World Bank to pay over $7 million for emission reductions in Uganda and Chile

A World Bank emissions trading initiative has announced that it is to purchase over $7 million in greenhouse gas emission reductions in Uganda and Chile, in line with the Kyoto Protocol’s Clean Development Mechanism (CDM).

The Prototype Carbon Fund (PCF) was established by the World Bank in 1999 to promote sustainable development, to demonstrate the possibilities of public-private partnerships and to provide a learning opportunity for its stakeholders. The first of the new projects is the West Nile Electricity project, involving the purchase of emission reductions to a value of US$3.9 million over 15 to 20 years in Uganda – the first ever CDM deal in Africa. The emission reductions result from the construction of two small hydropower stations and the rehabilitation of the region’s electricity grid, replacing highly inefficient diesel and petrol-fuelled generators in the Arua and Nebbi districts in the western part of the country.

“The project will bring reliable electric energy to a region of Uganda that is experiencing strong economic growth,” said Manager of the PCF Ken Newcombe. “In combination, international and local investment, clean energy technology to substitute for fossil fuels, and rural economic transformation touch the key elements of the UNFCCC’s Kyoto Protocol.”

The second new PCF project involves the purchase of at least US$3.5 million of emission reductions from the Chile Chacabuquito Hydro project – the first CDM project in Latin America. “We hope that this investment, made possible by the Prototype Carbon Fund, can be the first of many in Latin America,” said World Bank Executive Director representing Chile Mario Soto Platero. “We also hope that the industries that today pollute our world will find ways to reduce their emissions effectively.”

According to the PCF annual report, launched at the current round of climate change talks in Marrakech (see related story), an emission reduction purchase agreement has also been reached with the Liepaja Solid Waste Management Project in Latvia, for the implementation of a self-sustaining modern waste management system for the mitigation and collection of methane emissions, which will be used for electricity and heat generation. There are also a number of projects that are in advanced stages of planning in developing countries and economies in transition, says the report.

The PCF stakeholders consist of 17 private companies, including BP-Amoco and Deutche Bank, and six governments, including those of Canada and Finland, which subscribe to the scheme, and who each receive a pro rata share of the officially certified emissions reductions. Projects that have been cleared by the Participants Committee (PC) include an Indian project to obtain energy from municipal solid waste, renewable energy projects in Costa Rica, and the replacement of coke in pig iron production by charcoal. The PC states that it is keen to encourage smaller projects in order to enable the benefits of the CDM to reach small countries, rural areas, and the poor. One such example is the establishment of micro hydropower in isolated villages in Guatemala, which is currently being implemented.

The PCF programme has three key objectives: to show how project-based greenhouse gas emission reduction transactions can contribute to sustainable development and lower the cost of compliance with the Kyoto Protocol; provide the parties to the UNFCCC and the private sector with the opportunity to learn about the practicalities of Joint Implementation (JI) and the CDM; and to demonstrate how the World Bank can mobilise resources for its borrowing member countries whilst addressing global environmental issues.

“The PCF shows that these mechanisms can be made workable, and that carbon finance can make marginal projects in energy, waste management and forestry more attractive for domestic and international investors,” said Newcombe. “It also proves that such projects can significantly benefit developing countries and countries with economies in transition through the generation of income and the improvement of local environmental and social conditions.”

“Alleviating the crippling effects of climate change on poorer countries will require private as well as public investment,” said World Bank Vice President for Environmentally and Socially Sustainable Development Ian Johnson. “Efficient market-based mechanisms are crucial to lowering the costs of climate change mitigation and to channelling private capital to cleaner technologies and more socially and environmentally sustainable development in our client countries.”

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