Fairness and transparency in climate funding: workshop in Bangkok

I had the pleasure to take part in a workshop titled “Fairness and transparency in climate funding: taking into account the needs of the poorest populations” in Bangkok on May 11th, organized by Nexus – Carbon for Development. The event gathered some 50+ people to discuss the challenges and possibilities for pro-poor projects in the carbon markets. Specifically, we focused on two key themes:
1)    Could official development assistance (ODA) be used to leverage private investments into pro-poor carbon projects?
2)    How could carbon projects demonstrate their pro-poor benefits and should these be valued in the market? 
The aim of the event was not only to raise a discussion on the issue, but also consider producing a common statement on the two questions. The presentations and workshop material will shortly be available from Nexus.

ODA was strongly seen as one possible route for leveraging private investments into pro-poor carbon projects. This rested on several key notions. Firstly, pledged donor commitments for climate change investments will currently reach only half (c. USD 100 bn) of what is estimated to be required (c. USD 200 bn) by 2020. The private sector thus has a large gap to fill, but how can these investments be geared towards projects with pro-poor development impacts? Second, pro-poor projects often have difficulties in reaching carbon markets due to high upfront costs, transaction costs and knowledge gaps in e.g. the technologies employed. A majority of workshop participants saw that ODA has a strong role in facilitating private investment into carbon projects and would be crucial especially at their commencement. Nexus presented their regional project incubator approach, which through economies of scale could assist pro-poor projects in their initial stages. What Nexus is struggling with at the moment is achieving that necessary grant funding to support their activities and building a track record for such project incubators.

The other discussion centered on valuing the pro-poor benefits of carbon projects. While greenhouse gas emissions reductions are monetized on the market, there are no standardized indicators for measuring sustainable development benefits. In the case of the clean development mechanism (CDM) this has largely led to the situation where investments are geared towards those sectors (i.e. industrial gases) and regions (i.e. China, India, Brazil) where the most emissions reductions potential lies. The question we asked was: how could this be turned around to foster investment in pro-poor projects? Should there be a standard for pro-poor carbon projects and how would this be calculated? Several project developers (especially those working in projects with development impacts – such as cookstoves, biogas and water filters) wished for a pro-poor standard to differentiate themselves in the carbon market and thus be able to charge a premium for their higher value projects. However, several questions remained over how specifically to design and calculate such a standard and what implications this could carry. Would it result in a “greenwashing” of projects to claim pro-poor benefits? Does this area call for intervention, or could such issues be solved by the market?

For me the greatest contribution of the workshop was the various discussions I had with project developers working in the region. The amount of barriers pro-poor carbon projects face is huge and some actors had given up on the idea of carbon markets being able to deliver pro-poor projects. Thus organizations like Nexus have a large amount of work to do. At the same time there was enthusiasm in workshop participants for shaping carbon market approaches to becoming more transparent and equitable.