The role of multilateral institutions

Area of Science:

• Environmental Economics
• Climate Change Policy
• Sustainable Development

Background:

• The World Bank supports developing countries in accessing the global greenhouse gas emissions reduction market.
• International agreements like the Kyoto Protocol facilitate resource transfers and sustainable development through cleaner technologies and forestry.
• Carbon sequestration offers a sustainable use of natural resources within integrated ecosystem management.

Purpose of the Study:

• To explore the potential for developing countries to participate in and benefit from the emerging global carbon market.
• To outline the role of initiatives like the Prototype Carbon Fund (PCF) in developing this market.
• To identify key challenges and requirements for maximizing benefits for developing nations and the rural poor.

Main Methods:

• Analysis of the World Bank's involvement in carbon market development, including the establishment of funds like the PCF.
• Comparison of emissions reduction costs between developing countries and OECD countries.
• Identification of barriers to market participation and recommendations for capacity building.

Main Results:

• Developing countries have a comparative advantage in carbon emissions reduction, with costs of $3-$5 per ton of CO(2) equivalent.
• The PCF demonstrated success, leading to plans for new funds (Biocarbon Fund, Community Development Carbon Fund).
• Significant assistance is needed for project development, legal/institutional capacity building, and risk mitigation.

Conclusions:

• The global carbon market presents a significant economic opportunity for developing countries to achieve sustainable development.
• Addressing challenges related to property rights, investment climate, policy, and risk is crucial for realizing this potential.
• Reconciling short-term needs of the rural poor with long-term carbon sequestration revenues is essential.