Honduras Hydropower Project Makes History Today for the Small Community of La Esperanza Contacts Anita Gordon 202-473-1799 agordon@worldbank.org Sergio Jellinek 202-458-2841 sjellinek@worldbank.org LA ESPERANZA, HONDURAS, October 20, 2005¾ Another historic milestone in the global carbon market was reached today, when the Executive Board of the Kyoto Protocol’s Clean Development Mechanism (CDM) issued the first ever Certified Emission Reductions (CERs) to two small CDM projects located in Honduras—the La Esperanza Hydroelectric Project and the Rio Blanco Small Hydroelectic Project. The La Esperanza project is selling certified greenhouse gas emission reductions to the World Bank Community Development Carbon Fund (CDCF). In this first issuance of certified emission reductions, La Esperanza’s was a small, but historically important volume of 2,210 CERs. The issuance of the Certified Emission Reductions is the final step in a process that officially recognizes the project and its greenhouse gas emission reductions under the rules of the CDM. The CERs that are issued can be used by countries to fulfill their Kyoto commitments to reduce greenhouse gases. Companies may acquire and use CERs to meet national obligations to reduce emissions, such as under the European Union Trading Scheme. “One of the objectives of President Maduro's administration has been its commitment to promote new power production using renewable resources,” said Gerardo Salgado, Deputy Secretary of Natural Resources and Energy. “This goal has been reached with commissioning of new projects like La Esperanza hydro plant. However, it’s a great honor for Honduras to be a leader in the Clean Development Mechanism, showing not only our commitment with the sustainable use of our natural resources but contributing with actions to reduce greenhouse gases.” The people of the town of La Esperanza in central Honduras may not be aware that they are making history today but they do know that they are getting direct development benefits through innovative carbon trade mechanisms provided by the CDCF. The carbon fund operates under the Kyoto Protocol, the 1997 agreement to limit greenhouse gas emissions (GHG) that are causing climate change, which went into effect in February 2005. The Clean Development Mechanism, a flexible mechanism of the Protocol, allows OECD countries to fulfill some of their greenhouse gas emission-reduction commitments through projects in the developing world. Implemented by Consorcio de Inversiones S.A.from Honduras, La Esperanza Hydroelectric Project is a small scale hydroelectric project in the remote and mountainous rural area of the Intibuca region of central Honduras. The project will sell the electricity generated to the National Utility Company, ENEE, for the next 15 years. The electric power generated by this 12.7 megawatt containment/run of river hydro project will for the first time guarantee a reliable and steady supply of electricity to the town of La Esperanza and many of the surrounding communities, reaching about 40,000 people. Additional benefits will come from the sale of carbon dioxide emission reductions to the CDCF, reductions that will result from using climate friendly hydro power instead of oil or coal for power generation. Part of the payment of US$1.4 million by the CDCF for emission reductions was made upfront and contributed to the implementation of the community benefits, in particular the electrification of surrounding communities. "We feel that the having certified emission reductions (CERs) issued to the La Esperanza Project will be important for Central America,” said Ron Turner, Director General of Consorcio de Inversiones S.A. (CISA). “The CER's can now be seen as a real source of income which can help future projects to move from the idea stage to the reality phase. The CERs can be a win-win for developing countries and for the efforts to reduce global warming.” The company has committed to assist local communities currently without electricity in the Rio Intibuca basin to apply for rural electrification grants from the government and other sources. In addition Turner pointed out that CISA will also plant about 25,000 seedlings a year to gradually reforest degraded watershed areas around the project site. The CDCF partnership of eight governments and 16 companies is designed to provide vulnerable communities in developing countries, and in particular least developed countries with an opportunity to benefit from new investments in renewable energy and clean technology that aim to reduce greenhouse gas emissions and mitigate the effects of climate change, while measurably improving the welfare of communities involved. “As participants of this special fund managed by the World Bank, we are proud to have one of our projects make history,” said David Corregidor, Chair Of The CDCF Participants’ Committee and Deputy Director For The Environment And Climate Change of Endesa, Spain. “Through projects like La Esperanza, the Community Development Carbon Fund is sending a clear signal of the CDCF´s willingness to fund small-scale projects in developing countries that are able to deliver both greenhouse gas emission reductions—and therefore environmental benefits—and also community and social benefits. It is a concrete way to make real our determination to help build a more sustainable world.” Honduras is one of the poorest countries in Latin America. Most of the poor live in rural areas where the incidence of poverty is almost 75%. Only 37% of rural population has access to electricity. The town of La Esperanza has an irregular electrical supply and towns nearby are without power. The lack of power has stymied economic development and compromised livelihoods. “The issuance of the first CERs is another vital step in the implementation of the Kyoto Protocol as these first CERs issued further demonstrate the concrete way in which CDM projects can contribute to both [cost effective] mitigation of climate change and to the sustainable development of the CDM project countries,” said Warren Evans, Director of Environment at The World Bank. “La Esperanza says clearly to small communities all over the developing world that they have a very real opportunity to participate in this important market. The World Bank is proud to have played a role in helping to make this happen through the CDCF.” The reliable source of electricity in La Esperanza will allow businesses to grow that will be able to install three phase motors and other machinery without fear of burning out because of voltage variation. Other benefits will flow from the project as well. Nearby communities numbering 250 and 400 people, currently without electricity will be connected to the grid. The project will permanently employ about 30 people from the area. La Esperanza is expected to sell about 37,000 tons of certified emission reductions annually for a maximum of 21 years. ### For more information please visit: www.carbonfinance.org ANNEX 1: The Kyoto Protocol and the Clean Development Mechanism (CDM) The Kyoto Protocol provides an unprecedented opportunity for the Organization for Economic Co-Operation and Development (OECD) countries to reduce greenhouse gas emissions and at the same time help developing countries and economies in transition invest in climate friendly technologies and infrastructure. The Protocol’s Clean Development Mechanism (CDM) and Joint Implementation (JI) provide an element of flexibility for the industrialized countries to meet their obligations under the Protocol to reduce greenhouse gas emissions by on average 5.2 percent below their 1990 levels by 2010. In so doing, the Protocol provides an unprecedented incentive for those seeking lower cost emission reductions, to leverage the flow of private capital and privately held clean technology from North to South. ANNEX 2: Certified Emission Reductions (CERs) Each CER corresponds to an emission reduction of one ton of carbon dioxide equivalent generated by a CDM project and they can be acquired and used for compliance purposes by industrialized countries with quantitative emission limitation commitments under the Kyoto Protocol. CERs can also be used by companies—among them many of the CDCF private sector Participants—to which governments have allocated similar quantitative obligations. For example, through the link established between the Kyoto Protocol mechanisms and the European Union (EU) Emissions Trading Scheme, companies with emission reduction obligations under the EU Scheme can use CERs to meet part of their target. ANNEX 3: Carbon Finance Carbon finance is the general term applied to financing seeking to purchase greenhouse gas emission reductions (“carbon” for short) to offset emissions in the OECD. Commitments of carbon finance for the purchase of carbon have grown rapidly since the first carbon purchases began less than seven years ago. The global market for greenhouse gas emission reductions through project-based transactions has been estimated at a cumulative 300 million tons of carbon dioxide equivalent since its inception in 1996. Asia now represents half of the supply of project-based emission reductions, with Latin America second with 27 percent. Volumes are expected to continue to grow as countries that have already ratified the Kyoto Protocol work to meet their commitments, and as national and regional markets for emission reductions are put into place, notably in Canada and the European Union (where trading started on January 1, 2005).