World Bank Fund Targets Developing World Air Quality

Poor communities in developing countries soon stand the chance to benefit from the Community Development Carbon Fund (CDCF) developed recently by the World Bank in collaboration with the United Nations Climate Change Secretariat and the International Emissions Trading Association. The organizations announced commitments of US$35 million from both public and private sector participants, as part of a US$100 million package.

Washington D.C. – July 30, 2003 [] The CDCF will provide financial support to small-scale greenhouse gas reduction projects in the least developed countries and poor communities in developing countries. Poorer communities will get the advantage of development dollars coming their way, and participants in the fund will receive carbon emission reduction credits for reductions in carbon emissions. The CDCF will support initiatives with significant and measurable community development benefits in fields such as renewable energy, energy efficiency, and solid waste to energy conversion. Contributors include the governments of Canada, Italy, and the Netherlands, Japanese companies such as Daiwa Securities SMBC, Idemitsu Kosan, Nippon Oil, Okinawa Electric, BASF of Germany, and ENDESA of Spain. A number of other companies and governments are expected to announce their participation over the next several weeks. The CDCF represent a pioneer effort, which focuses on small-scale projects at the local level in the least developed countries and poor communities of developing countries, through the Clean Development Mechanism (CDM) of the Kyoto Protocol, the 1997 agreement to limit climate altering greenhouse gas emissions. This flexibility mechanism of the Protocol allows OECD countries to fulfill some of their greenhouse gas emission reduction commitments through projects in the developing world. “The threat that climate change poses to people’s efforts to move out of poverty is of particular concern to the World Bank,” said Ian Johnson, World Bank Vice-President for Sustainable Development. “Payments for environmental services through innovative funds like the Community Fund, open new possibilities for environmentally responsible development. We are demonstrating that dealing with global issues like climate change can have profound positive impact at the community level.” “Countries like mine will be hardest hit by climate change, and yet these same countries have until now, been bypassed by the carbon market,” said Emily Ojoo Massawa, Climate Change Coordinator of Enabling Activities in the National Environment Management Authority of Kenya. “This is an extraordinary opportunity to not just reduce carbon emissions but to use carbon finance as an innovative development tool. The CDCF will link private investors with community development projects, so that there are equitable benefits under the Kyoto Protocol, benefits that also go to the poorest of the poor.” Another proposed project in Kenya would reduce carbon dioxide emissions and raise tea growers’ income, by switching from fuel oil for tea drying, to biomass fuels. Some 80 million liters of fuel oil would be replaced by wood fuel annually, adding to the growers’ profits by reducing their energy bills by 66 percent a year, and avoiding 240,000 tons of carbon dioxide equivalent annually from being pumped into the atmosphere. By working through local intermediaries such as financial institutions, micro-credit institutions, cooperatives, and NGOs, and by applying streamlined project procedures compatible with small-scale Kyoto projects, the CDCF will seek to lower transaction costs and the risks involved in developing such projects. From the participants’ viewpoint, the new fund has unique advantages, said the CDCF. Under a situation where “the rules of the game” are yet to be defined, all CDCF projects will be developed in line with the small-scale CDM procedure, which has already been clearly defined. These will be some of the most valuable carbon emission reductions in the carbon market. Emission reductions acquired from the CDCF are expected to be the hard currency of the carbon market because this market is responding very positively to certified emission reductions with associated additional development benefits. They will be transferable across various regulatory regimes, including those established under the Kyoto Protocol, the European Union, Canada, and Japan. Carbon finance activities have taken on a new sense of urgency as evidence continues to mount that the Earth is getting significantly warmer, and changes in climate are inevitable. Climate change, and accompanying disrupted weather patterns-caused by the greenhouse effect through atmospheric loading of greenhouse gases (carbon dioxide, methane, etc) could wreak havoc on the planet, particularly on large parts of the developing world, said the organizers of the project.

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