The Forest Carbon Partnership Facility (FCPF), announced by the
World Bank on Thursday, will be part of UN climate change negotiations
in Bali in December to shape a global agreement for when the Kyoto
Protocol expires in 2012.
"A lot will depend on what the global
agreement will be, but we think potentially this could yield a lot of
money," Joelle Chassard, manager of the World Bank's carbon finance
unit, told Reuters in an interview.
Chassard said the new facility would provide financial incentives to reduce greenhouse gas emissions from deforestation.
The facility has already attracted interest from more than a dozen
developing countries including Indonesia, Brazil and several in
Africa's Congo River basin. The bank expects to first test the
mechanism in three to five countries.
Deforestation contributes 20 percent of total greenhouse gas
emissions, more than all the world's cars, trucks, trains and airplanes
combined. Environmental groups say that protecting tropical forests
from cutting and burning is the most direct and fastest way to mitigate
some of the impact of climate change.
By creating economic value for tropical forests, the facility can
help developing countries such as Liberia, Democratic Republic of
Congo, Guyana, Suriname and others generate new revenue for poverty
alleviation while maintaining the natural benefits such as fresh water,
food and medicines that the forests provide local populations.
Chassard described the new facility as a research and development
tool to determine practical responses to the problem of deforestation.
She said the facility would test mechanisms that could encourage
governments to reduce deforestation.
Part of the testing involves providing participating countries with
the means to prove they are reducing rates of deforestation.
"It will involve a lot of work on the ground with countries to
establish both a physical and institutional infrastructure to
demonstrate that they actually avoid deforestation," she said.
"Countries will have to demonstrate that physically they have reduced
the rate of deforestation."
Such a task will not be easy, Chassard acknowledged. It will require
countries to determine the present state of their forests in order to
measure future deforestation rates, she said. In addition, they have to
establish the carbon content in forests where not all trees are equal
storehouses, she added.
"Countries will need to have the means to ensure they are managing
the rate of deforestation throughout the country. You don't want to
preserve forests in one part of the country when another region is
being cut significantly," she added.
The fund initially will have US$300 million to finance emission
reductions and help prepare countries with the necessary tools to
monitor the forests.
The global carbon market grew to an estimated US$30 billion last year, three times than in 2005.
Carbon funds were created under the Kyoto Protocol as a way to
reduce carbon emissions by encouraging governments and the private
sector to offset their climate footprint by purchasing carbon credits.
Separately, the World Bank also announced the Carbon Partnership
Facility, which will purchase carbon credits from a pool of emission
reduction programs instead of the current system of one project at a
time.
The facility is expected to be used in power sector development,
energy efficiency, gas flaring, transport, and urban development.
"The CPF is significant because instead of purchasing greenhouse gas
emission reductions from one project at a time, say reducing methane
emissions from a landfill, we will be able to work on 10 projects
simultaneously across a country or a region," said Katherine Sierra,
World Bank vice president for sustainable development.
"We will also be able to purchase greenhouse gas emissions far
beyond 2012, which will help to remove some of the uncertainty
currently surrounding the post-Kyoto Protocol era," she added.
Story by Lesley Wroughton
REUTERS