WB, firm deal on carbon trading

Adianto P. Simamora , The Jakarta Post , Bekasi | Tue, 03/04/2008 11:11am

The World Bank and PT Gikoko Kogyo Indonesia signed an agreement Monday to develop an eco-friendly project that will trap climate pollutants released from the Sumur Batu sanitary landfill in Bekasi.

Under the agreement, the World Bank, acting as trustee of the Netherlands' Clean Development Mechanism (CDM) Facility, will purchase 250,000 tons of carbon dioxide (CO2) per year for 15 years.

"This project, together with the growing number of CDM projects in Indonesia, is an indication of the critical role the country is playing in addressing climate change," Joachim von Amsberg, World Bank director for Indonesia, said during the launch ceremony here.

The daily management of the landfill gas flaring project, aimed to harvest methane gas from solid waste in Sumur Batu landfill, would be run by Gikoko.

"The CDM enables Gikoko and Bekasi municipality to enter into private-public partnership in waste management to convert a liability with investment into a cash stream utilizing the Kyoto Protocol," said Joseph Hwang, production director of Gikoko.

Methane is a greenhouse gas that is potentially 21 times more harmful than CO2, the main contributor to global warming.

Carbon trading is part of the Kyoto Protocol allowing developing countries, including Indonesia, to reduce emissions.

The host of the CDM project will receive certified emission reduction (CER) credits issued by the United Nations executive board. The credits are traded in 38 developed nations that have the obligation to cut emissions between 2008 and 2012 by 5.2 percent below their 1990 levels.

The government of the Netherlands, which purchased the credits from the Bekasi landfill, is among the developed countries which are required to cut their emissions under the Kyoto Protocol.

One CER credit is equal to one ton of CO2 priced between US$5 and $10.

The UN Executive Board has approved 819 carbon reduction projects worldwide to begin in October -- 34 percent in India and 15 percent in China.

Indonesia, which ratified the Kyoto Protocol in 2004, listed only nine projects with the executive board. The government has so far approved 40 carbon trading projects. Most of them are related to the energy sector.

The UN reported that developing countries produced nearly 450 tons of CO2 and CER credits in 2006, with China still leading at 61 percent of the total.

The World Bank said the global carbon market was worth less than $1 billion in 2004 but skyrocketed to $11 billion in 2005 and to more than $30 billion last year.

The Bekasi administration said 7 percent of the funds generated from the carbon trading project would be used to develop communities living near landfill areas.

"The revenue will support community development in Sumur Batu. In addition, 10 percent of the revenue will be added to the local budget," Bekasi city secretary Chandra Utama Effendi said.

He said the Sumur Batu landfill received about 700 cubic meters of solid waste per day in the 10,000-hectare area, located along the northeast border of Bantar Gebang which belongs to the Jakarta administration.

Gikoko also expressed concerns about the United Nation's bureaucracy in validating the CDM project.

"The bureaucratic process is still too long. We have to wait about six months for validation to determine whether or not the UN approves the project. We hope the UN can improve its efficiency and encourage more private companies and local administrations to host CDM projects," Hwang said.