The Prototype Carbon Fund in Latin America : Lessons Learned

Abstract

Reducing emissions of carbon dioxide and other greenhouse gases that affect climate change is one of the key challenges facing the international community. The Bank's Prototype Carbon Fund (PCF) provides a framework for action, learning, and research to demonstrate how greenhouse gas emission reduction transactions can contribute to sustainable development, while lowering the costs of compliance with the Kyoto Protocol-the 1997 agreement to cut industrialized world emissions of greenhouse gases. The Latin American and the Caribbean (LAC) Region has a growing number of successful Prototype Carbon Fund (PCF) projects that have yielded useful experience for developing additional projects. This note highlights the lessons learned in the region, to date. The PCF is a public-private fund established in 2000 and administered by the World Bank acting as Trustee. It operates under the clean development mechanism principles of the Kyoto Protocol to the UN Framework Convention on Climate Change (UNFCCC). The PCF aims to demonstrate the potential of market-based mechanisms for reducing the cost of mitigating climate change. It does this by buying Certified Emission Reductions (CERs) from projects that reduce greenhouse gas emissions in Bank client countries, particularly projects that replace fossil fuels with renewable energy sources and those that improve end-use and supply-side efficiency. In return for their shares in the PCF, developed country governments and private sector companies receive CERs, which they can use towards their obligations under the Kyoto Protocol or domestic regulations.