International lending institutions reiterate commitment to mitigate impact of climate change

MANILA, Philippines – In the wake of concerns among carbon trade leaders on the fate of clean development mechanism (CDM) projects due to the worsening global financial crisis, international lending institutions have remained positive and reiterated their commitment to efforts to mitigate the impacts of climate change.

The World Bank (WB), Japan Bank for International Cooperation (JBIC), and the Asian Development Bank (ADB) stressed during the recent Carbon Forum Asia 2008 held in Singapore that they are continuing their support of CDM projects and carbon emissions reduction (CER) initiatives.

Jari Vayrynen, operations team leader of WB’s Carbon Finance Unit, admitted that the prevailing financial turmoil might threaten or even directly affect some CDM projects since the crisis may lead to investors tightening their belts and being unable to commit their resources.

Yet he believed that the financial crisis would not pose much of a threat to the carbon finance market as a whole.

“I think the main impact is on the underlying financing of these projects. CDM makes it performance-based payment over time and if the initial investment does not happen there is no CDM revenue… These then translate into delays in project implementation or cancellation,” Vayrynen told The STAR in an interview at the sidelines of the Carbon Forum Asia 2008.

But he emphasized that even with the global financial turmoil, the worldwide issue on climate change would remain. Thus, preparation by key players in the carbon market is imperative, as there seems to be no choice but to continue with CER activities.

Vayrynen said on the part of the WB, their commitment to CDM projects “is not changing at all” despite the global financial crunch.  

In fact, the WB opened last month a new carbon resource called Carbon Partnership Facility, which is aimed at funding purchases of CERs after 2012 up to 2022, he said.

He added that the WB is coming up with Climate Investment Funds, which would not be based on CDM but, on the contrary, focus on providing funds or resources to investment financing for the incremental cost of investing in cleaner technology.