WorldBankCarbonFinanceExperience,StrategyandNew.ppt

 World Bank Carbon Finance:Experience, Strategy and New Products Addis Ababa 21 October 2003 The Bank’s Mission and Climate Change Bank’s Mission: Poverty reduction and sustainable development Heavy Engagement in Climate Change because: Accept IPCC predictions on trends and impacts Poor countries will be worse off and poorest people have the least capacity to adapt, especially the rural poor Private Capital and Technology Transfer: Kyoto’s flexible mechanisms and lower marginal cost of abatement provide unprecedented incentives for private investment in clean technology, agriculture and forestry in developing and transition economies How the Funds Work Carbon Trades: est. volumes Buyers are becoming more diverse Carbon Finance flows 2001-2002 Market Intelligence:“Few Countries Benefiting, Little Private Sector Buying” Market: cumulative 200 million tonnes CO2 traded ($500 million) since 1996 Five-fold increase between 2001 and 2002 But … Only 43% of all carbon transactions made in CDM/JI (2001-2002), dominated by Dutch and PCF Only 13% of the private sector’s purchases were in CDM (2001-2002) African countries, smaller countries and small-scale projects are largely bypassed Impact of Carbon Finance on Project Financial Rate of Return Lead Time and Uncertainty Constraints on CDM Projects CDM as a Source of Compliance Assets CDM/JI will fall far short of the 2 billion ton plus cumulative “compliance gap” Even at 50% compound per annum in CDM activity, CDM is unlikely to deliver more than 350 million tons ERs before 2012 Aggressive Chinese CDM participation may increase this by 150-250 tons CO2e million maximum “Hot Air” is key to Kyoto compliance but is politically inaccessible “Greening” hot air is essential to making AAUs acceptable to OECD buyers World Bank Carbon Finance Strategic Objectives Beyond PCF Expand core carbon market development: “crowd in” private sector: ? OECD Country Funds (Netherlands, Italy) Extend carbon finance to poorer communitie