Partnership signed between the Netherlands and the World Bank Group
Washington D.C., April 29, 2002—
The IBRD and the International Finance Corporation (IFC), both members of the World Bank Group announced today agreements with the Netherlands establishing two facilities to purchase greenhouse gas emission (GHG) reduction credits. The IBRD and IFC Facilities, signed with the Netherlands’ Ministry of Environment, Housing and Spatial Planning (VROM), will support projects in developing countries in exchange for emission credits under the Clean Development Mechanism (CDM) established by the Kyoto Protocol to the UN Framework Convention on Climate Change.
The IBRD Facility has a target of placing up to 70 million Euros (approximately US$62 million) in projects over the first two years of its agreement, which will lead to emission reductions of approximately 16 million metric tonnes of CO2 equivalent. Over the next two years, this Facility will purchase emission reduction credits for renewable energy, energy efficiency, and fuel switching activities, but not for afforestation and reforestation. Based on agreement between the IBRD and the Netherlands, the Facility may continue for a second two-year period. In that second two-year period, the IBRD would purchase additional emission reduction credits worth 70 million Euros, approximately US$62 million.
The IFC Facility will place up to 44 million Euros (approximately US$40 million), in projects over the next three years. Eligible projects will include investments in renewable energy, such as wind and biomass power, energy efficiency improvements, recovery and utilization of methane from waste landfills, and switching of fuels to less carbon-intensive sources. IFC, the private sector development arm of the World Bank Group, will focus exclusively on transactions in the private sector. The IFC initiative will encourage the private sector in developing countries to access this new and evolving market for GHG emission reductions, representing a whole new source of funding to augment the more conventional sources for their ventures.
The IBRD and IFC, as members of the World Bank Group, join in supporting the Netherlands in meeting its objectives because of the clear convergence with the World Bank Group’s market development and capacity building role for the emerging market for Kyoto Protocol-compliant greenhouse gas emission reductions. For developing countries, the purchases will encourage the transfer of cleaner technologies to reduce emissions at an effectively reduced cost, and for developed countries, such as the Netherlands, this project increases the range of options for complying with the Kyoto Protocol emission reduction requirements.
Peter Woicke, Managing Director of the World Bank Group and Executive Vice-President of IFC
, said,
“With this initiative, IFC is showing its commitment to sustainable development by helping expand an important new market that generates both environmental benefits and funding for the private sector in developing countries. IFC’s experience with project finance in developing countries puts us in a unique position to assist private companies to access the emerging GHG market and to assist the government of the Netherlands to purchase emission reductions.”
“The IBRD/Netherlands CDM Facility,”
said
Ken Newcombe, Manager of both the new Facility and the Prototype Carbon Fund (PCF)
,
“provides an excellent opportunity for many more developing countries to gain invaluable experience by undertaking their first commercial transactions for the purchase of emission reduction credits under the CDM, and to compete in the emerging global carbon market.”
Lex de Jonge, Manager of the CDM Program for the Government of the Netherlands
, said that
“multilateral development banks – and most certainly the World Bank and IFC– are the best equipped organizations for contracting high quality eligible CDM projects with well balanced benefits for all parties involved.”
The Kyoto Protocol of the U.N. Framework Convention on Climate Change calls for industrialized countries to reduce their GHG emissions to levels below those generated in 1990 by the period 2008 – 2012. Emission reductions result from activities that avoid or reduce the production of carbon dioxide, methane or other greenhouse gases as compared to a ‘business as usual’ situation, or from ‘sequestering’ carbon emissions in biomass such as forests and soils. The Protocol allows industrialized countries several avenues for meeting their obligations, including cross-border purchases of GHG emission reductions from developing countries under the Protocol’s Clean Development Mechanism, which governs the operations of this new arrangement. The market for GHG emission reductions is becoming established and is expected to grow significantly over the next few years.
The World Bank Group has played a pioneering role in developing the market for emission reduction credits through the Prototype Carbon Fund (PCF). A public-private partnership of six governments and 17 private sector companies, the PCF will purchase US$145 million of emission reduction credits from projects in developing countries and economies in transition. Experience from the 30 projects being prepared in the PCF shows that the most powerful capacity-building experience for countries wishing to benefit from the CDM is to experience the first commercial transaction to achieve and sell emission reduction credits in compliance with the Kyoto Protocol.
PCF experience also shows that it is difficult to engage the private sector in investment in the learning-by-doing required to fully comply with the Kyoto Protocol/CDM across the large range of technologies and processes that can simultaneously offer cost-effective emission reductions and support environmentally and socially sustainable development locally. Establishing the knowledge base for market development through these ‘first-of-a-kind’ transactions and reducing the knowledge and information entry barriers for the private sector, is another point of strategic convergence between the Netherlands and the World Bank Group.
Known for his interest in and dedication to the success of the CDM,
Jan Pronk, Minister of the Environment for the Netherlands
, emphasized at the signing ceremony,
“Let’s not lean back now, but go full speed ahead with implementation.”
IFC’s mission is to promote sustainable private sector investment in developing countries, helping to reduce poverty and improve people's lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses. Since its founding in 1956 through the close of the last fiscal year on June 30, 2001, IFC committed more than $31 billion of its own funds and arranged $20 billion in syndications for 2,636 companies in 140 developing countries. IFC’s committed portfolio at the end of FY01 was $14.3 billion.
