Analysis of the Effect of the 2005 Kyoto Protocol on World Bank Carbon Offset Lending and Projects
Date Issued
2011
Date
2011
Author(s)
T.McMastser, Michael
Abstract
ABSTRACT
In 2005 the United Nations ratified the Kyoto Protocol in order to formally create a set of guidelines to control the emission of greenhouse gasses. These were then regulated by a cap-and-trade system among signature countries. This cap-and-trade system allowed for the creation of a ‘carbon market’ as well as the purchase of carbon offset credits by public and private institutions.
The basic carbon credit represents 1 ton of carbon dioxide (or one of 4 other gasses) that is not released into the atmosphere due to reduction programs or changes in the physical structure of facilities. These credits now can be bought or sold on the carbon market by companies, aid organizations or governments. International lenders use carbon credits in order to promote the cap-and-trade mechanism and give financial incentives to individual aid projects in their portfolios as a way of promoting clean energy usage.
This thesis titled “Analysis of the Kyoto Protocol on World Bank Carbon Offset Lending and Projects” makes a study of the effect of the 2005 Kyoto treaty on carbon offset spending both before and after the adaptation of the Kyoto protocol. It then pursues those details to see its effect on selected individual projects.
The major points of the comparison between Pre-Kyoto and Post-Kyoto projects were analyzed in terms of the numbers of projects, financing averages per project, total dollars spent on carbon offset projects and changes evident in World Bank environmental restructuring.
To analyze this study was conducted by the researcher of all World Bank carbon offset loans from their start in the year 2000 thru 2010. Research was also done on four projects from different regions that were approved both before and after the Kyoto Protocol to analyze if they were affected by the adoption of the Kyoto Protocol.
The researcher uncovered data that showed a large increase in World Bank lending and reform after the adoption of Kyoto in 2005. The specific increases in the data collected show that the Numbers of carbon offset projects from pre-Kyoto until post-Kyoto rose from 22 to over 126 projects by the end of 2010.
The average amount of financing per project increased from $3.9 million USD to $9.2 million USD after Kyoto. Total dollars spent on carbon offset projects rose from the 2000 to 2005 Pre-Kyoto amount of $86.1 Million USD to $739 Million USD Post-Kyoto for the period of 2006 to 2010.
Other significant data shows that loan approval rates for all sectors (Education, Health, etc.) of World Bank projects stayed the same for the period of 2000 to 2010 at a 91% approval. However, environmental approval rates rose from 91% to 96% in loans approved for environmental projects. Overall this shows the internal change in the Bank’s lending portfolio that came about as part of its environmental reform restructuring.
Data analyzed on the four World Bank offset projects showed that ¾ of the projects studied were affected by the passing of the protocol in some way. Some projects were simply given increased money for sectors containing carbon offset purchases while other projects that were initiated prior to 2005 were restructured to add additional development phases after Kyoto was passed.
Overall the thesis data shows that the ratification of the Kyoto Protocol had a large effect on lending policy and environmental reforms sponsored by the World Bank. More importantly the data shows that the additional commitments from the World Bank did reach down to the individual project level and influence local governments and communities.
It is shown in the data that three of the four case studies have drawn additional funding and/or future project commitments directly from the passage of Kyoto into law in 2005.
The Kyoto protocol was not the start of environmental lending by the World Bank but was seen as a mandate which justified the increased focus on world environmental projects.
Subjects
World Bank
Type
thesis
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