New Fund Uses Kyoto Protocol to Aid Poor Communities

WASHINGTON, DC, July 16, 2003 (ENS) - A new fund that will reduce emissions of the greenhouse gas carbon dioxide and at the same time use carbon finance as a development tool to benefit the least developed countries was set in motion on Tuesday. The Community Development Carbon Fund will support initiatives in fields such as renewable energy, energy efficiency, and solid waste to energy conversion.

The fund will provide financial support to small-scale greenhouse gas reduction projects in the least developed countries and to poor communities in developing countries. These communities will get development dollars, and participants in the fund will receive carbon emission reduction credits for reductions in carbon emissions.

The World Bank created the Community Development Carbon Fund (CDCF) in collaboration with the United Nations Climate Change Secretariat and the International Emissions Trading Association.

At a media briefing at its Washington headquarters Tuesday, the World Bank announced commitments to the fund of US$35 million from both public and private sector participants, as part of a US $100 million package.

So far, contributors include the governments of Canada, Italy, and the Netherlands, Japanese companies such as Daiwa Securities SMBC, Idemitsu Kosan, Nippon Oil, and 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 World Bank said.

Ian Johnson, World Bank vice president for sustainable development (Photo courtesy IISD)

“Payments for environmental services through innovative funds like the Community Fund, open new possibilities for environmentally responsible development," Johnson said. "We are demonstrating that dealing with global issues like climate change can have profound positive impact at the community level.”

The new fund will operate through the Clean Development Mechanism (CDM) of the Kyoto Protocol, the 1997 agreement to limit the emission of greenhouse gases responsible for global climate warming.

Eggert Voscherau, vice chairman of the BASF Board of Executive Directors and the chemicals manufacturing company's industrial relations director, said BASF will benefit from using the new fund and so will poor communities. "By participating in the CDCF, we want to emphasize our stance on sustainable development and the mechanisms of the Kyoto Protocol. At the same time, we can help improve quality of life in some poorer parts of the world.”

“Italy looks forward to working together with the World Bank and other participants in this innovative partnership,” said Corrado Clini, director general of the Ministry for the Environment and Territory of Italy. “It will allow Italy to reduce the costs of achieving its Kyoto [Protocol] commitments, while at the same time promoting the protection of the global environment.”

Corrado Clini, director general of the Ministry for the Environment and Territory of Italy (Photo courtesy IISD)

The Kyoto Protocol is poised to enter into force once the Russian Federation ratifies it, bringing the total of the industrialized group’s carbon dioxide (CO2) emissions to over 55 percent of that group's emissions in 1990, a trigger for the protocol to take effect.

After remaining silent for months on the question of whether or not Russia will ratify, the Russian leadership today indicated that ratification is just around the corner. Today in Moscow, Russian President Vladimir Putin discussed preparations for ratification of the protocol with Prime Minister Mikhail Kasyanov, RIA Novosti reported.

Recent carbon market research done by the World Bank shows that although the market for carbon emissions more than doubled in the last year, only 13 percent of direct private sector carbon emission reduction investment went to developing countries, and none to the least developed countries.

“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.

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,” Massawa said.

A project proposed for Kenya would reduce CO2 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.

The effect this switch would have on Kenya's dwindling forests was not mentioned by the World Bank.

But the bank intends to create another new fund to provide carbon finance to demonstrate and test projects that sequester or remove greenhouse gases in forest and agricultural ecosystems. The BioCarbon Fund, expected to be operational sometime this fall, will aim to deliver cost effective emission reductions while promoting environmental benefits, such as the conservation of biodiversity, the reduction of poverty and opportunities for adaptation to climate change.

Since 2000, the World Bank Group, through its Prototype Carbon Fund, has pioneered the development of project based flexibility mechanisms to generate potential greenhouse gas emission reduction credits.