KfW offers to finance ‘clean’ projects

KfW, the promotional bank of the Federal Republic of Germany, is encouraging Philippine companies to tap available financing that it is offering for Clean Development Mechanism (CDM) projects.

In a one-day seminar held yesterday at the Ranaissance Hotel in Makati, the European Chamber of Commerce of the Philippines (ECCP) and the KfW outlined CDM opportunities in the Philippines.

In an interview with The STAR, Karin Sittler, vice president of the KFW Carbon Fund, said there is no specific allotment for the Philippines alone.

Sittler said the financing would be made available by the KfW to qualified projects through various modes that could include direct loans, equity investments, assistance in the project preparation  or even in helping consolidate small CDM projects.

CDM refers to an arrangement under the Kyoto Protocol whereby industrialized countries that have committed to reduce their greenhouse emissions, but are unable to immediately do so, may invest in projects that reduce emissions in developing countries as an alternative compliance.

A crucial feature of an approved CDM carbon project is that the project would not occur without the additional incentive provided by emission reductions credits, a concept known as “additionality”.

The CDM allows net global greenhouse gas emissions to be reduced at a much lower global cost by financing emissions reduction projects in developing countries where costs are lower than in industrialized countries.

Environment and Natural Resources Undersecretary Manuel Gerochi, in his opening remarks, stressed the need to ensure that such CDM projects truly benefit the developing country.

“Don’t look at it as an economic good to be traded,” Gerochi said, stressing that such endeavors “must be mutually beneficial to us.”

Gerochi’s concern is part of growing criticism that while developing countries are convinced to adopt environmentally sound projects, the technology has to be acquired at a substantial cost from the developed countries who themselves do not or  are not willing to incur the cost to reduce their own emissions.

At the same time, Gerochi also expressed some distrust over the eventual beneficiaries of the Certified Emission Reductions (CERs), the trading of which has become a profitable global business.

However, Gerochi acknowledged that his concerns are part of the necessary tradeoffs needed to start the Philippines’ own path to reducing its own carbon emission and adopting more environmentally sound projects.