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UNDP helps jump-start carbon market in Eastern Europe and the CIS

Climate change poses an unparalleled threat to human development. The countries of Eastern Europe and the Commonwealth of Independent States, - many still grappling with a communist legacy of environmentally-unfriendly industry - are among the world’s worst producers of greenhouse gases. But carbon financing offers new opportunities for these developing countries to attract investment and cut emissions, and UNDP is working with the region to find solutions to help fund more sustainable development for the future.

The Kyoto Protocol to curb climate change introduced new mechanisms, including the Clean Development Mechanism (CDM) and Joint Implementation (JI), which give industrialized countries the possibility of supplementing their domestic greenhouse gas (GHG) emissions reductions through projects to reduce the emissions of developing countries.

According to a recent World Bank report, overall carbon market transactions in the first quarter of 2006 were worth some US $7.5 billion. But Eastern Europe and the CIS have been slow to participate in the carbon finance market, with Asia and Latin America currently accounting for the vast majority of projects.

And yet some former communist countries have the highest levels of GHG emissions per unit of GDP in the world. Uzbekistan was ranked by the World Resources Institute (2005) as having the most GHG-intensive economy in the world, followed by Kazakhstan in fourth and Turkmenistan in fifth place; six CIS countries are counted among the 20 most carbon-intense economies globally.

Serbia is by far the largest contributor to GHG emissions in the Balkans, and the situation is expected to worsen even further as the economy has begun to recover after a decade of political instability and stunted economic growth.

These inefficient, polluting economies are clearly unsustainable, but the countries of the region are well-positioned to achieve big emissions reductions quickly and cheaply, and are thus highly attractive for carbon finance.

So far participation in CDM and JI has been limited in many of these countries due to low awareness and understanding of carbon finance, which as a new area of environmental finance poses a host of new complexities. The absence of the needed institutional and legal frameworks to support and facilitate the flow of carbon finance, and problems with the overall business environment, also act as deterrents to potential investors.

UNDP, as a trusted partner to governments and on the ground in all the countries of the region, is well-placed to help create the necessary frameworks and build in-country capacities to identify, implement and mobilize resources for GHG reduction projects.

That is why UNDP has launched Leveraging Carbon Finance for Sustainable Development in South-eastern Europe and the CIS, a project aimed at developing public and private sector capacities to access carbon finance, identifying opportunities, and providing project management services to individual projects to help jump-start a dynamic carbon market in the region.

Capacity building initiatives have already been launched in Albania, Azerbaijan, Belarus, FYR Macedonia, Serbia and Uzbekistan, as well as pilot efforts in Kyrgyzstan and Ukraine. Macedonia recently presented a strategy, developed with UNDP support, to enable Macedonia’s participation in the CDM, while in Uzbekistan, Kyrgyzstan and Belarus UNDP has held inception workshops with government and ministry officials, who have begun work on their national strategy.

Training was also held recently in Ukraine in cooperation with the Czech Trust Fund to help raise local private sector awareness and build their capacity to initiate and develop JI projects.

UNDP places a special emphasis on encouraging knowledge transfers between developing countries, and the carbon finance project will also help to facilitate the flow of expertise and experience within the region through workshops and other networking opportunities.