The World Bank’s carbon finance program provides clean electricity to poor communities and helps reduce emission of harmful greenhouse gases that cause climate change. It has also catalyzed the emergence of the carbon market that is transforming renewable energy financing in the Philippines.
ILOCOS NORTE, PHILIPPINES, February 4, 2009 —In Bangui Bay, the humming of the 40 meter rotor blades of wind turbines 70 meters up in the air blends with the murmur of the breeze and the rush of the waves up and down the sandy shore. Just a few hundred meters away, this symphony is imperceptible. But the wind farm’s presence resonates beyond its placid realm, creating an even bigger story: the emergence of the Philippine carbon market that is transforming renewable energy financing in the country.
Nobody in Southeast Asia had done it before. There were just too many financial and technical barriers. But Neils Jacobsen, Danish engineer and environmentalist who has managed several power projects in the Philippines since the early 1990s, however, was undaunted. Denmark is the world’s leader in wind power technology and he thought it might just be applicable in the Philippines.
In 2000, Jacobsen established NorthWind Power Development Corporation (NorthWind) and in five years, inaugurated the first 25 megawatt (MW) wind farm in Bangui Bay. The project consists of 15 turbines and a 60 kilometer transmission line that delivers power to the switchboard of the Ilocos Norte Electric Cooperative (INEC) in Laoag City. The project cost $35 million, financed largely through an interest-free mixed credit from the Danish International Development Agency (Danida).
In June 2008, NorthWind added five more turbines, raising the wind farm’s capacity to 33 MW, enabling the company to provide half the province’s power needs.
Mr. Jacobsen attributes NorthWind’s success to a combination of three factors: right timing (NorthWind started the project when wind turbines were cheaper), right financing, and support from the World Bank through its Prototype Carbon Fund (PCF), which enabled NorthWind to generate more resources through the sale of “carbon emission reduction credits” under the Clean Development Mechanism (CDM) of the Kyoto Protocol.
"The Bank’s carbon finance program is a natural extension of its mission to fight poverty,” explains Mr. Bert Hofman, WB country director. “We want to ensure that poor countries can benefit from international efforts to combat climate change, including the emerging carbon market for GHG emission reductions.”
“Gone are the days of unreliable low voltage electricity,” says Ms.Fely Velasco, barangay captain of Baruyen, one of the barangays hosting the wind turbines in Bangui.
The wind farm attracts bus loads of tourists during weekends and in summer, opening up business opportunities for residents and nearby communities. Along the coastline from the town of Burgos up to Pagudpud, beach resorts and other tourism-related businesses have mushroomed. “The wind farm has put Bangui Bay on the map,” says Mr. Rogelio Alupay of the technical staff of Bangui’s municipal planning and development office.
There’s an equally amazing story that has emerged out of Northwind’s success, according to Mr.Joe Tuyor, WB operations officer for environment in the Philippines. The project has demonstrated how carbon trading works and created incentives for industries to invest in climate-friendly technologies, catalyzing the emergence of the carbon market in the country.
The private sector, says Mr. Tuyor, is responding well to CDM. “Many in the private sector are talking to CDM brokers that have grown in number since the CDM was first introduced in the country.”
Currently, there are 23 CDM projects registered with the CDM Board in the Philippines. Many of them concern the management of agricultural wastes or wastewater as well as renewable energy alternatives to fossil fuel. “The total estimated reduction in carbon dioxide equivalent per annum of the registered projects in the Philippines is about one million metric tons,” says Mr. Tuyor.
The major buyers of carbon credits in the Philippines are the United Kingdom, Netherlands, Japan, Italy, and Spain. The sellers are mostly energy companies and industries.
Mr. Tuyor says CDM is not only for the big players. Even local government units, communities, cooperatives and people’s organizations are now into the business.
CDM is already being implemented in Laguna de Bay through the World Bank-funded Laguna de Bay Institutional Strengthening and Community Participation Project (LISCOP). Community composting, reforestation, agro-forestry, hog waste, municipal landfill and slaughter house wastewater treatment projects are either being proposed or implemented and emission reductions for these types of projects are being purchased by the World Bank-managed Community Development Carbon Fund and the Biocarbon Fund.