[ Interview with K.-Joachim Trede, KfW Bank Group ]

Emissions trading:
linking climate protection and development

Dr. Trede, how does the World Bank climate protection fund work?
The fund acquires emission credits and passes them on to its contributors. What is special about the CDCF is that it invests only in small-scale projects in poor regions. So the concept has strong environmental and developmental features at the same time. The contributors to the fund, including KfW, accept that the credits from these investments are more expensive than those from bigger projects.

What is the advantage of the planned German climate protection fund? After all, interested companies could take part directly in JI and CDM projects.
A decisive advantage of the fund solution is the possibility of risk spreading. Also, companies that participate in the fund do not need to set up their own extensive capacities in order to master the complicated process of these flexible mechanisms and make proper assessment of risks. The fund also enables participation in purchasing emission credits with smaller sums.

Critics of emissions trading and JI and CDM projects say these instruments enable rich countries’ industries to buy themselves out of their own reduction measures. What is your position on that?
The Kyoto Protocol clearly calls for giving national measures priority over the use of the flexible instruments. In the end, it is the legislatives’ task to implement this directive. However, because CO2 emissions have an effect across borders it is important to reduce them globally as well. Due to the flexible mechanisms, you can do that where the costs are lowest. The Kyoto Protocol also ensures by means of extensive rules that projects in developing countries promote climate protection and sustainable development on a verifiable basis. Therefore we see the “buy-out” reproach as inappropriate.

Russia so far has not ratified the Kyoto Protocol. What happens if it does not come into force?
True, the Protocol sets the framework under international law, but the European Union directives on emissions trading have been law since October 2003. A supplementary directive covering JI and CDM projects is currently being drafted. So these mechanisms could be used for the EU even if the Kyoto Protocol is not binding under international law.

German Development Minister Heidemarie Wieczorek-Zeul has called for a stronger engagement by the World Bank for renewable energy. Does international development cooperation not give this sector the attention it deserves?
Within the framework of development cooperation, the KfW Bank Group pledged ¤ 653 million for renewable energy projects from 1998 to 2002. That makes it one of the world’s biggest bilateral donors in this sector. We assume that renewable energy will continue to be a priority area of international cooperation.

Questions by Tillmann Elliesen.