MDG Carbon Facility

CARBON FINANCE FOR SUSTAINABLE DEVELOPMENT

THE FACILITY

PARTICIPATE

RESOURCES

CONTACTS

APPROACH

Bridging developing countries and the global carbon market

The Facility forms the final part of UNDP’s three-step approach to capacity development in carbon finance. Over the last few years, UNDP has engaged in the first two steps, removing barriers and establishing efficient host-country procedures, such as supporting Designated National Authorities (DNAs).

STEP 1

Remove barriers to direct investments in climate-friendly technologies

STEP 2

Establish efficient host-country procedures for CDM and JI review and approval

STEP 3

Develop projects via the MDG Carbon Facility

In the final stage, the Facility works to:

Leverage UNDP's local presence to identify priority sectors and opportunities;

Develop emission reduction projects that can be used as "showcase" projects to increase private-sector interest in, and understanding of, carbon finance; and

Compile, analyse and disseminate experiences and lessons learned.

Market transformation and serving as a bridge between developing countries and the global carbon market are the Facility's primary objectives. Once a developing country gains proficiency in carbon finance, thereby attracting private-sector investment and developing project technologies that deliver longer-term development benefits, the Facility will exit that market.

The new MDG Carbon Facility Business Plan for 2010-2014 differentiates activities into three distinct yet related thematic areas: project-based carbon finance; sectoral crediting and trading mechanisms; unaddressed sources and sinks. For more on these focus areas, please see the Projects page.

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RECOGNIZING A NEED

The Clean Development Mechanism and Joint Implementation offer significant benefits for developing countries: increased capital flows, additional technology transfer and reduced costs of achieving sustainable development. However, more needs to be done in order to direct carbon finance to a larger number of developing countries and to a broader range of activities that provide sustainable development benefits.

Investment in carbon emission reduction projects has been narrowly distributed: large developing countries dominate the number of registered CDM projects, while least developed countries have had minimal participation. Furthermore, emission reduction projects have generally focused on technologies with few sustainable development benefits. For example, a significant proportion of carbon credits registered so far have come from non-CO2 industrial gas emissions — characterized by a high return on investment, but with limited benefit to sustainable development.

While the carbon market holds the promise of attracting a much greater volume of resources, it is clear to UNDP that assisting developing countries to benefit from the carbon market will simultaneously achieve greenhouse gas reductions and further the MDGs.