Department of State Washington File: Text: World Bank Launches Carbon Fund to Combat Rural Poverty

*EPF310 11/06/2002
Text: World Bank Launches Carbon Fund to Combat Rural Poverty
(Farmers can earn income from sequestering carbon in vegetation and soils) (1410)

A carbon fund launched by the World Bank will provide financing for reducing greenhouse gas emissions while at the same time helping to improve soil fertility, crop growth and biodiversity in developing countries.

A November 5 press release says the new $100 million BioCarbon Fund �� a public-private partnership �� will permit developing country farmers and rural communities to earn income from sequestering or conserving carbon in their agricultural lands and forests.

According to the release, about a fifth of the atmospheric buildup of greenhouse gases �� especially carbon dioxide that is linked to global warming �� is derived from land-clearing and other land management practices. Activities to retain the amount of carbon in vegetation or soils, as through reduced tillage, or to increase its absorption from the atmosphere, as through reforestation, make a significant contribution to combating climate change.

Fourteen companies, ranging from utilities to insurance companies, have already indicated their interest in participating in the fund. These potential participants are interested in obtaining emissions reduction credits that they may be able to use to meet regulatory requirements or voluntary commitments to reduce their greenhouse gas emissions. The Kyoto Protocol commits 37 industrialized countries to reduce their overall emissions of carbon dioxide and other greenhouse gases during the period 2008 to 2012.

"From the perspective of a development bank, carbon sequestration offers the greatest convergence between the carbon emissions reduction market and sustainable development," said Ken Newcombe, the World Bank's senior manager for carbon finance.

He said there is no shortage of potential developing world projects that may qualify for private sector funding, such as a Kenyan project that seeks to store and retain carbon across whole landscapes through agroforestry, planting legume trees to improve soil fertility and conservation tillage.

Following is the text of the press release:

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LAUNCH OF $100 MILLION BIOCARBON FUND PROVIDES NEW OPPORTUNITIES FOR RURAL POOR

Tokyo, Japan, November 5 -- A new carbon fund launched by the World Bank today will create an unprecedented opportunity for the poorest farmers and rural communities all over the developing world. The US$100 million BioCarbon Fund, a public/private partnership, will provide finance for reducing greenhouse gas emissions. Farmers and rural communities will find new value in their agricultural lands and forests as they earn income from sequestering or conserving carbon. Combating rural poverty and stabilizing rural economies are among the biggest challenges facing developing countries.

Every year 20 times more carbon is exchanged between the atmosphere and the Earth's vegetation and soils than is released from fossil fuels. About a fifth of the build-up of greenhouse gases in the atmosphere is derived from land-clearing and other land management practices. Activities to retain (e.g. reduced tillage) or increase (e.g. reforestation) the amount of carbon in vegetation or soils -- referred to as ��sinks' -- can make a significant contribution to combating climate change. Many of these activities have additional benefits, such as improving soil fertility, improving crop growth, providing non-timber forest products and maintaining biodiversity.

"The BioCarbon Fund is an innovative example of making markets for global public goods," said Ian Johnson, World Bank Vice President for Sustainable Development. "The Biocarbon Fund puts it all together by meeting the triple goal of reducing greenhouse gases in the atmosphere while reversing land degradation, conserving biodiversity, and improving the livelihoods of local communities in poor countries"

The biggest winners will be developing countries that until now have been bypassed by direct private sector carbon dollar investment. A recent World Bank study established that only 13 percent of all direct private sector carbon emission reduction dollars go to the developing world. "The BioCarbon fund will make large parts of the developing world attractive for carbon investors, especially those countries with effective regulatory and institutional frameworks," said Daniel Murdiyarso, a professor at Bogor Agricultural University in Indonesia, and a member of the BioCarbon Fund's Technical Advisory Committee.

The threat climate change poses to long-term development and the ability of the poor to escape from poverty is of particular concern to the World Bank. "From the perspective of a development bank, carbon sequestration offers the greatest convergence between the carbon emission reduction market and sustainable development," said Ken Newcombe, the World Bank's Senior Manager for Carbon Finance. "Take the tantalizing image of private sector dollars flowing into such projects in the rural areas of the poorest countries. For example, in the Africa context we've already got a potential flow of projects even before we're out of the starting blocks." These include a Kenyan project that seeks to store and retain carbon across whole landscapes through agroforestry, planting legume trees to improve soil fertility, and conservation tillage. Another project in Uganda would establish plantations of indigenous tree species to create ��natural' forest buffers around encroached areas of land within two national parks. Local people will be able to collect non-timber products from these forests.

Fourteen companies and governments have already indicated their interest in being pioneers in the ��sinks' business, and have signed a Memorandum of Understanding with the BioCarbon Fund. The signatories range from power utilities to insurance companies, and include Caisse des Depots et Consignations and Eco-Carbone from France; Japanese utilities Chugoku, Shikoku, Okinawa, and Tokyo Electric; as well as Mitsui and Company, Marsh Specialty Operations, the Rabobank of the Netherlands, Suncor Energy of Canada, St Microelectronics, the global reinsurer Swiss Re, and Sustainable Forest Management. These potential participants are interested in obtaining emission reductions, or carbon credits that they may be able to use to meet regulatory requirements or voluntary commitments to reduce greenhouse gas emissions. These companies are also seeking to contribute to sustainable development and biodiversity conservation.

The BioCarbon Fund will complement the two other World Bank managed carbon funds -- the flagship Prototype Carbon Fund (PCF), and the Community Development Carbon Fund (CDCF) launched in September at the World Summit on Sustainable Development. Like the PCF, the BioCarbon Fund will be a prototype fund in that it is designed to learn from the experience of doing real projects in real communities. However, the BioCarbon Fund will focus on sink-related projects, whereas the PCF deals mainly with energy related projects. "The BioCarbon Fund is unique in that it will have two ��windows' for projects," said Newcombe. "One class of projects will be Kyoto compliant. But the second window will explore options that take us beyond the Kyoto negotiations and seek to extend the benefits that can flow from carbon finance." Much of the experience from the BioCarbon Fund will be transferred to the CDCF, which seeks to provide carbon finance to small-scale energy and biocarbon projects in the least developed countries.

Why the World Bank is concerned about climate change?

Climate change, and accompanying disrupted weather patterns -- caused by the greenhouse effect through atmospheric loading of greenhouse gases -- could wreak havoc on the planet, particularly parts of the developing world. The impacts of climate change will put the poor of the developing world at even greater risk. The carbon finance activities of the World Bank are a natural extension of the Bank's mission to alleviate poverty. The Bank makes every effort to ensure that poor countries can benefit from international responses to climate change including the emerging carbon market for greenhouse gas emission reductions.

Two windows for the Biocarbon Fund

The BioCarbon Fund will focus on projects that wouldn't happen without the incentive provided by carbon finance. The Fund will have two windows.

The first will provide emission reductions potentially eligible for credit under the Kyoto Protocol. These are limited to afforestation and reforestation activities in the first commitment period. The types of projects may include:

Small-scale reforestation projects to restore landscape stability by reducing erosion and providing windbreaks.

Agroforestry projects such as shade coffee, intercropping of trees with other crops, and the establishment of trees to help restore grazing lands.

Small-scale, community-promoted plantations for timber, biofuel, and other forest products that fit within a broader landscape design.

Improved forest management to enhance carbon storage in countries with economies in transition.

The second window will explore options for carbon credits that, while meeting the triple goals of the BioCarbon Fund, achieve them by activities other than afforestation and reforestation. These projects produce emission reductions that may be creditable under emerging carbon management programs. The types of projects may include:

Restoration of degraded forests in developing countries by improved forest management and replanting.

Rehabilitation of dryland grazing lands by establishing shrubs and improving soil carbon.

The protection of forest fragments within a wider landscape management plan.

For more information, please visit: http://www.biocarbonfund.org

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(Distributed by the Office of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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