World Bank seeks EU investors for LDC CDM fund
The World Bank is seeking investment from Europe's large utilities, industry and governments for UN clean development mechanism (CDM) projects in some of the world's least-developed countries.
From January 2013, only emissions offset credits from the UN's list of least-developed countries (LDCs) will be tradable within the EU's carbon market. The World Bank is targeting what it perceives as "stayers" in the carbon market to invest in its Carbon Fund.
A source at one of Europe's biggest utilities confirmed that its company is talking to the World Bank about investing through the bank in CDM in LDCs for the post-2012 period.
The World Bank's political clout makes it the most important player in the CDM arena and a valuable partner, the source said.
Under the terms of the Carbon Fund, investors will provide resources for carbon asset creation in low-income countries, in exchange for a right of first refusal to sign an Emissions Reduction Purchase Agreement forward contract once the project reaches validation.
The Carbon Fund, part of the bank's Carbon Initiative for Development (Ci-Dev), is focussed on CDM projects that create UN-backed certified emission reduction units (CERs), but it will broaden its reach as and new market mechanisms become eligible for compliance.
"The focus of Ci-Dev is on LDCs because that's where the market exists today with the EU emissions trading system. We're looking at a range of projects in a number of countries with a particular focus on renewable energy and renewable energy access," Brice Quesnel, head of Ci-Dev, told ICIS Heren.
The bank has five such projects under development in LDCs including Bangladesh, Nepal and Mali.
Ci-Dev was launched in December at the UN climate talks in Durban and also contains a 'readiness fund', aimed at developing new project methodologies and standardised baselines for the CDM. The money will also be targeted at the design of new market mechanisms.
Fewer than 1% of CDM projects registered to date are in LDCs. The vast majority of LDCs have no CDM projects.
UN data shows that even though the EU - by far the biggest market in the world for CERs - has signalled that it will not accept CERs from countries other than LDCs after this year, project developers are still scrambling to register projects in non-LDC locations, which are widely perceived as less risky for investors.
In the second half of 2011, just 25 out of 1,242 projects in LDCs were submitted to the UN for validation, the step that precedes registration. VF
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24 May 2012 21:02
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