN IRELAND ACTING THROUGH ITS DEPARTMENT OF ENERGY AND CLIMATE
CHANGE ("DECC")
and
INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT ("IBRD")
AS TRUSTEE OF THE CARBON INITIATIVE FOR DEVELOPMENT CARBON FUND
(together the "Participants")
Her Majesty's Government of the United Kingdom of Great Britain and Northern Ireland, acting through
its Department of Energy and Climate Change, (hereinaflter referred to as "Carbon Fund Donor") will
make a contribution to Tranche A of the Carbon Initiative for Development Carbon Fund ("Carbon
Fund") (TF072095) in the amount of thirty five million Great Britain Pounds (GBP 35,000,000)
("Contribution").
The Department for International Development ("DFID") of the United Kingdom of Great Britain and
Northern Ireland ("Readiness Fuad Donor"), on behalf of the Carbon Fund Donor, has already entered
into a separate Administration Agreement with the IBRD for a contribution of fourteen million Great
Britain Pounds (GBP 14,000,000) to the Readiness Fund, TF072039, in compliance with Section 5.1(e)
of the "Instrument", as defined in paragraph 1.I(e) below.
The Carbon Fund Donor and the IBRD acting as Trustee of the Carbon Fund ("Trustee") have reached
the following understanding regarding matters relating to the Carbon Fund Donor's Contribution:
I      Definitions
1.1    Unless defined otherwise herein, capitalized terms appearing in this Arrangement will have
the meaning ascribed to them in the Instrument, and the terms set forth below will have the following
meanings:
(a)    "Arrangement" means this Donor Participation Arrangement. as amended from time to
time, including the annexes attached hereto;
(b)    "Contribution" means the Carbon Fund Donor's contribution to Tranche A of the Carbon
Fund in the amount specified in paragraph 3.1 of this Arrangement;
(c)    "Governmental Authority" means any national, regional or local governmental, agency or
authority in any country, and any other governmental or quasi-governmental entity, agency,
organization, commission, secretariat, executive board, mechanism, conference or authority,
including any existing or future international, regional or multi-national governmental or
political bodies or establishments, including, but not limited to, those established by the parties
to the UNFCCC or the Kyoto Protocol or the member states of the European Union, and any
subordinate entity, technical body, expert, validator, certifier, operational entity or authority of,
recognized by, reporting to, mandated by, or acting on behalf of any of the foregoing;
(d)    "Information Memorandum" means the confidential information memorandum of the


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Carbon Fund, dated October 28, 2013, as may be modified or supplemented from time to
time:
(e)    "Instrument" means the Instrument establishing the Carbon Initiative for Development Carbon
Fund. attached hereto as Annex I as amended from time to time;
(f)    "Promissory Note" means the promissory note, substantially in the form of Annex 2 to this
Arrangement, in the amount of the Contribution, issued by the Carbon Fund Donor and made
payable to the Trustee on demand; and
(g)    "Current Indicators" means the indicators, baseline, data sources and milestones as
provided for in Annex 3 to this Arrangement.
II     The Instrument
The Participants will respect the relevant terms and conditions of the Instrument. The Instrument will
be an integral part of this Arrangement.
III   The Contribution
3.1    The Carbon Fund Donor will make a contribution of thirty five million Great Britain Pounds
("GBP") (GBP 35,000,000) to Tranche A of the Carbon Fund, being not less than the Minimum
Contribution required under the Instrument.
3.2    The Contribution will be administered by the Trustee on behalf of the Carbon Fund Donor in
accordance with the provisions of this Arrangement, the Instrument, and the Current Indicators.
3.3    The Trustee will prepare its Annual and Quarterly Progress Reports in accordance with the
provisions of this Arrangement, the Instrument and the Current Indicators.
IV     Payment of the Contribution
4.1    The Carbon Fund Donor will pay the Contribution through the issuance and delivery of a
Promissory Note to the Trustee, according to this part IV and to Article V of the Instrument.
4.2    The demands for payment will be made in writing (including electronic mail) each year on
October Ist, or, if such date is a holiday, on the preceding working day. After a demand is made, the
Carbon Fund Donor will have 60 days' notice to deliver the payment to the Trustee. The following
schedule for demands of payments is indicative and may be amended by the Trustee, after consulting the
Carbon Fund Donor and having regard to the financial requirements of the relevant Tranche of the Fund,
including the anticipated requirements for payments under ERPAs:
(a) Shortly after the signature of this Arrangement by the Participants, and
no later than November 1st, 2013:  GB? 150,000
(b) On or before October Ist 2014:  GB? 2,900,000
(c) On or before October 1st, 2015:  GBP 2,940,000
(d) On or before October Ist, 2016:  GBP 7,540,000
(e) On or before October Ist, 2017:  GBP 6,640,000
(f) On or before October Ist, 2018:  GB? 7,580,000
(g) On or before October I st, 2019:  GBP 6,640,000


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(h) On or before October Ist, 2020:   GBP 190,000
(i) On or before October Ist, 2021:   GBP 180,000
(j) On or before October Ist, 2022:   GBP 130,000
(k) On or before October 1st, 2023;   GBP 90,000
(1) On or before October Ist, 2024:   GBP 20,000
4.3    Any interest generated by the Contribution will be transferred by the Trustee to the Readiness
Fund, to support activities under the Readiness Fund.
V      Costs and Expenses
5.1    The Trustee may deduct and retain for its own account, as a deduction from the Contribution, an
amount equal to two percent (2%) as an administrative fee for the Carbon Fund.
5.2   In addition, other costs incurred by the Trustee, such as program management and Carbon Fund
administration performed by the Carbon Finance Unit, related to the Carbon Fund, will be charged to the
Carbon Fund on an actual basis up to a maximum of three percent (3%) of the Contribution.
5.3
(a)    Subject to Sections 5.1 and 5.2 of this Arrangement, for Bank-executed activities, the Carbon
Fund funds may be used to finance:
(i)  staff costs with indirects;
(ii)  travel expenses;
(iii)  consultant fees individuals and firms;
(iv), contractual services;
(v)   associated overheads including sustaining costs;
(vi)  equipment and office premise and lease costs;
(vii)  extended term consultants;
(viii)  media, workshops, conferences and meetings; and
(ix)   temporary support staff costs.
(b)    For Recipient-executed activities, the Carbon Fund funds may be used to purchase Emission
Reductions under Emission Reduction Purchase Agreements.
VI     Confirmations by the Trustee
6.1    The Trustee confirms that:
(a)    it has the necessary power and authority to act as Trustee of Tranche A of the Carbon Fund; and
(b)    the individual signing this Arrangement on behalf of the Trustee is an authorized signatory of the
18 RD.
VII    Confirmations and Acknowledgments by the Carbon Fund Donor
7.1    The Carbon Fund Donor hereby confirms and acknowledges as follows:
(a)    There is no guarantee that a Project or any ERs generated by a Project or otherwise contracted for
by the Trustee will be recognized, documented, confirmed, validated, certified, approved,


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credited, supported, registered, accounted for or agreed to by any Governmental Authority.
However, the Trustee will seek to ensure, in accordance with the Project Selection Criteria for
Tranche A as set out in Schedule I to the Instrument, registration of Projects as CDM projects or
the generation of Emission Reductions consistent and compliant with the UNFCCC.
(b)    The pro rata share of Emission Reductions attributable to the Carbon Fund Donor's Contribution
will be cancelled by the Trustee on behalf of the Project Entity.
(c)    Any Carbon Fund Donor and/or Carbon Fund Buyer may review or evaluate activities financed
by the Carbon Fund. The Carbon Fund Donor/Buyer and the Trustee will decide on the scope and
conduct of such review or evaluation, and the Trustee will provide all relevant information within
the limits of the Trustee's applicable policies and procedures. If necessary the project will be
adjusted according to the findings of the review. All associated costs, including any costs incurred
by the Trustee, will be borne by the Carbon Fund Donor and/or Carbon Fund Buyer. It is
understood that any such review or evaluation will not constitute a financial, compliance or other
audit of the Carbon Fund.
(d)    In participating in the Carbon Fund, the Carbon Fund Donor acknowledges the risks referred to in
the Information Memorandum.
(e)    The Carbon Fund Donor has received and carefully reviewed the Information Memorandum and
the Instrument, as each may be supplemented, revised or amended, prior to the date hereof, this
Arrangement, and all appendices, schedules and annexes to each of the foregoing, understanding
that each such document supersedes all prior versions thereof and any inconsistent portions of
previously distributed materials relating to the Carbon Fund.
(f)    The Carbon Fund Donor acknowledges that the Carbon Fund has only recently been established
and has no financial or operating history, that Contributions to the Carbon Fund have to be agreed
upon with the Trustee, that no Governmental Authority has passed upon the Interest or made any
finding or determination as to the fairness of the Contribution, made hereunder.
(g)    The Carbon Fund Donor has or will have all necessary power and authority to (i) enter into this
Arrangement and issue the Promissory Note; and (ii) pay its Contribution.
(h)    The Carbon Fund Donor acknowledges that the tax consequences to the Carbon Fund Donor of a
Contribution in the Carbon Fund may depend on its circumstances and that the Carbon Fund
Donor should consult with its own tax advisor regarding any and all applicable national, federal,
state, and local tax considerations applicable to such contributions to the Carbon Fund. The
Carbon Fund Donor is relying solely upon the advice of its own tax and legal advisors, and will
not rely upon the general discussion set forth in the Information Memorandum with respect to
such matters.
(i)    The Carbon Fund Donor has no need for the liquidity of its Contribution, and has sufficient
knowledge and experience in financial and business matters, as well as the relevant applicable
environmental matters, together with sufficient resources, to analyze and evaluate the merits,
risks and suitability of the Carbon Fund in the context of its financial position and particular
circumstances.


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VIII Cooperation
The Carbon Fund Donor will, when reasonably requested, provide reasonable assistance to the Trustee in
connection with activities necessary to manage the Carbon Fund or to cause generation of the ERs. This
will include the Carbon Fund Donor's cooperation to provide assurance to project developers that the
Carbon Fund Donor's funding does not represent a diversion of ODA, consistent with the requirements of
the Marrakesh Accords.
IX     Limitation of Liability
In providing funds under this Arrangement, the Carbon Fund Donor does not intend to accept any
responsibility or liability towards any third parties for any claims, debts, demands, damage or loss as a
result of the implementation of the activities under the Carbon Fund.
X      Effectiveness, Amendment, Termination and Notice
10.1  This Arrangement will come into effect on signing by both Participants.
10.1  This Arrangement may only be amended with the written consent of the Participants hereto to be
given in the form of an exchange of letters.
10.2  This Arrangement will terminate in accordance with the relevant provisions of the Instrument.
10.3   All communications of the Participants relating to this Arrangement will be in writing (including
facsimile communications and electronic mail), or by telephone (to be promptly confirmed in writing).
Each communication will be made to the relevant person at the address, facsimile number, telephone
number or electronic mail address, from time to time designated by that Participant to the others for that
purpose. The address, facsimile number, telephone number and electronic mail address so designated are
set out below:
Carbon Fund Donor:
Name:               THE GOVERNMENT OF THE UNITED KINGDOM OF GREAT
BRITAIN AND NORTHERN IRELAND, acting through its Department
of Energy and Climate Change
Address:            3 Whitehall Place London, SW1A 2AW UK
Attention:          Head of team, International Climate Policy and Finance
Telephone:          +44 (0)300 068 5263
Facsimile:          ---------------
Electronic Mail:    david.capper@decc.gsi.gov.uk
Trustee:
Name:               International Bank for Reconstruction and Development,
acting as Trustee for the Carbon Initiative for Development Carbon Fund
Address:            1818 H Street, N.W. Washington, D.C. 20433 U.S.A.
Attention:          Manager of the Carbon Finance Unit
Telephone:          +1-202-458-1873
Facsimile:          +1-202-522-7432
Electronic Mail:    I3RD-carbonfinance@worldbank.org


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XI    Disclosure
The Trustee may disclose this Arrangement and related information on the Carbon Fund in accordance
with the Bank's Policy on Access to Information. The Carbon Fund Donor may disclose this
Arrangement pursuant to UK legislation relating to access to information held by public authorities and
pursuant to the UK Government's broader transparency agenda.
Signed on behalf of:
THE DEPARTMENT OF ENERGY AND CLIMATE
CHANGE OF HER MAJESTY'S GOVERNMENT OF THE
UNITED KINGDOM OF GREAT BRITAIN AND
NORTHERN IRELAND
By: &           "4
Signature of Author[A Representative
Name: tAA       (
Title: 0P11, bWMer)e lur?FIOtNAL cLtlH4Te
Date:    16V(A
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT ACTING AS TRUSTEE OF THE
CARBON INITIATIVE FOR DEVELOPMENT CARBON
FUND
By: -
Signature of Authorized Representative
Name:____________________
Title:-~A~3~f~A4~'~~
Date: 1      ~       20A Vok3


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ANNEX I
INSTRUMENT


ANNEX 3
CURRENT INDICATORS
This Annex will be applicable to and form an integral part of all Administration Arrangements/Agreements between the Trustee and the respective Carbon
Fund Donor and/or Carbon Fund Buyer. Baseline, data sources and milestones will be finalised with 6 months of the start of the programme and further annual
milestones will be agreed on a rolling basis.


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PROJECT         Carbon Market Finance (CMF)
NAME
Impact Indicator 1                 Basellne      2014      -2015      2016        209"2205
XPI Indicator                      2013
Carbon          M tonnes C02 reduced by  Planned          0         0          0     .             0.1          1.7         7.6
financing       all international carbon  Achieved
reduces         finance projects drawing                                         Source
greenhouse gas  on CMF developed         UNFCCC CDM database information on projects drawing on CMF programme replicated projects
emissions and   methodologies.
poverty in less
developed       Impact Indicator 2                 Baseline     2014    12015        2016        2019        2022        2025
KPI Indicator                      2013
Number of people with    Planned         0          0          0          0   280,000    23,000,000  31,000,000
increased access to clean  Achieved W 5__
energy, as a result of
international carbon
finaiced projects drawing  UNFCCC CDM database information on projects drawing on CMF programme replicated projects
on CMF developed
methodologies.
Impact Indicator 3                 Baseline      2014       2015      2015        2019        2022        2025
KPI Indicator                     2013
Level of installed capacity  Planned     0          0          0          0         27         450         800
of clean energy (MW)     Achieved
from all international                                             -r
carbon finance  e        UNFCCC CDM database information on projects drawing on CMF programme replicated projects
drawing on the new
methodologies.
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o  0       i*. Outcome Indicator 1                 Baseline   2014      2015       2016       2019        2022        2025 AssumpIOns
&  J lt?  KPI Indicator                     2013
Increased carbon  Ex of private/public finance  Planned     0      0          0     E 13m      E 40m        E 40m        40mational
finance flows to  mobilised for investment in  (public)                                                                       carbon market
poor countries  CDM projects that use the  Planned          0   £ 6m      E 12m    f 1som     E 550m       f 550m     E SSOm    cv to
for low carbon  new methodologies         (private)                                                                           replicate
energy and other  directly supported by the  Achieved                                                                          demonstrated
poverty reducing  CMF programme.          Achieved                                                                             CMF
technologies,                                                                                                                  programme
Source                                         pmjects
WB data and reporting - taken from finance mobilised for CMF programme projects       New
Outcome Indicator 2                   Baseline  2014      2015*     2016*       2019         2022        2025 methodologies
KPI Indicator                         2013                                                                     can generate
M tons C02 reduced        Planned            0     0   TBA       TBA              0.5          1.6        2.6 high
through prjects directly  Achieveddelomn
supported by the CMF                                                                                           benefits for
progrmme.poor people.
programme.              UNFCCC CDM database; WB data and reporting on number of CERs purchased from CMF        Governments
programme pro ects            __19_                                  2022             and partners
Outcome Indicator 3                   Baseline  201+      2015*     2016        20 202022                2025 continue to
K'ludicator                          201engage in low
Level of installed capacity  Planned         0     0   TBA       TBA               55         130         165 carbon
of clean energy (MW) in   Achieved                    NNM_                                                     development.
CMF programme directly                                          Source
supported locations.    WB data and reporting taken from monitoring of CMF programme projects
Outcome Indicator 4                   B22016                                    2019         2022        202s
KPI Idicator.
Number of people with     Planned            0      0  TBA       TBA        1,700000    3700000     4,300,000
increased access to clean Aciv
energy from all projects in
CMF pro gramme directly WBdtanreoigtkn
WBpo                  datains  an  eotngtknfom monitoring of CMF programme projects
*Note: Soie Outcome indicator milestones for 2015 and 2016 to be agreed (TBA)
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Output Indicator 1.1                             2014      2015       2016       2019        2022        2025  Assump.tons
seasnaiwaimes2013
New             Number of new          Planned           0          0         2          2          5           5           5 New
methodologies   methodologies          Achieved                                                                                methodologies
(standardised   submitted by the                                              Source                                           can be applied
baselines and   programmesite                            and CDM BB reports                                                    in practice; and
programmatic    approved by CDM                                                                                                facilitate access
approaches) and  Executive Board                                                                                               of increased
streamlined     Output Indicator 1.2                             2014      2015      2016       2019         2022        2015  LDCs to the
processes                                          Baseline           I                                                        carbon market
approved by the                                   2013
CDM Executive   Number of new          Planned           2          4         S          5_         6           6           6
Board.'         methodologies and      Achieved
other reform measures                                         Source                                            M
developed.
WB reports                                                                                Medium
15% (provisional)
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Output Indicator 21                  Bueline       2014       2015       2016        2019         2022         2025  ÀÉsiiiipd1ons
______     2013      __    _     __     _   _   _  _1J_                _  _   I__        _   _   _   _   _
Communities,     Numberofactivitics       Planned           0           3          5          6           8           10           10  Capability is
private setor    (e.g. workshops, key    Achlieved                                                                                     maintained and
and govemment    publications) to                                                  Soure                                               strengthened
with !DCrese     dissemniate           WBC     F n      rnlat hough
capability to use  programme experience. WB CMF programme reports0                                                                     experience.
standardised     Output Indieator 2.2                Øaeie         214'        21         2016       219Ø          2022       ý202,-
baselines and                                         201
programmatic     Number of Designated    Planned            0           0          1          2                 3                   3
approaches.      National Authorities    chv
(DNAs) submitting      Achied                                       l
standardized baselines                                            Squrce
for approval by the EB
in target countries.   WB CMF programme reports and UNFCCC CDM website
Low
20% (provisional)
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O1tput Indicator 3.1                             2014       1015       2016       2019         2022        2025  Asunipton
2013                                                                          -     ,
Practically     Number of CDM projects   Planned          0          0          1         1          8           10          10  Demonstrations
demonstrate     registered with the CDM  Achieved                                                                                are attractive
financial       Executive Board in focus                                         Soarc                                           enoughtfor
_____  ____                     ______Source___________                        enough for
viability of    countries that use the new  WB CMF programme reporting and UNFCCC CDM website                                    replication and
standardised    CDM methodologies.                                                                                               scale up; and
baselines (SB)                                                                                                                   their more
and             Output Indicator 3.                               2014      2015       2016       2019         2022        2025  widespread use.
programmatic                                        Baselme                                                                      Replicated
approaches                                         2013                                                                          projects can
(PoAs).         Number of project models  Planned         0  TBA        TBA       TBA        TBA        TBA          TBA         attract sufficient
developed that apply new                                                                                         capital for their
methodologies.                                                                                                   implementation.
Source
WB reporting
Output Indicator 3.3               Baseline      2014       2015       2016       2019         2022       2025
2013
CDM projects developed   Planned          0  Guidelines All       Updated    All        All
and registered with the                      agreed     developed guidelines developed  developed
CDM Executive Board are                                 projects             projects   projects
consistent with guidelines                              consistent All       consistent  consistent
for stakeholder                                                   developed
engagement                                                        projects
consistent
Achieved
Source                                           RISK     *-
Documented WB and donor agreed guidelines on stakeholder engagement                      L'ow
25% (provisional)
A-15


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Output Indicator 4.1               Baseline      2014       2015      2016       2019         2022        2025  Assumptions
* ~   -'*~~201311
RBF effectively  Value of CER credits  Planned           0       E 2m       L 5m     f 12m      f 33m        L 33m       L 33m   Projects provide
incentivises    contracted from        Achieved                       I                                                         verifiable
private         projects supported                                             Source                                           development
nvestm n  thf usg de       WB CMF reporting and contracts for purchasing credits through CMF programme Emission Reduction    tand
technologies that RBF mechanism.             Agreements (ERPAs)t
deliver emission                     Purchase Agreements (ERPAs)                                                                 project supply
reductions and  Output Indicator 4.2               Baseline      2014       2015      2016       2019         2022        2025   for CER
poverty                                            2013                                                                         purchase.
reduction.      Number of events to    Planned           0           2         4         6           7           7            7
engage potential       Achieved
project developers for
CER contracting.
WB reporting                                        Medium
35% (provisional)
Notes
Milestones based on an illustrative portfolio. To be refined in programme implementation
*Output Indicators will be finalised by September 2013
All results are attributable to UK funding, calculated on the basis of total results and attributed UK funding
Annual milestones from 2016 will be set in advance on a roiling basis, on the, drawing on annual reviews and progress
Impact weightings for Outputs are provisional and to be agreed by March 2013
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