A Critical Conversation on Climate Change ... - Green Choices

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180 development dialogue september 2006 – carbon tradingBank, among others, recognised early on. Only months after the2001 Marrakech Accords laid down the rule book for the CDM,the consultancy Ecofys had already concluded that there would beonly a ‘limited role for renewable energy projects under… KyotoMechanisms dominated by least-cost approaches’. 418 More recently,the World Bank explicitly called attention to the ‘the non-economic’nature of the renewable projects in the CDM portfolio, noting thatthe current proportion of renewable energy projects is bound to diminishin the ‘mature CDM market’. 419Among registered CDM project types, only energy efficiency schemeshave produced fewer credits (less than 1 million tonnes of CO 2equivalent) than renewables. Calculations by the World Wide Fundfor Nature (WWF) show that the amount of financing expected tobe mobilised by the CDM for renewable energy is a fraction not onlyof existing investment and Overseas Development Assistance (ODA)flows, but also of Global Environment Facility (GEF) financing forrenewable energy. WWF estimates that the CDM will account for lessthan 0.5 per cent of the annual renewable energy market in Southerncountries if current trends continue. 420When investors do put money into renewable energy schemes, theyare treating them mainly as green decorations for portfolios dominatedby conventional energy rather than as sober market investments.The Finnish government, for example, submitted four micro-hydroprojects in Honduras to the CDM, yet their credit generation is sosmall – one project is claiming to generate only 9,000 tonnes of CO 2credits over 10 years – that it is difficult to see how credit sales couldeven cover transaction costs. 421 Similarly, the minimum price tagfor certifying a CDM project in South Africa – estimated at around40,000 rand/usd 6,300 – puts carbon finance out of reach of mostsmall-scale renewable energy project developers. 422Centre for Science andEnvironmentBut don’t the Southern governments hosting CDM projects want them to beof more long-term value to their peoples?Some might like it to be that way, but that’s not how the market works.If host countries started trying to enforce ‘sustainable development’criteria, transaction costs would go up and their projects would beless likely to attract investment. Unsurprisingly, CDM host countrieshaven’t been very insistent on promoting renewable energy or other‘high-quality’ CDM projects capable of driving innovation andstrategic change.In sum, CDM is not a renewable energy promotion instrument ora ‘sustainable development’ fund. It identifies and funds low-cost
lessons unlearned 181carbon credits rather than investments that drive strategic change inenergy and transport.Still, it must be better than nothing.‘A mechanism designed to promote climate protection,’ as CDM expertBen Pearson puts it, ‘should be reducing the number of coal andoil projects, not providing them with a new revenue stream and divertingfinancing from renewable projects.’ The technology the CDMpromotes merely embroiders an overwhelmingly fossil-oriented approachto energy and transport. Nearly every institution that investsin the CDM market is investing far more in the fossil fuel market.It’s useful to return once again to the example of the World Bank. Manycorporate investors in the Prototype Carbon Fund (PCF) – the Bank’sflagship carbon fund – are in fact receiving far greater amounts of Bankfinancing for fossil fuel projects that produce emissions (Table 4).Table 4CorporationPCF contribution for CDM andJI projects 1999–2004 423(USD million)Received from WB forfossil fuel projects1992–2002(USD million) 424Mitsui 17 481 1,807.5BP 5 938.8Mitsubishi 5 403.6Deutsche Bank 5 165.6Gaz de France 5 138.9RWE 5 138.9Statoil 5 242.3Total 46 3,834.6The involvement of BP and Statoil in the PCF is particularly notablegiven the ongoing financial support by the Bank’s InternationalFinance Corporation (IFC) for their efforts to open up the massiveAzerbaijan oil fields for consumption in Western Europe and the US.In October 2003, BP and Statoil were part of a group of corporationswho received usd 120 million from the IFC for development ofthe Azeri-Chirag-Guneshli oil fields in Azerbaijan. Greenhouse gasemissions from the oil produced by this project will be over 2,000million tonnes carbon dioxide over 20 years. In November 2003, theIFC approved another usd 125 million for the Baku-Ceyhan pipelinebetween Azerbaijan and Turkey, whose investment consortium isagain led by BP. An estimated three billion tonnes of carbon dioxidewill be released to the atmosphere through the burning of the oil thatwill be transported by the pipeline.
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PRESS RELEASEContact:Linda Chiavaro
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ContentsEditorial note 2Chapter 1 I
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editorial note 3in Dorset, UK - poi
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6 development dialogue september 20
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Chapter 2‘Made in the USA’A sho
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‘made in the usa’ - a short his
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Chapter 5Ways forwardIn which the c
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ways forward 331‘Tinkering around
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ways forward 333suggests that the
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ways forward 335more stringent than
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ways forward 337Unlike carbon tradi
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ways forward 339hold little appeal
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ways forward 341Waiting their Chanc
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ways forward 343ways - many of whic
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ways forward 345energy - loan benef
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ways forward 347From an Open Letter
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ways forward 349be answered in the
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ways forward 351rogated by Indian v
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ways forward 353argue, they’ve he
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ways forward 355‘The US alone acc
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appendix - the durban declaration o
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appendix - the durban declaration o
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A Critical Conversation on Climate Change ... - Green Choices

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