Press about Carbon Trading

Inter Press Service

FINANCE-ENVIRONMENT: World Bank Setting Up 'Hot-Air' Fund

By Abid Aslam

WASHINGTON, July 26, 1999 (IPS) - The World Bank is looking for investors in a pioneering scheme to trade emissions of 'greenhouse gases' that are blamed for global warming.

The Bank expects to open its 'Prototype Carbon Fund' (PCF) to a select group of investors in industrialised countries in mid-November and hopes to raise sufficient capital by the end of January 2000 to get the scheme up and running, says Charles Feinstein, chief of the Bank's Global Climate Change Unit.

The PCF, approved by the World Bank's executive board last week, will operate like a mutual fund - except that the securities traded will not be stocks but tonnes of carbon. Investors will help to finance efforts to reduce greenhouse gas emissions in the developing world.

Potential projects, subject to investors' approval, include those in the portfolio of the Bank and the International Finance Corporation, its private sector affiliate, as well as other agencies, says Feinstein.

Eligible investments will include efforts to promote renewable energy such as solar power or to improve existing projects by boosting energy efficiency or replacing 'dirty' technologies with 'clean' alternatives - by switching from incandescent to compact fluorescent light bulbs, for example.

Investors will be rewarded with corresponding 'credits', or licenses to spew equivalent amounts of carbon into the atmosphere. They could use the credits to avoid having to reduce their own emissions, or sell the permits to other companies or countries unable or unwilling to make carbon reductions mandated by the 1997 'Kyoto Protocol' on climate change.

The PCF's maximum capacity has been set at 150 million dollars and officials expect to attract 75-100 million dollars during the first opening. The governments of Finland, the Netherlands, Norway and Sweden have agreed to participate although none has made a binding commitment to invest, according to Feinstein.

Eighteen corporations also have tentatively agreed to sign on, he says. They include British Petroleum (BP); utilities in Denmark, Finland, Norway and Sweden; and major Japanese firms, including Mitsubishi.  ''These are blue-chip firms with significant investment resources but also an underlying interest in the carbon emissions market because they are large-scale energy industries,'' says Feinstein.

The Bank, which has sunk three million dollars into the scheme, expects to recover about 80 percent of its costs through commissions charged on transactions, says PCF team leader Kenneth Newcombe.

Economic analysts say the Bank stands to turn a handsome profit if it remains long enough in the carbon market. By the lending agency's own estimates, trading could reach 150 billion dollars per year by the year 2020.

Market prospects, however, remain uncertain. 'Emissions trading' is permitted under the Kyoto Protocol but signatories have put off deciding the size and rules of the new commerce until late 2000 or early 2001.

At Kyoto, industrialised countries pledged to reduce their emissions to below 1990 levels by 2008. Some countries already have reached this goal but for those that have not, emissions trading is ''a low-pain option'', says Charlie Kronick, director of Britain's Climate Action Network.

''As currently defined, the central feature of an emissions trading regime will allow for notional pollution reductions, where country one can buy the unused emissions of country two,'' Kronick notes. ''In the period up to 2012, this hot-air trading could actually lead to an increase in global emissions.''

Many environmentalists and some European governments favour limiting the amount of a country's reduction target that can be bought on the emissions market but the United States opposes such limits.

Critics assail emissions trading as enabling recalcitrant wealthy countries to effectively 'buy' all their reductions abroad but supporters say the scheme makes economic sense because carbon-reducing projects are cheapest in the Third World.

The scheme ''gives parties an incentive to inflate artificially their baseline figures - that is, the amount of carbon they are actually emitting,'' says Daphne Wysham, research fellow at the Washington-based Institute for Policy Studies.

Under the PCF, Wysham argues, ''the World Bank could exaggerate the progress on carbon reductions by building inefficiency into its own fossil fuel projects...then provide technology or assistance to make these projects more efficient.''

Greenhouse gases are released mainly when fossil fuels such as coal and oil are burned. Most scientists blame them for raising atmospheric temperatures, with far-reaching implications for climate, health, and economic activity.

The world can afford to keep burning fossil fuels at its current rate - releasing six billion tonnes of carbon per year - for less than 40 years before courting major ecosystem damage, according to the environmental group Greenpeace.

Climate change will be felt most by poor countries, the Bank admits. In coming weeks it plans to unveil a new strategy governing its lending for energy projects in the Third World, Eastern Europe and the former Soviet Union.

The strategy, entitled 'Fuel for Thought', is aimed at weaning the Bank off traditional oil and gas projects and promoting cleaner, more sustainable power-generating technologies such as wind and solar power. The World Bank is the largest public financier of power projects in developing countries and has been assailed for financing major polluters - including 1.35 billion dollars for four new coal-fired power plants in
China in the past year alone, according to Wysham.

Bank lending for renewable power projects stands at about eight percent of its energy portfolio and staff members as well as environmentalists have urged that this be increased to at least 20 percent. However, the new document contains ''no targets in terms of dollar values,'' says Feinstein.

''At the end of the day, what matters most is not the amount of money we commit...but also the advice we give borrowers and the extent to which it is heeded,'' he argues. (END/IPS/aa/mk/99)

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Inter Press Service

ENVIRONMENT: World Bank Pushing Pollution Trade Plans

By Abid Aslam

WASHINGTON, Jul 19 (IPS) - The World Bank is pushing plans to set up a market in pollution - despite contention over the methods and merits of such a scheme. The Bank will ask its executive board Tuesday to authorise a 'Prototype Carbon Fund' (PCF), intended to become the model for a worldwide market in licenses to emit 'greenhouse gases' that are blamed for global warming.

The PCF would operate like a mutual fund, except that the securities traded would not be stocks but tonnes of carbon, according to Bank Environment Department Director Robert Watson.  Once approved, the Bank will sink 60-150 million dollars into projects aimed at reducing greenhouse emissions - and creating corresponding 'credits', or licenses to spew equivalent amounts of carbon.

These then would be bought by companies or countries seeking to use the credits to avoid having to reduce their own emissions.  'Emissions trading' is permitted under the 1997 'Kyoto Protocol' on climate change but signatories have put off deciding the size and rules of the new commerce until next year.

''There is a political tug of war still going on,'' acknowledges Ole Kristian Holthe, Norwegian ambassador for the environment. The PCF, however, will provide ''a primer'' - or early lesson - in how the commerce might be conducted.

Greenhouse gases are released mainly when fossil fuels such as coal and oil are burned. Most scientists blame them for raising atmospheric temperatures, with far-reaching implications for climate, health, and economic activity.  ''Fossil-fuel burning from post-1992 World Bank projects will eventually contribute...38 billion tonnes (of carbon), equivalent to 1.7 times the total emitted by all the world's countries in 1996,'' says Daphne Wysham, research fellow at the Institute for Policy Studies here.  

''It is these emissions from which the Bank now hopes to profit'' by charging a commission on trading under its carbon fund, she adds.  Watson says Wysham's figures are inflated but he acknowledges that the Bank has committed six times more money to fossil fuel projects than to renewable energy since 1992. The agency stands to lose - not profit - from the PCF, he adds.  Economic analysts say that will be true only if the lender pulls out of the carbon market early. If it stays in, the Bank stands to reap a five percent return on trading that, by the agency's own estimates, could reach 150 billion dollars per year by 2020.

Lucrative contracts also will be clinched by companies which can verify emissions reductions. This will prove pivotal to the market by establishing the quantity of carbon available for trading.  The first such certificate was awarded Jul 8 to a 23-million- dollar project funded by the multi-donor Global Environment Facility, Mexico and Norway. The Mexican project involved replacing traditional incandescent lightbulbs with energy- efficient compact fluorescent bulbs.  As a result, some 170 tonnes of carbon dioxide emissions were abated between May 1995, when the project began, and the end of 1998, according to Det Norske Veritas (DNV), a Norway-based industrial compliance monitor.

DNV won a 150,000-dollar contract to verify the emissions reductions. The contract was awarded by the World Bank and funded by a Norwegian government trust fund housed at the Bank.  Officials say it is a coincidence that a Norwegian group was given Norwegian funds to verify successes claimed under a project partly funded by Norway but acknowledge that, as a result, DNV is positioned to take an early lead as a certifier in the emerging pollution market.

''The only reason Norway got involved was to produce learning value,'' Holthe says.  The world can afford to keep burning fossil fuels at its current rate - releasing six billion tonnes of carbon per year - for less than 40 years before courting major ecosystem damage, says Matthew Spencer, climate and energy campaigner with Greenpeace UK.

Given the high stakes involved, many environmentalists favour direct state intervention to promote renewable energy and curb fossil fuel use and exploration.

Ideas include taxing - or at least withdrawing public subsidies from - activities that contribute to global warming. In the United States alone, such subsidies amount to 21-36 billion dollars per year, according to the Alliance to Save Energy, a watchdog group.

Worldwide, the subsidies near 300 billion dollars. In developing countries, price controls on kerosene and diesel amounted to 65 billion dollars in 1991, according to the Worldwatch Institute.  Revenue from a tax on international currency transactions, designed to stabilise financial markets by dampening speculation, could be used to fund the transition from fossil to renewable energy, 'greens' argue.

''A tax of merely 0.25 percent would yield 150-200 billion dollars annually,'' says Edward Goldsmith, an editor of the British magazine 'The Ecologist'. Currency trading is estimated at 1.3 trillion dollars per day. 

However, interventions against 'market forces' are not popular in business and policy-making circles, hence the push on behalf of 'market-based' schemes, Spencer notes.

Holthe argues that emissions trading plans show that ''we are approaching the market and industry in a serious and important way to involve them as the key actors that they are.''  Analysts, however, describe the plans as ''a low-pain option'' for those industrialised countries unable or unwilling to commit to carbon reductions at home in the short term.

Demands for a global carbon market have been accommodated ''to ensure and maintain participation in the Kyoto negotiations of the United States - the largest single emitter of greenhouse gases - as well as Canada, Japan, Australia and New Zealand,'' says Charlie Kronick, director of Britain's Climate Action Network.   ''Perhaps the most important feature of (these) flexible mechanisms is the ability to provide overall cost savings to the developed countries that use them,'' Kronick adds.

The problem, he argues, is that ''emissions that are avoided (can simply) be traded back into the atmosphere, with no actual emission reduction taking place.''

(END/IPS/aa/mk/99)

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Inter Press Service

ENVIRONMENT: World Bank to Overhaul Energy Lending Policy

By Abid Aslam

WASHINGTON, Jul 19 (IPS) - The World Bank is looking to overhaul its lending for energy projects, long criticised for favouring heavy polluters and contributing to global warming.  The Bank's 24 executive directors will consider Tuesday a new strategy governing all Bank lending for energy projects in borrowing countries.

Officials say that the new policy, if enacted, will wean the Bank off traditional oil and gas projects and promote lending for cleaner, more sustainable power-generating technologies.  At issue is how the largest public financier of power projects in developing countries can help meet the needs of the world's two billion poor people - most of them in rural areas - who have no electricity, without contributing further to climate change.

Robert Watson, environment department director at the World Bank, says the new strategy will boost Bank investment in renewable energy - including wind, solar and geothermal power, which harnesses heat energy from Earth's crust.    ''If you look at our portfolio now, it's very much project-by-project. We're trying to achieve a more strategic approach overall,''  Watson says.

Environmentalists, in a letter to the executive directors, acknowledge that the new proposals go further than previous ones but complain that:

- The strategy falls short of their demands that the Bank commit at least 20 percent of its energy lending to renewable power projects.

- It contains targets for the number of new-technology and clean-up projects to be started in coming years but provides no clear rules for judging their sustainability, nor for comparing their environmental pedigree to that of older projects.

- It lacks provisions to tally and monitor emissions of 'greenhouse gases'

- blamed for global warming - resulting from Bank loans. These had been requested by activists, environment ministers from the 'Group of Seven' industrial powers and Russia, and Bank President James Wolfensohn.

- Proposed guidelines remain vague and weak on transparency and public accountability.  Before the Bank proceeds any further, it should ''lay out an implementation and monitoring plan which includes an annual review process and provides for the ongoing participation of NGOs,'' or non-governmental organisations, activists say.

Groups signing the letter include Friends of the Earth, the Centre for International Environmental Law and the Sustainable Energy and Economy Network.   The Bank's proposed overhaul is several years in the making and is supposed to have been shaped, partly, by consultations with NGOs and other 'stakeholders' over the past two years.

The environmentalists say in their letter, ''we were alarmed by the Bank's decision to reject a staff recommendation that the document be released to the NGO community in advance of the Board meeting.''   As it happens, the environmentalists received late last week a leaked copy of the strategy paper, entitled 'Fuel for Thought'.

Most scientists say the prime culprits in global warming are the 'greenhouse gases' released mainly when fossil fuels such as coal, oil and gas are burned.   Higher atmospheric temperatures threaten vast portions of the world with extremes of drought and flooding. In some scenarios, entire island nations such as the Maldives could be lost to rising sea levels as Earth's polar ice caps melt.

The Bank and its critics agree that the agency is a leading funder of fossil-fuel projects and the resulting greenhouse gas emissions. Daphne Wysham, research fellow at the Washington-based Institute for Policy Studies, estimates that since 1992 the global lender has ploughed 25 times as much money into fossil fuel projects as it has committed to renewable power efforts.  Wysham also maintains that loans in 1992-97 resulted in the release of 9.5 billion tons of carbon into the air. The Bank, however, says the lending ratio is closer to six-to-one and puts the amount of carbon released at 1.4 billion tons.

''The figures are highly distorted,'' says Watson. But, he acknowledges, ''we are lending more for fossil fuels than for renewables.''    Reformists at the Bank fret about the likely consequences of climate change for poor countries and favour increased energy efficiency and greater use of renewable technologies. However, they are hindered by the lending agency's stated mission of economic development, says Wysham.

''Energy consumption is a key indicator of a nation's economic growth, so it is no surprise that roughly one-fifth of the World Bank's lending goes toward increasing energy and power supply in poor nations,'' she explains.

The NGOs' 20-percent goal for renewable-energy lending enjoys the support of a number of Bank staffers - in fact, they first suggested it in  1997.   The idea was dropped last year amid internal squabbles, however.  As a result, only about eight percent of the Bank's total energy portfolio is allocated to renewable technologies, according to Charles Feinstein, chief of the agency's Global Climate Change Unit.

The latest Bank proposals follow numerous earlier efforts to enact new energy lending policies. Privately, agency staffers agree with outside assessments that these efforts have had limited impact.   Strategy papers and guidelines ''are written by Washington- based policy analysts (but) the core of the Bank's operations lies with its task managers and country directors, who process loans and work directly with officials in developing-country governments,'' notes Christopher Flavin, senior vice president at the Worldwatch Institute, a think-tank here.  ''These managers and their clients view new directives from the policy staff as impediments to their main task - processing loans,'' Flavin argues.

''Indeed, operations staff and client governments have strongly resisted the new energy policy papers.''

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  ROMA: INCONTRO DEDICATO A PETROLIO, AMBIENTE E DIRITTI UMANI

di Gio' Barbera
May, 1999

Presso l’Hotel Nazionale di Roma, si è svolto un incontro dedicato a: "Petrolio, ambiente e diritti umani. Ruolo delle banche multilaterali allo sviluppo e delle imprese". L’iniziativa presieduta dal sen. Maurizio Pieroni (Capogruppo dei senatori verdi) è stata introdotta da Francesco Martone (Coordinatore Campagna per la riforma della Banca mondiale) e Daphne Wysham (Institute for Policy Studies, Washington D.C.). 

Hanno apportato il loro contributo, fra gli altri, il Ministro dell’Ambiente Edo Ronchi, il Sottosegretario agli Esteri Rino Serri, Kpwang Abessolo François (Centre for Environment and Development del Camerun), Oronto Douglas (Environmental Rights Action-Nigeria), Gianni Tognoni (Segretario generale Tribunale permanente dei Popoli) e Zar Ni (Free Burma Coalition). Ha concluso l’incontro il sen.Stefano Boco, Vicepresidente Commissione Esteri del Senato. L’iniziativa è stata organizzata dal Gruppo Parlamentare Verdi, da l’Ulivo del Senato e dalla Campagna per la Riforma della Banca Mondiale. Ma da quali esigenze è scaturita? "Le attività delle imprese multinazionali del settore petrolifero sono state più volte al centro dell’attenzione dell’opinione pubblica per le loro gravi ripercussioni sociali ed ambientali" spiegano i promotori. "Dal delta del Niger in Nigeria il caso degli Ogoni e di Ken Saro Wiwa ha fatto il giro del mondo. Ma esistono al mondo molte altre Nigerie. 

In Ciad ed in Camerun dove la Banca mondiale vuole finanziare imprese multinazionali per l’estrazione di petrolio in zone a rischio, o in Birmania dove la costruzione del gasdotto di Yadana è stata accompagnata da gravi violazioni di diritti umani, quali l’uso di lavoro in schiavitù. Petrolio, quest’oro nero che per alimentare il nostro modello di consumo, è causa di impoverimento per popoli lontani. Al di là di questa riflessione va identificato il ruolo delle imprese italiane che operano in quei Paesi e quello del nostro governo. In molti casi, infatti, queste attività sono sostenute anche attraverso fondi pubblici erogati tramite le banche multilaterali di sviluppo e le agenzie di credito all’esportazione".

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