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given many a glimpse of how carbon markets may (repeat, may) help to decarbonise the global economy.

the world bank gets the ball rolling

Alongside a few early entrepreneurs, it was the World Bank that stepped in to kick start the process. The Prototype Carbon Fund (PCF) is a fund managed by the World Bank to purchase emission reduction credits under JI and the CDM. It gets over $180 million from six governments and 15 companies. The PCF was the first investor in the CDM. It was established in 1999, became operational in 2000 and signed its first emission reduction purchase agreement for a CDM project in Chile in 2002. It functioned as a learning and implementation network providing participants with an opportunity to learn about JI and the CDM before the Protocol had entered into force and before the guidelines on how to implement such projects had been agreed.3 It was also intended to have demonstration effects that project-based investments under the Kyoto Protocol could earn revenue for Southern countries and increase the profitability of cleaner energy options. The PCF has shareholders from the public and private sectors, and was set up to create carbon as an asset for trading in the marketplace.

The motivations for actors to get involved in this were mixed. They included:

learning about this emerging market, gaining competitive and strategic advantage over competitors, influencing ongoing negotiations and acquiring emissions reductions. Although it invested very little of its own resources into the PCF, the World Bank saw carbon finance as an opportunity to channel additional resources, private resources in particular, to developing countries in a period of declining ODA [Overseas Development Assistance].4

Though welcoming the effort to enroll the private sector in financing carbon abatement efforts, many in the South and in environmental NGOs were more wary of organisations like the World Bank getting involved. The World Bank still invests heavily in fossil fuel projects, despite the mounting evidence that climate change significantly

3 C. Streck, 'New partnerships in global environmental policy: The Clean Development Mechanism ' , Journal of Environment and Development, 13(3) (2004), 295-322.

4 F. Lecoq and P. Ambrosi, 'The Clean Development Mechanism: History, Status and Prospects' Review of Environmental Economics and Policy 1(1) (2007),134-51.

exacerbates the welfare of its main clients: the poor. For instance in 2008 the World Bank invested in a 4000-megawatt coal-fired power plant in Gujarat, India, which will emit more carbon dioxide annually than the whole of Tunisia.5 As late as 2007, more than 50 per cent of the World Bank's $1.8 billion energy-sector portfolio did not include climate change considerations at all.6

The World Bank's role as a purveyor of neoliberal reform also creates contradictions for its new-found role in enabling a transition to climate capitalism. The bank itself concedes 'unregulated electricity markets are likely to put renewable energy technologies at a disadvantage in the short-run because they favour the cheapest energy as determined purely by price, but do not capture environmental and social externalities'.7

Such internal contradictions do not detract from the fact that the World Bank is at the forefront of efforts to finance low-carbon energy transitions. As part of its Strategic Framework on Development and Climate Change, two Climate Investment Funds were approved in July 2008: the Clean Technology Fund and the Strategic Climate Fund. Donors from ten countries have pledged $6.1 billion to the World Bank for these funds, with the largest commitments made by the USA ($2 billion), the UK ($1.5 billion) and Japan (up to $1.2 billion). The Clean Technology Fund's objective is to provide finance for low-carbon energy projects or energy technologies in the South that reduce emissions, while the Strategic Climate fund aims to facilitate demand for a post-2012 market by supporting large-scale programmatic and sectoral investments.8

financiers step in

If the World Bank helped kick-start the CDM, however, private financial actors have since driven its development into a fully fledged

5 C. Swann, 'Zoellick fossil fuel campaign belied by World Bank's Tata loan' Bloomberg.com, 10 August 2008. See http://www.bloomberg.com/apps/news?pid=2 0601080&sid=ap2zaLeAmcdQ.

6 World Resources Institute, Correcting the World's greatest market failure: Climate change and multilateral development banks (Washington, DC: World Resources Institute, 2007). See http://www.wri.org/publication/correcting-the-worlds-greatest-market-failure.

7 I. Tellam (ed.), Fuel for Change: World Bank Energy Policy - Rhetoric and Reality (London: Zed Books, 2000), p. 33.

8 World Bank, Climate Investment Funds (Washington DC: World Bank, 2008). Available at http://www.worldbank.org/cifs; World Bank, Development And Climate Change: A Strategic Framework For The World Bank Group, Report to the Development

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