Co-financing Greenhouse Gas Mitigation Projects through Carbon Revenue
Opening Remarks by
Paul J. Heytens
Country Director, Bangladesh Resident Mission
Asian Development Bank
19 October 2009
Sheraton Hotel, Dhaka
Honorable Secretary for Environment and Forests Dr. Mihir Kanti Mazumder, distinguished guests, ladies and gentlemen:
Good morning. It is a privilege, for me to welcome you here on behalf of the Asian Development Bank. This event will help us to work together to mitigate climate change and capture new business opportunities presented by the carbon market. Your presence here today highlights the wide interest in, and importance of, today's topic.
Impacts of Climate Change
What is now clear is that the emission of greenhouse gasses from human activities is causing global warming at a rate that has become alarming and threatening to all of us. Even more so, rising global temperatures create a compounding effect on forests, water and other natural resources, which is likely to exacerbate the damage to human lives.
The poorest countries and the poorest people are the first and worst victims of climate change and the disasters induced by it. The Asia-Pacific region and Bangladesh in particular is expected to suffer significantly from the detrimental impacts.
For example, about 1.2 billion people could face freshwater shortages by 2020 in Asia; crop yields in Central and South Asia could drop by 50% by 2050; Asia's numerous mega cities including Dhaka are vulnerable to flooding and damage from unpredictable weather patterns; and within this century, citizens of small islands and other low-lying nations and regions may be forced to become "climate refugees."
In Bangladesh, disasters, including severe floods and cyclones, disproportionately affect the poor. Damaged municipal and community infrastructure, including waste and sewerage facilities, raise health risks and many who are dependent on natural resources are left without livelihood options.
Bangladesh is predicted to be one of the countries most affected by climate change with more than 70 million people and 20% of the coastal area at risk from direct impacts. Already, riverbank erosion annually deprives an estimated 100,000 inhabitants of their livelihood. Most of those affected are extremely poor.
Unfortunately, developing countries like Bangladesh bear the consequences of climate change though they have contributed least to the build up of greenhouse gases.
Moreover, although average GHG emissions per capita in South Asia are much lower than those of non-Annex I countries, unmitigated climate change, in the long term, is likely to exceed the capacity of natural, managed and human systems to adapt. Therefore, even for South Asian countries like Bangladesh, high-carbon economic development is not a sustainable option anymore.
So, in the interest of self-preservation, Bangladesh must join global efforts and explore opportunities to continue economic development on a low-carbon path. Finding financing for low carbon technologies is often the main challenge and we must look at innovative ways and make use of market based mechanisms such as the Clean Development Mechanism (CDM) under the Kyoto Protocol to move forward.
Carbon Market Opportunities
ADB has been working to support the carbon market development in the Asia-Pacific region because it has shown a significant potential to leverage domestic and international investments.
The carbon market is now estimated at over €90 billion, with CDM representing approximately one quarter, or about €25 billion, and demands are expected to increase in the near future. However, the CDM market in Asia has been mostly concentrated in just a few countries such as the Peoples Republic of China and India.
To date, Bangladesh has only 2 registered CDM projects among the over 1,800 worldwide. The fact that such few projects have been developed in Bangladesh means that ample opportunity exists to scale up efforts.
We feel that Bangladesh has significant potential for various CDM projects in the area of renewable energy, energy efficiency, urban development, and transport. However, we need to be aware of the issues and challenges of developing CDM projects here. High transaction costs, the long project cycle, and uncertainty over post 2012 issues are some of the barriers that we need address. Under CDM, payment for carbon credits is usually made after the project is implemented, therefore helping the cash flow but not the project financing, which is often the main barrier for many clean energy projects.
ADB's Response
Here in Bangladesh, ADB is assisting the Government and its line agencies to mainstream climate change adaptation and mitigation. ADB has developed a country specific Climate Change Implementation Plan to assist the country to transform to a more climate resilient and low carbon development path, starting with its own project activities.
Turning to some specific activities, following the unveiling of the Bangladesh Climate Change Strategy and Action Plan (BCCSAP), ADB approved a $2 million technical assistance grant to build capacity in relevant government agencies to implement the BCCSAP with a special focus on project preparation, implementation, and policy formulation. Bangladesh is also participating in an ADB-financed regional study on the economics of climate change in South Asia. In addition, ADB, together with the World Bank is also moving ahead with the Pilot Program for Climate Resilience in Bangladesh, which could provide up to $60 million in financing to pilot test and demonstrate ways to integrate climate risk and resilience into core development planning.
The main focus of today's event, however, is another ADB program to support climate change mitigation through the Carbon Market Initiative (or CMI). The initiative provides upfront financing and technical support to project developers with GHG mitigation benefits that can be eligible for the carbon market. I would especially like to highlight the Future Carbon Fund that can provide upfront financing for projects that generate carbon credits beyond 2012, when the first commitment of the Kyoto Protocol expires.
ADB therefore is strongly committed to assisting Bangladesh to improve its economic growth aspirations following low carbon path.
We are looking forward to further collaboration, especially for projects with GHG reduction potential, to maximize the benefits of the carbon market.
Concluding Remarks
We are fortunate to have with us here today the country's key movers of climate change action - top policy makers, project sponsors and developers, and CDM practitioners.
We encourage you to actively interact and exchange ideas and know-how on making CDM projects happen. Let us aim to convert our discussions into tangible projects.
We also have ADB staff and CDM experts who will brief you on the ADB project processing cycle and services offered under the CMI, and will later be happy to meet with you for project specific consultations.
Climate change and energy security are crucial issues for Bangladesh and the Asia-Pacific region as a whole. But this challenge is also an opportunity to progress down the path of sustainable and climate-responsive development. Now is the time to implement sound policies, and to make programs and projects happen.
Let us work together to identify projects and activities at the country, community, corporate and personal levels that promote low carbon, sustainable growth in Bangladesh. We look forward to your fruitful discussions during the day and hope this catalyzes concrete project activities.
Thank you very much.
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