Saturday, March 17, 2007

Make Markets Work for Climate

This was a major event, so I report on it in some detail. (It came ot my attention only recently.)

Make Markets Work for Climate
October 16, 2006

Opening Session

Katherine Sierra
World Bank Vice President for Sustainable Development

The first major point was delivered right a way and it sounds like this:
On the short term fossil fuel should be part of the mix. Reason? We need to serve the "1.6 billion people in the developing world" who "have no access to modern energy sources."
Also, transformation to low carbon economy is not possible in that same term.

The "investment gap" for developing countries as a whole is about "$80 billion a year, in order to get access to energy services and generate growth."

Ms Sierra also addressed and encouraged the "good samaritan" company representative saying: "The companies and private institutions present here have realized the real meaning of Corporate Social Responsibility. They have shown leadership and courage in making viable the idea that what is good for business and communities can also be good for the climate."

This, though rhetoric and wishful in nature in nature, carries a further important message. The World Bank will expect that private companies will pick up the slack that is currently created by governments arguing issues to pretty much death.

Snapshot of the Carbon Economy today

13 governments and 62 private sector companies, a $10 billion market, 57 projects with carbon contracts, allocated World Bank funds: $1,2 billion.

"The first carbon fund – the Prototype Carbon Fund – was conceived in late 1999 several years before the Kyoto Protocol eventually entered into force. The Government of the Netherlands, along with other European governments and a cross-section of European and Japanese companies, some of them represented here today, joined hands together with the Bank as pioneers in the carbon market.

Seven years later, a market with a volume that surpassed $10 billion last year has the potential to double in 2006. The Bank manages nine carbon funds and facilities on behalf of 13 governments and 62 private sector companies. The funds have a value of about $1.9 billion. More than $1.2 billion has been allocated to 57 projects for which carbon contracts have been signed."

The profile of the market: (1) waste management; such as "solid waste land fills, waste water, and agricultural refuse." (2) small scale renewable energy; (3) forestry; (4) chemicals.

The sad realisation ...

We need large scale renewable energy in the mix NOW, because of "the long lead times associated with these projects – it takes anywhere between three to five years to obtain financing, get the necessary licenses and clearances, and complete construction before emission reductions can be generated."

2006 plus 5 years is 2011. The Kyoto protocol deadline for setting up operational large scale renewables is 2012. The window of opportunity therefore is one year.

However ...

The long term framework for low carbon market is already in the making. This could be good news, but not if it is built (as is the case now) on shifting sand. So what else we can do? We should hang on to being innovative.

There is a current whole in the Kyoto Protocol, let's plug it in. Deforestation in the tropics amounts to about 20% in greenhouse emission, yet for some reason there is no incentive in the Protocol for these countries to protect their old growth rainforests. Don't ask how that happened. The directive to plug the whole in does not cost a red cent. Yet when implemented, a whopping 20% could potentially be cut from the emission. (Being innovative offers quite an attractive cost-benefit ratio ...)

My comments

Encouraging? Depends what you make of it. It certainly is a frank assessment. The wishful forecast was that the Carbon Economy might double in the next year.

I think that would be a good trend. A doubling in volume every year for the next 5 years could create a ripple on effect to a point where that economy would automatically transform itself into a Low Carbon Economy. (I just don't think that we should discount internal mechanics of any mature robust market.) Signs of large scale renewable investments and practical interest from PPPs NGOs would then start to become more evident. That might also become the point when for governments - finally - it will become sexy to contribute 30-50% to private investment.

Matching citizens' investment dollar for dollar in Low Carbon Green Economy could effectively double starting capitals.

Meaning in simple terms, that the volume of the economy could still continue to double into the foreseeable future.


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