Carbon Livelihoods’?

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Carbon Livelihoods’? Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized © 2012 The World Bank Group 1818 H Street, NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org/socialresilience E-mail: [email protected] All rights reserved. This paper has not undergone the review accorded to official World Bank publications. The findings, interpretations, and conclusions expressed herein are those of the author(s) and do not necessarily reflect the views of the International Bank for Reconstruction and Development / The World Bank and its affiliated organizations, or those of the Executive Directors of The World Bank or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. Rights and Permissions The material in this publication is copyrighted. Copying and/or transmitting portions or all of this work without permission may be a violation of applicable law. The World Bank Group encourages dissemination of its work and will normally grant permission to reproduce portions of the work promptly. For permission to photocopy or reprint any part of this work, please send a request with complete information to the Copyright Clearance Center Inc., 222 Rosewood Drive, Danvers, MA 01923, USA; telephone 978-750-8400; fax 978-750-4470; Internet: www.copyright.com. TABLE OF CONTENTS Acknowledgements ............................................................................................................................................................. 4 Acronyms ............................................................................................................................................................................. 5 Executive Summary ............................................................................................................................................................. 7 1. Introduction ............................................................................................................................................................... 11 2. Background to carbon markets & projects ................................................................................................................. 15 3. Evidence base on the livelihood impacts of carbon projects ...................................................................................... 21 4. Towards ‘carbon livelihoods’? ..................................................................................................................................... 29 5. The World Bank carbon finance portfolio and its objectives ...................................................................................... 35 6. Do carbon projects provide livelihood opportunities? ............................................................................................... 41 7. Does carbon finance influence the livelihood opportunities provided by projects? .................................................. 49 8. Conclusions ................................................................................................................................................................. 73 9. Recommendations ...................................................................................................................................................... 77 10. References .................................................................................................................................................................. 80 11. Annex: List of Questions and indicators used for analyzing project design documents ............................................. 87 ACKNOWLEDGEMENTS This report is part of the World Bank’s analytical work on the social dimensions of climate mitigation, led by Gernot Brodnig, SDV. It was written by Leo Peskett, Prachi Seth (Overseas Development Institute) and Gernot Brodnig. During the review process valuable comments were received from the peer reviewers Richard Damania, Johannes Woelcke, Brice Quesnel (World Bank), Arun Agrawal (University of Michigan); and from Michael Levitsky and Sladjana Cosic (World Bank). In addition, the authors are grateful for the contributions from Andrew Shepherd (ODI), Axel Mikaelowa (Perspectives), Clifford Polycarp (WRI), Ellysar Baroudy, Robin Mearns, Glenn Morgan, Brice Quesnel, Sandrine Boukerche, Chris Warner, Zenia Salinas and Haddy Sey (World Bank). The authors are also grateful to Mustafa Pajazetovic (World Bank) for his invaluable research support in the data collection stage, and to Dorothee Georg (World Bank) for her thorough review and editing. ACRONYMS BioCF BioCarbon Fund NECF Netherlands European Carbon Facility CDCF Community Development Carbon Fund NTFP Non Timber Forest Product CDM Clean Development Mechanism ODI Overseas Development Institute CFU Carbon Finance Unit PCF Prototype Carbon Fund CFU Carbon Fund for Europe PDD Project Design Document DCF Danish Carbon Fund RE Renewable Energy EE Energy Efficiency REDD Reduced Emissions from Deforestation and FCPF Forest Carbon Partnership Facility Degradation GHG Green House Gas SCF Spanish Carbon Fund ICF Italian Carbon Fund SD Sustainable Development IDA International Development SIA Social Impact Assessment Association PoA Programmes of Activities IFC International Finance Corporation UNEP United Nations Environment Programme IET International Emissions Trading UNFCCC KP United Nations Framework Convention on JI Joint Implementation Climate Change Kyoto Protocol LULUCF Land Use, Land Use Change and Forests WB The World Bank NCDMF Netherland Clean Development Mechanism WB CF Unit World Bank Carbon Finance Unit Facility PHOTO: UN PHOTO/WFP/PHIL BEHAN EXECUTIVE SUMMARY Global carbon markets are now valued at $144 billion, The second question is a more detailed exploration of with $3.4 billion of this figure linked to investment in a whether and how carbon finance may alter livelihood wide range of greenhouse gas emission reduction and outcomes. In order to answer this question, we develop removals projects in developing countries. Thousands of a simple framework which defines a series of unique projects now exist, ranging from large-scale industrial gas ‘attributes’ of carbon finance and use existing literature capture to household-level renewable energy or forestry. and examples from the World Bank portfolio to understand These ‘flexible mechanisms’ have been developed with their implications from a livelihood perspective. the aim of tackling global climate change while at the same time contributing to ‘sustainable development’ in In the broad portfolio review we find that relatively host countries. few projects in the World Bank portfolio offer local livelihood benefits. The portfolio is dominated by larger This report seeks to understand the extent to which these scale industrial projects for which contribution towards new financial flows can contribute to local livelihoods in sustainable development are often framed in terms of developing countries. It addresses two main questions: technology transfer and general contribution towards economic growth. Across all project types the main 1. Do carbon projects offer livelihood opportunities benefits that projects provide are training, employment or present risks, and what are these? and other financial benefits (79, 78 and 62 percent of 2. Do the attributes of carbon financing alter the projects respectively), but in the majority of cases these nature of livelihood opportunities and risks? benefits appear limited to relatively few staff and skilled personnel, providing relatively few opportunities for local The first question focuses on what we know about the livelihoods. This is broadly in line with literature on the impacts of carbon projects. We draw on evidence from wider CDM portfolio. However, a sub-set of projects, mainly existing studies in the carbon finance literature and in the areas of forestry, small-scale renewables and micro- studies on the livelihood impacts of similar technologies industry, reports greater benefits for local communities. implemented without carbon finance. We also conduct These include benefits such as new income opportunities, a basic quantitative analysis of the World Bank portfolio improved energy supply and savings on fuel, increased through a systematic review of project design documents security of land assets and improved health. For most for the 85 registered CDM projects in the portfolio as of projects, little is known about the distribution of these May 2011. opportunities or how they balance with costs. 8 CARBON LIVELIHOODS Few projects consider potential project risks for local there may be livelihood benefits because communities in project design documents. Gender is funders will look for sustainable solutions that the most frequent consideration, which is referenced avoid future disputes and non-permanence in 18 projects. It is not clear whether risks tend to be threats. This depends completely on how such underreported by project developers, or whether projects processes are managed and the motivations of are considered to entail only negligible risks. Similar those involved, to ensure that such reforms are patterns are found when analyzing data in the World Bank ‘pro-poor’. In the most part insecurity of land ‘Integrated Safeguard Datasheets’. tenure seems to introduce a higher level barrier in terms of making projects too risky, often The analysis of how the attributes of carbon finance can preventing
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