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The World Bank's carbon finance initiatives are part of the larger global effort to combat climate change, and go hand in hand with the Bank's mission to reduce poverty and improve living standards in the developing world. The threat climate change poses to long-term development and the ability of the poor to escape from poverty is of particular concern to the World Bank. The impacts of climate change could unravel many of the development gains of the last several decades.
The Bank is therefore making every effort to ensure that developing countries and economies in transition can benefit from international efforts to address climate change, including the emerging carbon market for greenhouse gas emission reductions. Our mission is to catalyze a global carbon market through the purchase of high quality emission reductions in climate-friendly projects in developing countries and economies in transition. As such, carbon finance is the first large scale initiative that seeks to catalyze private sector investments to address a global environmental issue. The World Bank’s carbon finance products include:
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The Prototype Carbon Fund (PCF) – A partnership between 17 companies and 6 governments, managed by the World Bank, the PCF became operational in April 2000. As the first carbon fund, its mission is to pioneer the market for project-based greenhouse gas emission reductions while promoting sustainable development and offering a learning-by-doing opportunity to its stakeholders.
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The Netherlands Clean Development Facility – The World Bank announced an agreement with The Netherlands in May 2002, establishing a facility to purchase greenhouse gas emission reduction credits. The Facility supports projects in developing countries that generate potential credits under the Clean Development Mechanism (CDM) established by the Kyoto Protocol to the UN Framework Convention on Climate Change.
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The Community Development Carbon Fund (CDCF) – The CDCF provides carbon finance to small-scale projects in the poorer rural areas of the developing world. The Fund, which was designed in cooperation with the International Emissions Trading Association and the United Nations Framework Convention on Climate Change and became operational in July 2003, is a public/private initiative that has a target size of $100 million and that is still open to subscriptions. The CDCF supports projects that combine community development attributes with emission reductions to create "development plus carbon", and will use financial innovation to improve the lives of the poor.
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The BioCarbon Fund – The World Bank has mobilized a new fund to demonstrate projects that sequester or conserve carbon in forest and agro-ecosystems. The Fund, a public/private initiative administered by the World Bank, aims to deliver cost-effective emission reductions, while promoting biodiversity conservation and poverty alleviation. The Fund started operations in May 2004 and has a capital of $33.3 million as of January 2005.
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The Italian Carbon Fund – In fall 2003 the World Bank entered into an agreement with the Ministry for the Environment and Territory of Italy to create a fund to purchase greenhouse gas emission reductions from projects in developing countries and countries with economies in transition that may be recognized under such mechanisms as the Kyoto Protocol's CDM and JI. The Fund is open to the participation of Italian private and public sector entities.
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The World Bank Staff Climate Protection Program – The World Bank is seeking to reduce its own carbon footprint. In a first move to deal with its carbon emissions, the World Bank's Environmentally and Socially Sustainable Development (ESSD) Vice-Presidency has committed resources to offset its carbon emissions for 2001. These offsets will directly support community-level projects in developing countries that also produce carbon ERs.
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