In June, the Bank released its annual States and Trends of the Carbon Market report, which revealed that the market for carbon credits has declined for the first time, with $1.5 billion of credits traded last year, the lowest amount since 2005. Andrew Steer, the Bank’s special envoy on climate change, said that "this bodes very badly for the countries we are trying to help … the market is failing us.”
Despite the gloomy findings of the report, the Bank continues to advocate carbon market mechanisms as pivotal to securing low-carbon development (see Update 74, 73, 72). Steer said “this report sends a message of the need to ensure a stronger, more robust carbon market with clear signals”. The Bank demonstrated its faith in national carbon finance initiatives by also announcing that eight countries have received grants to plan national carbon market based instruments under its Partnership for Market Readiness (see Update 74).
Meanwhile, the Bank is continuing to promote soil carbon sequestration projects in carbon markets (see Update 73). At a June meeting in Norway, Bank president Robert Zoellick said: “People estimate that, with the right soil carbon policies, you could absorb about 13 to 14 per cent of greenhouse gases … this could fit very nicely with ways to improve the productivity of the soil, improve the resiliency of the agricultural crops … there’s a nice win-win venture with soil carbon and agricultural productivity”.
This is an unnecessary distraction when agriculture in developing countries urgently needs public financing
However, Harjeet Singh of NGO ActionAid International warns against this unqualified optimism: “The concern is the way the World Bank is promoting soil carbon as a commodity to be traded by financial speculators. With the ‘compliance markets’ unwilling to accept soil carbon credits because of doubts about whether the carbon is permanently stored, farmers and governments may be chasing an imaginary market. Even if they can sell the credits, high transaction costs won’t leave any financial benefits for farmers. This is an unnecessary distraction when agriculture in developing countries urgently needs the public financing for adaptation that developed countries are obligated to provide.”
The Bank’s flagship soil carbon project in Kenya (see Update 73) has recently attracted criticism. In a side event at the UN climate summit in Bonn in June, the Institute for Agriculture and Trade Policy (IATP) presented findings of research on the Kenya Agricultural Carbon Project. Although the project expects to earn $2.5 million from carbon credits, start up and transaction costs will absorb just over $1 million of this, leaving $1.4 million to be divided up between 60,000 farmers over the 20 year project lifecycle. Assuming stable carbon prices of $4 a tonne, this amounts to $23.83 for each farmer, or just over a dollar per year. IATP also argues that the methodology used vastly overestimates the projected emissions reductions for the project.