The Challenge of Low-Carbon Development - World Bank Internet ...

demonstration initiative. The Community DevelopmentCarbon Fund and the BioCarbon Fund have strong, explicitdemonstration goals. The other Kyoto Funds are stronglyoriented toward helping developed countries secure carboncredits for compliance purpose. The newer initiatives, theCarbon Partnership Facility and Forest Carbon PartnershipFacility, return to the pioneering mode in seeking to demonstratenovel kinds of carbon transactions not yet recognizedunder Kyoto.The new facilities also feature equal representation of donorand host countries in fund governance. In contrast, earlierfunds were governed by a committee of the participants(donors), though in consultation with host countries.Catalytic impact on the carbon marketThe CFU played an important role in catalyzing the emergenceof the market. Although there had been earliercarbon transactions (including Costa Rica’s pioneering saleof forest carbon credits), observers point to the PCF’s earlymobilization of funds and private sector investors as galvanizingthe realization that carbon markets were workable.The PCF invested heavily in developing monitoring andverification tools and in the legal apparatus for transactingoffsets, which were diffused among practitioners in theemerging market.The CFU was important in catalyzing theemergence of the carbon market and activein developing methodologies for carbonoffset measurement.The CFU was active in developing methodologies for carbonoffset measurement, though not uniquely so. As notedin box 5.2, development of a validation methodology is akind of public good: it cuts the development time, risk, andcost for all subsequent projects that use the same technology.In the first five rounds of the CDM’s MethodologicalPanel, the WBG was responsible for 12 of the 44 submittedmethodologies and for 6 of the 22 that were approved.Altogether, for large scale energy and transport technologies,the CFU has been involved in the preparation of 45 methodologies,of which 16 were eventually approved. Those methodologieshave been used so far in registered energy andtransport projects that are expected to produce 137 milliontons CO 2e, or about 10 percent of the CDM total for thesecategories. The CFU has also proposed most of the acceptedforestry methodologies, though there have been few otherusers of these and many small-scale methodologies. Currentwork on the Forest Carbon Partnership Facility and CarbonPartnership Facility aims at facilitating the development ofradically new approaches to the carbon market that work atscales much larger than site-specific projects.From the beginning, there was concern about whether theBank’s carbon funds would spur private sector participationor crowd it out—especially given the Bank’s perceived clout.UNFCCC statistics show that, using registered projects ortons as a measure, the Bank’s market share rapidly dwindled(figure 5.2). There was a surge of project registrationswhen the Kyoto Protocol came into force in 2005, so that by2005 the World Bank comprised only a small share of themarket. That being so, one could question the relevance ofthe 2005 goal of helping countries to market carbon credits,as a vibrant market was already emerging at the time.The World Bank’s market share of CDMprojects dwindled rapidly over time as avibrant market emerged.One way to assess the CFU’s demonstration effect on additionalityis to compare its relative success in securing CDMregistration. Registration is a measure of a project’s quality,including its stringency in determining additionality. TheCFU’s ratio of problematic to registered projects is smallerthan that of the CDM at large (table 5.2).Figure 5.2World Bank Share of CDM Projectsand Tons RegisteredPanel A. Registered projects (log scale)Registered CDM, number1,0001001012004 2005 2006 2007 2008 2009Registration, yearPanel B: CERs registeredCER by 2020 (tCO 2 ) (millions)1,2001,0008006004002000OtherWBG2004 2005 2006 2007 2008 2009Registration, yearOtherWBGSource: Calculated by IEG based on IGES Oct 2009, IGES as ofOctober 2009.Note: CDM = Clean Development Mechanism; CER = certifiedemission reduction.Special Topics | 75