14 February 2005

02.02.05. World Bank: Post Kyoto Uncertainty Threatens Emerging Carbon Emmissions Martket

Editor’s Note: What I find quite disturbing in this piece (and the broadly shared attitude behind it) is the untenable combination of (a) a sense of urgency on the one hand, but (b) on the other a sigh and resigned statement that this is going to take a lot longer than 2012 to get right. Which to my mind, points up the importance of what we are trying to achieve here.
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Post Kyoto Uncertainty Threatens Emerging Carbon Emmissions Martket


Press Release - World Bank, Feb. 14 2005

WASHINGTON – In the wake of the entering into force of the Kyoto Protocol , which limits carbon dioxide (CO2) emissions in rich countries, the World Bank urged industrialized nations to address the uncertainties of the post-Kyoto period , after 2012.

According to Ken Newcombe , Manager of the Carbon Finance Business Unit at the World Bank “ The most important issue right now is ensuring supply from the developing countries of emission reductions, because the demand has suddenly increased enormously. Canada and Japan have come into this market with significant offers for funding for projects under the Kyoto Protocol’s market-based mechanisms. Time is running out in order to supply those, so to my mind, the next 2 years is absolutely critical to ensure on the one hand, that the developing countries right over to take advantage of carbon finance to support clean technology and do sustainable development, and the other, the major buyers in this market, like the Europeans, Canada and Japan get sufficient supply to keep their cost of compliance at a level which is politically acceptable”

Both the Kyoto Protocol and the European Union’s Emissions Trading Scheme make use of flexible mechanisms by which rich countries can buy emission reductions through climate-friendly projects in developing countries and count those reductions as part of the Protocol’s established target of reducing emissions by 5 percent by 2012 in industrialized countries, compared with 1990 levels.

However the design of a climate-friendly project such as a wind power project or geo thermal project that would take the place of a coal fired power plant or oil fired power plant takes time to design, to get the environmental clearances, to get the agreements for the electricity and to finance it, and then it takes time to build it and make it operational. So typically, it is a 5-year process. In reality for a project starting today, there will be only a few years left in the current scheme of things to get emission reductions counted for compliance purposes.

So if projects were developed now, they wouldn’t start operating until 2008 to 2010, leaving very little time to get actual emission reductions achieved against the baseline of the original carbon intensive power plant.

So time is running out. Adds Newcombe, “The opportunity has been made available for the developing countries to take advantage of this tremendous influx of capital and technology, but the door is closing at the same time, because it all has to be done by end of 2012.”.

The World The Bank manages $US 800 million through different carbon funds. It has made significant efforts in the development of the carbon market, first by launching the Prototype Carbon Fund (PCF) to demonstrate how to cost-effectively achieve greenhouse gas reductions while contributing to sustainable development. More recently, the Bank launched a series of carbon funds to expand learning-by-doing to poor countries, and to address market failures. The Community Development Carbon Fund (CDCF) and the BioCarbon Fund (BioCF) enable smaller and rural poor communities in poor countries to benefit from carbon finance for sustainable development purposes.

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