About Community Development Carbon Fund (CDCF)
The CDCF was created in March 2003 to extend the benefits of carbon finance to the poorest countries and poor communities in all developing countries, which would otherwise find it difficult to attract carbon finance because of country and financial risk. Contributors to the CDCF support projects that measurably benefit poor communities and their local environment and will receive in return, verified Kyoto-compliant emission reductions from these projects. Parallel resources from donors are mobilized to support technical assistance, capacity building, and project preparation in CDCF countries.
The CDCF is a multi-donor Trust Fund - a public/private partnership - administered by the World Bank. Nine governments and 16 private firms participate in the first (and for now the only) tranche of the CDCF, for a total capitalization of $128.6 million. Participants acquire a pro rata share of emissions reductions from purchase agreements signed with host country governments or project sponsors.
The following are participants in the first tranche of the CDCF: Government of Austria, Regional Government of Brussels (Belgium), Government of Canada, Government of Italy, Government of Luxembourg, Government of the Netherlands, Government of Spain, Regional Government of Wallonia (Belgium); Companies and organizations: BASF, Daiwa Securities SMBC Principal Investments, EdP, Endesa, Fuji Photo Film Co. Ltd., Göteborg Energi AB, Hidroeléctrica del Cantábrico, IBRD as Trustee of the Danish Carbon Fund, Idemitsu Kosan, KfW, Nippon Oil Corporation, Okinawa Electric Power Co., Rautaruukki, Gas Natural, Statkraft Carbon Invest AS, Statoil ASA, Swiss Re.
Community benefits and community dialogue
The single overarching factor, which defines this Fund and differentiates it from the other World Bank carbon funds, is the generation of community benefits by the projects it finances. CDCF projects are an opportunity for small communities in poorer countries to obtain clean water, improve health conditions, create jobs for women, as much as it is an investment in clean technologies that help reduce greenhouse gas emissions and mitigate climate change. The CDCF achieves these goals by linking private investors with community development projects, and thus lowering transaction costs and risks associated with such projects in the poorest parts of the world.
The CDCF emphasizes community dialogue and consensus building, to ensure that individuals, community leaders, existing community organizations and local government officials agree on the benefits to be provided and the counterpart contributions required for both investment and recurrent costs. Where possible, project developers work with existing representative community organizations. Where none exist, communities are encouraged to organize themselves into an association for the purposes of participating in the project.
25% CDCF resources are to be invested in purchasing emission reductions generated from projects located in priority countries. These are defined as (i) World Bank's International Development Association (IDA) list of countries; (ii) countries commonly referred to as "IDA blend" with a population of less than 75 million; or (iii) countries designated as Least Developed Countries (LDCs) by the United Nations.
As of October 1st 2007, the CDCF has signed twenty Emissions Reduction Purchase Agreements (ERPA) for the purchase of a total of 7.10 million tons of carbon dioxide equivalent for a value of US$60.1 million. The current CDCF pipeline comprises over 44 projects representing a potential ERPA value of over US$159 million. Over 75% of the ERs from projects in the present portfolio are envisaged to be generated by 2012.
In collaboration with the International Emissions Trading Association (IETA), the World Bank co-convened an Advisory Group comprised of internationally recognized sustainable developments experts. Advisory Group members help the Bank establish quality portfolio criteria, design efficient project screening tools, and advice on the community benefits aspect of the fund. The Advisory Group reviews and advises on overall portfolio development in terms of types of projects and distribution of projects between countries, regions, and technologies however decisions are made by the Participants themselves.
The World Bank, as Trustee, oversees the CDCF's management and appoints a Fund Manager and a Fund Management Unit. This unit is part of the World Bank's Carbon Finance Unit and draws on the World Bank's experience with carbon finance, in particular with the launch and running of the first successful carbon fund - the Prototype Carbon Fund (PCF).