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

CF Assist provided training to 6,225 people, more than aquarter in Sub-Saharan Africa, and helped in the preparationof 300 projects, about half of which were in the Philippinesand Uzbekistan.ConclusionsThe World Bank’s CFU has played an important role inopening an entirely new field of environmental finance,popularizing the idea of carbon markets and contributingto the institutional infrastructure of the market. Dependingon the outcome of international negotiations, this couldevolve into a major financial vehicle for supporting developmentand climate mitigation. Higher carbon prices willbe necessary, though, to effect widespread transformationof energy technologies.The 2005 exit strategy did not functionsmoothly; the Bank moved into pilot areasof the carbon market as planned but didnot exit established parts of the market.Constrained by the strictures of the Kyoto Protocol, theCFU has spent much of its creative energy grappling withthe perplexities of establishing additionality and dealingwith the CDM apparatus. The additionality and impact ofits own actions are mixed. It has contributed to the diffusionof some technologies, such as landfill gas, and supportedfirst-of-kind technology investments in some countries.The BioCarbon Fund and the Community DevelopmentCarbon Fund have supported novel small-scale, rural, andforestry projects—and found in the process that this is difficultto do.In contrast, much of the CFU’s support for energy technologieshas gone to projects where its financial leverage wasrelatively small. CFU staff claim that the cachet of involvementwith the Bank’s carbon fund has attracted investorsto Bank-supported projects. To the extent that this is true,there may be other, less complicated ways to put the WBG’sprestige to use.The CFU has spent much of its creativeenergy grappling with the perplexities ofestablishing additionality and dealing withthe CDM apparatus.On market exit, the 2005 Strategy statement put it this way:To the degree that carbon markets thrive, the Bankwill exit from the carbon market. The Bank as trusteeof carbon funds will increasingly be able to act as the“buyer of last resort” and transition from being a ‘buyer’of carbon assets to helping its clients countries positionthemselves as sellers. If risk and uncertainty declinesin certain countries and for certain technologies, theBank’s carbon funds will be no longer needed as theBank’s participation becomes, over time, no longer necessaryto help create viable projects and to manage risksfor buyers and sellers. This, in effect, constitutes a builtinexit approach for the Bank from the lower-risk partof the carbon market (World Bank 2006).This exit strategy has not functioned smoothly. Althoughthe Bank did indeed move into higher-risk, pilot areas ofthe carbon market, it continued to build up its lower-riskKyoto-oriented business after that market was alreadythriving. It then became clear that the bottleneck was notmarket demand for offsets, but creative, high-leverage waysto use those funds for sustainable development. This wouldhave suggested greater emphasis on the supply side of themarket.78 | Climate Change and the World Bank Group