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October 2012

Costa Rica scripts a new chapter in forest carbon finance

Benoît Bosquet's picture

Thick cloudy skies subdued the sunlight on an autumnal day in Paris. That did not stop the group of representatives from the public and private sector attending the 5th Carbon Fund Meeting of the Forest Carbon Partnership Facility (FCPF) from making a decision that is a major milestone. Costa Rica is set to become the first country to access performance-based payments through the FCPF. This is the first time a national program is being supported by carbon funds in this global initiative of 54 countries and organizations, heralding a new phase in forest carbon finance.

This decision is a strong vote of support for Costa Rica’s ambitious plan to become the first “carbon neutral” country by 2021. Conserving forests and planting trees that capture carbon dioxide plays a large role in the national endeavor.

An interesting feature of Costa Rica’s proposal to the Carbon Fund is the quasi-national scope of the program that would be implemented in a mosaic approach on additional 341,000 ha of mainly privately owned land. Two-thirds of the targeted area is degraded land that the country aims to restore with reforestation, secondary growth and agroforestry, and one-third is old growth forest that will be protected from deforestation. The resulting emission reductions are estimated at 29.5 million tons of CO2. Close to half of these emission reductions (12.6 million tons of CO2) would be offered to the Carbon Fund, and would require an estimated financing of $63 million (assuming a price of $5 per ton of CO2).

How a small grant turned Humbo green

Edward Felix Dwumfour's picture

A comparative picture of the Humbo region in February 2002 and March 2010.

A number of years ago, I started a journey with seven poor communities located about 380 kilometres southwest of Addis Ababa, by a mountain called Humbo. The idea was to allow a degraded mountain to regenerate, and the communities would earn carbon credits for their efforts.

I still hear this phrase echoing in my ears: “With the meager amount of resources they have, this is an impossible agenda”. But the communities were stubborn and dedicated, and last week, the project was issued 73,339 carbon credits (temporary Certified Emission Reductions, tCERs) for their efforts. Similar payments will add up to $700,000 over the next 10 years from the BioCarbon Fund.

The Humbo communities wanted to see a transformation because they knew that their lands had been stripped as a result of unregulated cattle grazing and massive clearance of vegetation to meet their excessive demand for timber, firewood and charcoal. Soil erosion and flooding had intensified as a result. They could see their farmlands increasingly covered with silt, cobbles and boulders. Above all, they could attest that their farmlands were losing fertility, becoming unproductive and yields were down.

New Bank Climate Department off and running

Mary Barton-Dock's picture

At a meeting of the Asia Society in New York last week, Prime Minister Sheikh Hasina of Bangladesh, estimated that a 1 degree increase in the planet’s temperature (we are already at .8 degrees) would cost her country 3-4% of its GDP growth annually. At the same time, DARA, a European-based NGO, and the Climate Vulnerability Forum released the second Climate Vulnerability Monitor, which estimates that climate change is already costing the world 1.6% of GDP growth globally, and contributing to over 400,000 deaths. The report, written by over 50 scientists, economists and policy experts, also estimates that by 2030 climate change and air pollution combined could cost the world 3.2% of growth globally, and up to 11% in the world’s least developed countries. 

I spent  nine of the last 20 years living in Africa, watching the continent struggle terribly with negative growth in the 90’s, fight its way to positive growth and eventually celebrate a 5-8% growth rate that allowed many African countries to put a serious dent in poverty. But clearly, those hard won gains in poverty reduction and development are at risk, and sooner than we thought. The most important message of DARA’s report is that climate change is not just a problem for future generations.

But as former President José María Figueres of Costa Rica reminded a United Nations General Assembly audience last week, climate change also presents an enormous economic opportunity. Bloomberg’s New Energy Finance reported that over $1 trillion was invested in clean energy last year. And the feeling is that this figure could be much higher if we could just figure out the policies and financial instruments to unleash capital in the direction of green growth. So which path will we seize for our changing climate? The one which builds on the growth and development of past decades or the one which leads to the grim prospect of losing hard fought gains against poverty? The race to choose is on, and for those of us whose dream is a world free of poverty, for those of us who couldn’t bear to see Africa return to the economic and social struggles of the 90’s, we’d better get sprinting.

So today ─ against this very compelling background ─ we launch our new Climate Policy and Finance Department (CPF) at the World Bank. This department brings together the Climate Change team, the Climate Investment Funds (CIFs) Admin Unit, the Carbon Finance program, the GEF and Montreal Protocol teams around this essential question: what can the World Bank Group do to help countries take climate action at a faster speed and larger scale, and turn climate change into an engine for growth?