New fund extends reach of Kyoto Protocol.

The Clean Development Mechanism of the Kyoto Protocol has been extended to more intimately include developing countries in efforts to reduce greenhouse gas emissions. The Community Development Carbon Fund (CDCF), launched in July by the World Bank in collaboration with the United Nations Climate Change Secretariat and the International Emissions Trading Association, gathers public and private participants to finance small-scale greenhouse gas reduction projects in the least developed countries. Participants, either governments or businesses, receive the credits associated with reducing carbon emissions for each of the projects, while host communities receive development funds.

The Clean Development Mechanism (CDM) was created as part of the Kyoto Protocol in 1997 to lower the cost to signatory countries of reducing greenhouse gas emissions, and to support sustainable development initiatives in developing countries. But skeptics doubted that the CDM could be used to finance smaller projects with tangi ble benefits to local communities. They argued that small projects deploying small-scale technologies would not be able to absorb the inherent and significant costs--such as determining project baselines and certifying emission reductions--without eroding the incentives for investment in such projects and making them uncompetitive. Unless action were taken to "fast track" small projects within the CDM framework, the critics said, the inherent bias of the mechanism would be towards large capital-intensive projects, thus foregoing many opportunities for small and safe renewable energy projects.

The CDCF aims to provide this fast track by lowering transaction costs and the risks involved in developing such projects. It allows use of a pre-approved methodology for calculating baseline carbon emissions, and it allows a single organization both to make the baseline calculations and perform the yearly evaluations. It also encourages the engagement of local intermediary organizations to carry out these duties and assist with funding, with the help of multilateral organizations and income from initial CDCF investments.

Prospective projects include a renewable energy power installation in South Africa, a solar market development project for more than 20,000 homes in Bolivia, modernization of 40 coal-fired district-hearing boilers in Mongolia's capital city of Ulaanbaatar, and switching from fuel oil to biomass fuel for drying tea in Kenya. Over a dozen projects are already in the pipeline.