$100 M BioCarbon Fund Aims to Limit Global Warming

WASHINGTON, DC, November 13, 2002 (ENS) - The poorest farmers and rural communities across the developing world will earn income from land management practices that keep the greenhouse gas carbon dioxide out of the atmosphere under a new multi-million carbon fund launched by the World Bank.

The US$100 million BioCarbon Fund has been in the works for months, and last week, it was publicly launched at the Katoomba Group Forestry Meeting in Tokyo, Japan. This working group, named after their first meeting place, Katoomba, Australia, focuses on innovative approaches to conserving the world's forests using market based mechanisms.

The BioCarbon Fund is a public/private partnership that will finance the reduction of greenhouse gas emissions through improved land management practices. As added benefits soil fertility and crop yield may increase, non-timber forest products can add to local livelihoods, and biodiversity is maintained.

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Worker extracts resin from a pine tree in a Honduran agroforestry cooperative. (Photo by G. Bizzarri courtesy FAO)
"The BioCarbon Fund is an innovative example of making markets for global public goods," said Ian Johnson, World Bank vice president for sustainable development.

"The Biocarbon Fund puts it all together by meeting the triple goal of reducing greenhouse gases in the atmosphere while reversing land degradation, conserving biodiversity, and improving the livelihoods of local communities in poor countries," he said.

The fund bases its activities on the fact that each year 20 times more carbon dioxide is exchanged between the atmosphere and the Earth's plants and soils than is released from the burning of fossil fuels.

About a fifth of the buildup of greenhouse gases in the atmosphere is derived from land clearing and other land management practices, climate scientists estimate.

Sequestering or conserving carbon dioxide with such projects as planting legume trees across whole Kenyan landscapes, or planting indigenous tree species as forest buffers in Ugandan national parks, is the backbone of the BioCarbon Fund.

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.

World Bank Group President James Wolfensohn said, "Continued global warming is in nobody's interest, but the simple facts of the matter are that developing countries will suffer the most damage, and their poor will be at an even greater disadvantage. I see the Bank's role in climate change as providing every opportunity to developing countries to benefit from the huge investment the OECD countries and companies must make in reducing climate change."

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Opening of new agricultural land by use of fire in Mauradua, Central Sumatra, Indonesia, 1971. Land will be abandoned and left open to erosion when depleted. This type of land may be rehabilitated to sequester carbon. (Photo by H. Null courtesy FAO)
The BioCarbon Fund will focus on projects that would not happen without the incentive provided by carbon finance. A recent World Bank study found that only 13 percent of all direct private sector carbon emission reduction dollars go to the developing world, a situation the fund's participants hope to change.

Daniel Murdiyarso, a professor at Bogor Agricultural University in Indonesia, and a member of the BioCarbon Fund's Technical Advisory Committee, said, "The BioCarbon fund will make large parts of the developing world attractive for carbon investors, especially those countries with effective regulatory and institutional frameworks."

Fourteen companies and governments have indicated their interest by signing a Memorandum of Understanding with the BioCarbon Fund.

The signatories range from power utilities to insurance companies, and include Caisse des Depots et Consignations and Eco-Carbone of France and Japanese utilities Chugoku, Shikoku, Okinawa, and Tokyo Electric; as well as the Mitsui company. Marsh Specialty Operations, the Rabobank of the Netherlands, Suncor Energy of Canada, St Microelectronics, the global reinsurer Swiss Re, and Sustainable Forest Management have also signed the agreement.

These potential participants are interested in obtaining emission reductions, or carbon credits to meet regulatory requirements or voluntary commitments to reduce greenhouse gas emissions. They may also wish to contribute to sustainable development and biodiversity conservation.

The Kyoto Protocol to the UN Framework Convention on Climate Change commits 37 industrialized countries to reduce their overall emissions of carbon dioxide and five other greenhouse gases during the period 2008 to 2012. Other countries have undertaken, or are considering, voluntary commitments to cut their emissions.

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Xinglongzhao Forest Farm, Inner Mongolia. The surrounding areas were reafforested in 1976. (Photo by J.Y. Piel courtesy FAO)
"From the perspective of a development bank, carbon sequestration offers the greatest convergence between the carbon emission reduction market and sustainable development," said Ken Newcombe, the World Bank's senior manager for carbon finance.

"Take the tantalizing image of private sector dollars flowing into such projects in the rural areas of the poorest countries. For example, in the Africa context we've already got a potential flow of projects even before we're out of the starting blocks."

The BioCarbon Fund will complement the two other World Bank managed carbon funds - the flagship Prototype Carbon Fund (PCF), and the Community Development Carbon Fund (CDCF) launched in September at the World Summit on Sustainable Development.

The BioCarbon Fund will be a prototype fund, designed to learn from the experience of doing real projects. It will focus on activities to retain or increase the amount of carbon in vegetation or soils, while the Prototype Carbon Fund covers energy related projects.

"The BioCarbon Fund is unique in that it will have two windows for projects," said Newcombe. "One class of projects will be Kyoto compliant. But the second window will explore options that take us beyond the Kyoto negotiations and seek to extend the benefits that can flow from carbon finance."

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Soil erosion in Kavre district of Nepal due to intense cattle grazing. (Photo by G. Bizzari courtesy FAO)
The Kyoto compliant window will provide emission reductions potentially eligible for credit under the Kyoto Protocol. These are limited to afforestation and reforestation activities in the first commitment period 2008 through 2012.

These may be small-scale reforestation projects to restore landscape stability by reducing erosion and providing windbreaks, or agroforestry projects such as shade coffee, intercropping of trees with other crops, and the establishment of trees to help restore grazing lands.

The second window will explore options for carbon credits that, while meeting the triple goals of the BioCarbon Fund, achieve them by activities other than afforestation and reforestation. These projects produce emission reductions that may be creditable under emerging carbon management programs.

These may include restoration of degraded forests in developing countries by improved forest management and replanting or rehabilitation of dryland grazing lands by establishing shrubs and improving soil carbon.

Gatherings of The Katoomba Group are sponsored by Forest Trends, a Washington, DC based non-profit organization created in 1999 by representatives of conservation organizations, forest product firms, research groups, multilateral development banks, private investment funds and foundations.

For more information about Forest Trends, please see http://www.forest-trends.org The Katoomba Group is online at: http://www.katoombagroup.com/