A controversial carbon fund by the World Bank will open for business in April 2000, the “Prototype Carbon Fund.” With the U.S. notably absent, the fund is being supported by four countries, Finland, the Netherlands, Norway, and Sweden, and electric power/trading companies in Japan and Belgium. Under the plan, each country invests up to $10 million and each company, up to $5 million. The money goes toward clean technology projects in developing countries and transition economies in eastern and central Europe in exchange for emissions credits which can be used to meet Kyoto Protocol obligations. The World Bank acts as intermediary and negotiates the prices between the country or company and the recipient entity.
The Bank hopes to fund 20 renewable energy projects over the next three years and to withdraw as intermediary once the private sector begins to play a significant role through the open market. So far, four governments and nine companies have agreed to participate, a total of US$85 million. The Fund is capped US$150 million and is scheduled to terminate in 2012.
A solid waste management project in Latvia is the first recipient. Investors will finance sanitary landfills with methane catchment, an improvement over the country’s current open dump sites. Investors will receive credits equal to the amount of emissions reduced through the project. A renewable energy fund in Costa Rica has also been approved for funding.
84 countries have signed the 1997 Kyoto Protocol treaty. Until the treaty is legally binding there is a risk that the emissions credits generated will have no value. Most participants agree, however, that eventually emission reductions will be mandated in some form.
U.S. private sector industry players question whether operating a fund is an appropriate role for the World Bank. Says Michael Marvin, president of the Business Council for Sustainable Energy, the Bank should “finance more clean energy projects rather than create, operate and control a fund.” Others see the move as competing with the private sector, and possibly hindering the emergence of the greenhouse emissions trading market.
James Wolfensohn, World Bank president insists the intention is to catalyze the market and the Bank will exit when the private sector market gets off the ground. “We are concerned about the vulnerability of poor people in poor countries to the threat of climate change. For an institution whose task is to alleviate poverty, we would be negligent if we failed to explore innovative ways of making the climate change convention work.”
Prototype Carbon Fund: [sorry this link is no longer available]
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