The Challenge of Low-Carbon Development - World Bank Internet ...

Impacts on technology transferThe 2005 goals called for the CFU to “expand the technologyfrontiers of the carbon market to ensure that carbonfinance and carbon trade supports energy infrastructureand technology transfer.” Energy technology constitutesa minority of total CERs under contract. The largest energysubsectors are hydropower at 6 percent of the overallpost-2004 portfolio, landfill gas (6 percent), energyefficiency (4 percent), and methane avoidance (3 percent).Biomass, geothermal, and wind are about 1 percent each.The degree of emphasis on technology transfer varies.The CFU has had an active role in the diffusion of landfillgas technology. The Jepirachi Wind Farm Project was thefirst grid-connected wind farm in Colombia; its operationprovided useful lessons on adapting turbine operations tothe coastal region’s distinctive climate conditions (Pinilla,Rodriguez, and Trujillo 2009). In contrast, hydropowerwas already well established in Chile and China before theBank’s carbon projects arrived in those countries.CDM project proponents must note technology transfer intheir project design document. Seres and Haites (2008) reviewedthese documents for all CDM projects in the pipelineas of June 2008. IEG reviewed the categorization of the59 WBG-sponsored projects in their database. Nineteenspecifically mentioned technology transfer, a slightly smallerproportion than the 36 percent in the overall sample. Ofthe 19, there were 6 landfill gas, 5 wind, 4 energy efficiency,2 biogas, and 2 industrial gas projects. Eight cases involvedequipment transfer only, 7 knowledge only, and 4 equipmentand knowledge. Nepal was the only low-incomecountry in this group.Almost two-thirds of the CERs under contract were forChinese reductions of HFC-23, a highly potent, industriallygenerated GHG. HFC-23 is a by-product of refrigerant productionand can be abated at very low cost. This purchasegenerated a large pulse of offsets at a time when there wasincreasing pressure on the Bank to deliver them. Globally,HFC-23–based offsets accounted for half of all CERs validatedin 2006, enabling the creation of a secondary marketand allowing CER-short companies to meet immediate carbonobligations.Almost two-thirds of carbon offset purchaseswere for Chinese reductions of HFC-23, aby-product of refrigerant production.However, HFC-23 offsets provoked concerns. As permittedby the CDM, the refrigerant companies realized a largeprofit on these transactions, subsequently taxed by Chinaat a 65 percent rate for development purposes. 5 However,critics say that carbon finance was unnecessary and inefficientfor this purpose, suggesting that the industries couldhave borne the cost or simply have been reimbursed for it,analogously to the Montreal Protocol 6 (Wara and Victor2008). There was also concern that companies might enterthe refrigerant business merely to profit from HFC-23destruction, because destroying the by-product pays morethan creating the refrigerant. For this reason, UNFCCCrules were put in place to exclude new entrants from claimingemissions reductions. 7Implementation and benefitsFor most projects, the production of carbon offsets is proportionalto the production of local benefits such as electricityor regrown forest volume. CDM monitoring reportsallow comparison of planned versus actual issuance ofoffsets. Looking at CDM-wide statistics, biogas, methanerecovery, cement, and transportation have performed farbelow expectations; for other technologies, there is widedispersion in planned versus actual performance.Chapter 2 discussed the performance of the 12 WBGcarbon-financed hydropower projects for which formalmonitoring information is available. Information is availablealso on 12 other WBG carbon projects (table A.6). Twolandfill gas projects have fared very poorly, with issuanceyields below 10 percent of planned levels (see box 2.2 onwhy landfill gas plans were too optimistic). Four other projectshad yields below 65 percent. The remainder performedas designed or better. Internal tracking of BioCarbon Fundprojects shows that reforestation and afforestation are proceedingmore slowly than anticipated.Biogas, methane recovery, cement, andtransportation have performed belowexpectations, and for other technologiesthere is wide dispersion in planned versusactual performance.Integration with Bank activitiesThe World Bank has largely not realized synergies betweenoperations and carbon finance in the Kyoto Funds. Only 10of the 108 agreements are associated with Bank operations.For the operational part of the Bank, mainstreaming of carbonfinance is seen as too much trouble, because of the timeand hassle of arranging for project registration. In contrast,four proposed operations under the Carbon PartnershipFacility are grounded in existing Bank projects.Knowledge transfer and capacity buildingThe carbon funds have supported CF Assist, a capacitybuildingprogram that advises countries on carbonregulation, sponsors a range of training, helps identify carbonprojects, and sponsors carbon trade fairs and expos.The annual carbon trade fair has been cited as an importantcontribution to information diffusion. Over 2006–09,Special Topics | 77