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Africa Aid, Carbon Trading, Top Bank’s G8 Wish List

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June 5, 2007—World leaders meeting in Heligendamm, Germany, this week take up two issues at the heart of the World Bank’s development agenda—higher levels of aid for Africa, and combating climate change through reducing emissions, carbon trading, increasing energy efficiency and other efforts.

The G8 pledged in 2005 to increase official development assistance (ODA) to Africa to US$50 billion by 2010, but ODA actually dropped to $35.1 billion in 2006 from $35.8 billion the previous year, according to the Bank’s 2007 Global Development Finance (GDF).

“The record so far indicates that apart from debt reduction, African countries haven’t realized the benefits promised at the G-8 Summit two years ago, during the Year of Africa,” says John Page, the Bank’s chief economist for the Africa Region.

The Bank's 2-year-old Africa Action Plan addresses the 2005 Gleneagles Summit's call to
accelerate progress and coordinate assistance to Africa. Economic growth averaged 5.5 percent in 2005 and 5.3 percent in 2006, and 11 countries introduced reforms to reduce the time and cost to start a business in 2006. Primary school enrollment rate surged to 96 percent in 2004, and the mortality rate for children under 5 fell from 161 in 1990 to 149/1,000 in 2004.

Two dozen African countries have shown sustained growth of more than 5 percent, but outside exports of oil and core commodities, Africa remains relatively marginal in claiming a share of global trade. One continuing obstacle: trade barriers maintained by wealthy industrial nations that penalize sectors, such as cotton, where African producers might succeed internationally.

Noting that a number of African countries have pushed through significant reforms and shown higher rates of economic growth, Obiageli Katryn Ezekwesili, World Bank Vice President for the Africa Region, said, “Only visible impact of growth in the standard of living of citizens can strengthen and guarantee their sustained support for reforming governments, and this requires massive financial resources which the continent lacks.”


Africa Aid
Source: 2007 Global Development Finance
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In addition, Sub-Saharan Africa was the destination of only 6 per cent of the $4.9 trillion in private capital that flowed to developing economies between 1990 and 2006, according to GDF.

“Many donor countries have increased support for special humanitarian assistance and debt reduction over four decades, but, unfortunately this does not translate into additional resources for African countries to rebuild their infrastructure, train teachers and combat HIV/AIDS and malaria,” says Page.

Climate Change

On climate change, the Bank urges the G8 to seek an international greenhouse gas agreement that uses the booming carbon market to mitigate climate change and create incentives for the expanded use of clean energy.


Carbon Market Expands
Source: State and Trends of the Carbon Market 2007
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The Heligendamm discussions on the issue involve not only the G8 but leaders from other top CO2-emitting countries, such as China and India.

Leading energy CEOs strongly supported the idea of a global carbon market at a two-day forum this week organized by GLOBE International.

The carbon market allows companies in industrialized nations to reduce global CO2 emissions—and meet pollution targets set by their governments—by buying carbon credits from environmentally friendly projects that reduce greenhouse gases in developing countries.


CO2 Emissions
Source: World Development Indicators 2007
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Last year the carbon market tripled to over US$30 billion, of which about 20 percent went to climate friendly projects in the developing world.

Carbon markets could “expand exponentially” under a post 2012 agreement for curbing greenhouse gas emissions and “deliver financial flows to developing countries of anywhere between US$20 billion to US$120 billion a year,” says Katherine Sierra, vice president for sustainable development.

Such funds are “sorely needed” to supply electricity to people in developing countries, reduce greenhouse gas emissions, put developing countries on a “low carbon development path,” and help them adapt to climate change, she says.

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