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CLIMATE CHANGE: World Bank Touts Carbon Market

COPENHAGEN, Dec 9 2009 (IPS) - The World Bank proudly defended the global carbon market in the Danish capital Tuesday for its “contribution” to efforts to mitigate climate change, in spite of criticism from civil society.

The multilateral lender presented its publication titled “10 Years of Experience in Carbon Finance: Insights from working with carbon markets for development and global greenhouse gas mitigation”, at the 15th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP 15), running Dec. 7-18 in Copenhagen.

The study assesses the World Bank’s experience of working with the Kyoto Protocol’s flexibility mechanisms, like the Clean Development Mechanism (CDM) and Joint Implementation (JI).

JI is a system that allows industrialised countries to fulfil part of their obligatory greenhouse gas emissions reductions by paying for projects that reduce pollution in other nations of the North.

In practice, this means building installations in the countries of Eastern Europe and the former Soviet Union, financed by Western European and North American countries.

Meanwhile, the CDM allows rich nations to compensate part of their greenhouse gas emissions by financing projects that reduce emissions in the developing South.

The rich country that finances the project can acquire carbon credits, equivalent to the emissions savings made in the developing country, and these count towards its own binding emissions reductions. These carbon credits are, additionally, tradeable: they can be bought and sold on the carbon market.

The World Bank sees the carbon market as a positive development, as it estimates the countries of the South will need between 75 billion and 100 billion dollars a year, from now to 2050, to cope with the effects of global warming.

World Bank carbon finance specialist Martina Bosi reminded a press conference in Copenhagen Tuesday that the Bank created the 160 million dollar Prototype Carbon Fund in 2000, five years before the Kyoto Protocol went into effect.

Today, the World Bank manages several funds worth 2.5 billion dollars, the main beneficiaries of which are China, India, Brazil, Mexico and Colombia.

Among the most important funds are the BioCarbon Fund, which focuses on forestry and land-use projects, and the Community Development Carbon Fund, which focuses on projects in least developed countries, “that have received strong social co-benefits in addition to reducing greenhouse gas emissions.”

According to the report presented Tuesday, 26 percent of the projects financed by these World Bank funds were based in Latin America and the Caribbean, 21 percent in Asia, a further 21 percent in East Africa, 18 percent in Europe and 13 percent in Southeast Asia.

Bosi stressed that a large proportion of the funds for World Bank projects under the CDM are from the private sector, and that market mechanisms are an important tool for including private capital in climate mitigation efforts.

Private capital has provided 49 percent of the resources for the projects so far. The carbon markets have contributed 21 percent, public foreign investment 17 percent and local public funding 13 percent.

Non-governmental organisations are critical of the CDM because they regard it as a “corrupt” system that is “cheap” for the countries of the North, as it allows industrialised countries to avoid real measures to reduce their domestic greenhouse gas emissions, while favouring transnational corporations.

Friends of the Earth said that the CDM should be abolished because it does not promote the structural changes needed to bring about a sustainable economy, and complained that “many projects in the CDM pipeline have severe negative social and environmental impacts.”

In a communiqué released at the Copenhagen conference, Friends of the Earth demanded rich countries “pledge to cut domestic emissions by at least 40 per cent (compared to 1990 levels) by 2020, without offsetting (using the CDM) or carbon trading.”

According to the organisation, “most of these projects do not actually reduce emissions,” and have catastrophic consequences for the environment and society in the developing South.

It also demands that the countries of the North “meet their obligations for financial transfers to developing countries for mitigation and adaptation,” without cutting development aid. These financial transfers should be administered by the United Nations, it said.

Other external financing, like the funds managed by the World Bank, should also not count towards the fulfilment of these obligations, it said.

* This story appears in the IPS TerraViva online daily published for the CoP 15 at Copenhagen.