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Why is LAC Slow to Tap Carbon Funds?
By Keith R | July 1, 2008
Topics: Climate Change, Economics & the Environment, Environmental Protection | No Comments »
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The Dominican Republic’s Environment Secretariat (SEMARENA) and the United Nations Economic Commission for Latin America and the Caribbean (ECLAC) recently co-hosted an event in Santo Domingo designed to prompt Dominicans into tapping the many international funding opportunities for projects related, directly or directly, to climate change (“carbon markets”).
And well they should! For some reason I have yet to figure out, many Latin American and Caribbean (LAC) nations have been very slow to tap this market even though they may have many, many tasks and potential projects that would meet the funding criteria. Sadly enough, so far only a handful of are tapping this market.
This is particularly true of projects which would qualify for offical “clean development mechanism” (CDM) status under the Kyoto Protocol, whereby someone from another country (so far mostly Europeans, but in the near future probably North Americans as well) finances much of a project in return for getting a “carbon credit” against their own greenhouse gas (GHG) emissions at home (that’s an oversimplification of a complex process, but it gives you the gist of it).
As of early June 2008, the UN Environment Programme’s (UNEP) Riso Centre that tracks such things reports that four countries — Brazil, China, India and Mexico — account for 80% of CDM projects in the pipeline; 75.6% of projects are in Asia and the Pacific vs. 20.1% in Latin America and the Caribbean (LAC). Brazil and Mexico together account for 66% of the LAC projects in the pipeline (see pie chart). Chile is finally showing leadership at 8% of LAC projects, followed by Argentina and Colombia, trailed by Ecuador, Honduras, Peru and Guatemala. The Caribbean states, much of Central America, and Bolivia, Paraguay and Uruguay, are notable by their absence.
Why is this so?
There’s not a single, easy answer to that. In some cases there may still be incomplete knowledge about the funding possibilities, although it almost seems as though if you are an environment, forestry or waste management official in a developing country these days, you’d have to have been hiding under a rock not to know about many of the funds.
Which leads to reason #2: many officials know of the funding sources, but do not have the resources on-hand (often a personnel limitation more than anything else) to get the word out and then help shepard projects through the (sometimes confusing) process.
A third reason I sometimes hear is the local lack of the technical backup needed to get through the carbon credit certification process — which is why the recent announcement that Spain is helping build and man labs for this purpose (and related purposes) throughout LAC is welcome news.
A fourth reason I have heard is while LAC has many potential projects, many of those actually submitted for consideration are too poorly or inadequately designed and/or documented to win certification.
In any case, there now are many, many different types of “carbon financing” available — by SEMARENA’s reckoning, about US$732.5 million and 151 million Euros. You can download a PDF (in Spanish) of Environment Secretary Omar Ramírez Tejada presentation outlining all the funding sources available, including some particular to the DR. For those of you who cannot read Spanish, Temas provides you with most of the same list here in English with appropriate links:
- The Community Development Carbon Fund (CDCF): US$128.6 million fund capitalized by 9 governments and 16 corporations/organizations that emphasizes improving poor communities while reducing carbon emissions (“development plus carbon credits”);
- BioCarbon Fund: US$44 million fund operated by the World Bank that focuses on sequestering or conserving carbon through forestry and agricultural projects;
- The World Bank’s US$180 million Prototype Carbon Fund (PCF): seeks to generate purchaseable CDM and joint inplementation (JI) certified emission reduction (CER) credits (primarily from European buyers) through “learning-by-doing” public-private partnerships;
- The Netherlands CDM Facility (NCDMF): US$46 million managed by the World Bank’s International Finance Corporation (IFC) that seeks to develope CERs from (1) renewable energy technology, such as geothermal, wind, solar, and small-scale hydro-power; (2) clean, sustainably grown biomass (no waste); (3) energy efficiency improvement; (4) fossil fuel switch and methane recovery; (5) sequestration.
- The Italian Carbon Fund: US$15 milion fund managed by IFC to invest in CDM projects that generate CERs Italian firms will purchase.
- The Danish Carbon Fund (DCF): US$68.5 million fund managed by the World Bank and IFC as trustees, with two public (Ministries of Environment & Foreign Affairs) and four private sector participants. The DCF prefers CDM or JI projects involving wind power, combined heat and power (co-generation), hydropower, biomass or landfills.
- The Spanish Carbon Fund (SCF): US$278.6 million fund for projects will be open to purchase by Spanish entities. The SCF prefers projects for renewable energy; co-generation using biomass or agricultural wastes (generation of heat and electricity using crop waste such as rice husks, sugar cane bagasse, paper plant residues) or wastewater treatment or solid waste management; reducing end-of-pipe GHG emissions by industry.
- The just launched Forest Carbon Partnership Facility (FCPF): overseen by the World Bank, it will focuss on so-called reduced emissions from deforestation and degradation (REDD) projects;
- Carbon Fund for Europe (CFE): 105 million Euros fund co-managed by the World Bank and the European Investment Bank (EIB) intended to help participants from Ireland, Belgium, Norway, Luxembourg and Portugal meet their Kyoto Protocol obligations and commitments to the European Union’s (EU) Emissions Trading System (ETS).
- Austrian JI/CDM Programme: 36 million Euros program buys CERs to help Austria fulfill its Kyoto commitment.
- The Corporation for Andean Finance’s (CAF) Latin American Carbon Program (PLAC), funded by the Dutch Government, which will seek carbon credit generating projects in Latin America in the energy, mass transport, industry and waste management sectors.
- Deustche Bank, which has been a heavy buyer of carbon credits.
Secretary Ramírez Tejada also mentioned the Belgian JI/CDM Programme, but that one has already closed for submission of new projects.
I find it odd that the Secretary did not mention another, unique funding source open to projects from developing countries: the United Nations Development Programs’s (UNDP) MDG Carbon Facility. [All the more odd, with the UNDP rep there by his side.] The UNDP facility helps countries apply for and win carbon financing for projects that not only reduce GHG emissions, but also support achievement of one or more of the Millennium Development Goals (MDGs), such as access to improved sanitation, access to potable water, etc
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From the Environment and Natural Resources Secretariat (SEMARENA):
El Secretario de Estado de Medio Ambiente y Recursos Naturales, Omar Ramírez Tejada, dijo este jueves que los mercados de carbono tienen recursos ascendentes a 732.5 millones de dólares y 151 de euros que pueden ser utilizados para reducir las emisiones de gases de efecto invernadero y transferir recursos financieros y tecnología no contaminante al mundo en desarrollo.
Ramírez Tejada explicó que Los mercados del carbono se basan en el concepto de reducciones de GHGs. El mayor mercado del carbono está designado para complementar las acciones domésticas para reducir las emisiones bajo el Protocolo de Kyoto.
El funcionario habló al dictar la conferencia “Los Mecanismos Financieros del Cambio Climático” que tuvo lugar en un hotel de la Capital. El acto formó parte de las actividades organizadas en el marco de la reunión de la CEPAL que se desarrolla en el país.
Dijo que los sectores en los que pueden colocarse las inversiones son energía limpia, reducción de emisiones de carbono, fomento de nuevas tecnologías, prevención de la deforestación y adaptación a los riesgos climáticos, entre otros.
Ramírez Tejada identificó las fuentes o instituciones con
fondos disponibles para lograr financiamiento para proyectos de Mecanismo de Desarrollo Limpio (MDL) entre los que citó al Fondo Prototipo de Carbono (PCF) lanzado por el Banco Mundial en Abril del 2000 y el Fondo de Carbono Europeo.
Además está el Bio Carbón Fund, el Fondo del Carbono para el Desarrollo comunitario (FCDC), Fondo del Biocarbono (BioCF), el IFC Netherlarnds Carbon Facility, el Fondo Prototipo de Carbono, el Fondo Italiano de Carbono, el Netherlands Clean Development Facility (NCDF) y el Fondo Danés de Carbono.
El Secretario de Medio Ambiente explicó que en el plano local existen diversos proyectos orientados a mitigar los daños causados por las emisiones de Gases de Efectos Invernadero, tales como el Fondo de Áreas Protegidas (FAP), el Fondo Plan Quisqueya Verde, el Fondo de Pago por Servicios Ambientales Hídricos de las Cuencas de los ríos Yaque del Norte y Yaque del Sur y el Fondo Fideicomiso.
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