(Published by Thomson Reuters Point Carbon)
LONDON - The World Bank is considering launching a start-up finance scheme to help emission reduction projects get off the ground in the world's poorest nations, a bank official said.
The bank is mulling plans to provide early-stage finance for new clean development mechanism (CDM) projects in poor countries that may find problems securing investment, Klaus Oppermann, head of the policy team at the World Bank's Climate Finance Unit said in an interview with Point Carbon News.
"We are looking at a facility that may have a strong focus on providing advanced payments on future carbon credits for projects in low-income countries which often have greater commercial risks and find it harder to secure capital," he said.
"This would be a major innovation for us, as even though advanced payments on expected carbon credits have been done by the bank before on a case by case basis, this would be the first carbon-linked facility to focus on this," he added.
Under EU rules, credits from CDM projects registered after 2012 will only be eligible for use in the bloc's carbon market if they are located in countries defined as least developed (LDC) or if the host country has signed a bilateral pact.
However, no such pacts have so far been agreed, leaving buyers concerned that these countries may not have the capacity to meet total demand for CERs after 2012 in the EU's emission trading scheme, the world's main demand centre for credits.
AFRICA
Oppermann said the facility would look to support projects in both LDC, and non-LDC lower-income countries.
"In Africa, particularly, it would be artificial to follow the strict distinctions of which countries are and are not considered LDCs. We want to be broader and to enable the countries that require the most help to continue (in the CDM)," he said.
So far just 25 projects have been registered in LDCs such as Tanzania, Bhutan and Cambodia, according to Thomson Reuters data, while they have yielded just 48,522 certified emission reductions (CERs) out of 611 million issued by the UN to-date.
"There will be a huge challenge to meet potential demand for credits in the EU ETS when the scheme moves towards only accepting CERs from countries that are currently underrepresented in the CDM," Oppermann said.
"Meeting this challenge will require facilitating and simplifying the CDM for low income countries and to establish a type of a fast-track approach for these countries," he added.
LULUCF
The facility may provide advanced payments for credits from forestry and land use-change projects (LULUCF) which, while permitted under the CDM, have not yet been issued with any CERs and are not eligible for use in the European market.
However, the bank wants to be prepared for any future developments or opportunities there may be for carbon credits out of these projects Opperman said.
"We could envisage a scenario in two to three years from now when (credits from) a broader range of LULUCF projects could find a market, even if they are not permitted in the EU-ETS," he added.
No details were revealed about a potential launch, or how much finance it could provide, as the facility is at a very early consultation stage.
"We are working hard with the consultation process," Oppermann said, adding that discussions are taking place between potential fund donors and stakeholders in developing countries.
