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Cablegate: Reaping the Rewards of the Clean Development

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RR RUEHWEB

DE RUEHLP #0715/01 0741315
ZNR UUUUU ZZH
R 151315Z MAR 07
FM AMEMBASSY LA PAZ
TO RUEHC/SECSTATE WASHDC 2837
INFO RUEHAC/AMEMBASSY ASUNCION 6638
RUEHBO/AMEMBASSY BOGOTA 3961
RUEHBR/AMEMBASSY BRASILIA 7846
RUEHBU/AMEMBASSY BUENOS AIRES 5096
RUEHCV/AMEMBASSY CARACAS 2326
RUEHPE/AMEMBASSY LIMA 2435
RUEHMD/AMEMBASSY MADRID 3380
RUEHMN/AMEMBASSY MONTEVIDEO 4488
RUEHQT/AMEMBASSY QUITO 4968
RUEHSJ/AMEMBASSY SAN JOSE 1621
RUEHSG/AMEMBASSY SANTIAGO 9554
RUEHUB/USINT HAVANA 0218
RHMFIUU/HQ USSOUTHCOM MIAMI FL
RUMIAAA/USCINCSO MIAMI FL
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC

UNCLAS LA PAZ 000715

SIPDIS

SIPDIS

STATE FOR WHA/AND LPETRONI
BRASILIA FOR JSTORY
SAN JOSE FOR BLINK
USAID/LAC FOR JBISSON
USAID/EGAT FOR DMULLER AND CELRON
USAID/BOGOTA FOR BBAYLE
COMMERCE FOR JANGLIN

E.O. 12958: N/A
TAGS: SENV ECON PGOV BL
SUBJECT: REAPING THE REWARDS OF THE CLEAN DEVELOPMENT
MECHANISM

REF: A. LA PAZ 661
B. LA PAZ 695

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SUMMARY
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1. (U) Bolivia hopes to mitigate the potential impact of
climate change (reftels) by taking advantage of the Kyoto
Protocol's clean development mechanism, which allows
industrialized countries committed to greenhouse gas
reductions to invest in emission reduction projects in
developing countries. According to GOB officials, Bolivia
seeks to position itself as a key project host, in hopes of
attracting investment and generating revenue from the sale of
resulting certified emission reduction credits. While an
admirable goal, regulatory uncertainty has slowed its
implementation. End summary.

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THE CDM: WHAT IT IS AND HOW IT WORKS
------------------------------------

2. (U) The clean development mechanism (CDM) is a Kyoto
Protocol arrangement allowing industrialized countries with
greenhouse gas reduction commitments to invest in developing
country emission reduction projects as an alternative to what
are generally assumed to be more costly emission cuts at
home. To qualify as a CDM project, proposals must contribute
to sustainable development in the host country and facilitate
the stabilization of atmospheric concentrations of greenhouse
gases.

3. (U) An industrialized country seeking approval of a CDM
project must meet host country sustainable development
criteria and demonstrate that the project is not something
that would have happened anyway, while establishing a
baseline estimate of the greenhouse gases that would have
been emitted in the project's absence. After validation by a
designated third party, the CDM executive board considers the
proposal. Approved and implemented projects may receive
certified emission reduction (CER) credits based on the
measured difference between baseline and actual greenhouse
gas emissions; CER holders may then sell their credits (one
CER is defined as one metric ton of carbon dioxide
equivalent) in a variety of emerging carbon markets.

-------------------------------
BOLIVIA: A KEY CDM HOST COUNTRY
-------------------------------

4. (U) According to National Climate Change Program staff,
Bolivia seeks to position itself as a leading developing
country host of CDM projects, in hopes of attracting
investment and generating revenue from the sale of resulting
certified emission reduction credits. Program coordinator
Gisela Ulloa told Econoff March 6 that companies have
proposed approximately 25 ventures in sectors as varied as
reforestation, energy, and waste handling. In one, a company
plans to install and operate a gas extraction and flare
system at a Santa Cruz landfill, thereby preventing methane,
a powerful greenhouse gas, from escaping into the atmosphere.
In another, an organization hopes to promote the
reforestation of several thousand hectares of land (and a
corresponding increase in carbon dioxide capture) in the
department of Cochabamba.

5. (U) Ulloa said she believed projects like these could
significantly reduce greenhouse gas emissions and help
mitigate the effects of climate change. She noted that the
forestry and energy sectors present especially attractive
emission reduction opportunities for industrialized
countries: afforestation (the direct human-induced conversion
of non-forested to forested land) and forestation activities
have an estimated emission reduction potential of 35 million
metric tons of carbon dioxide between now and 2012, and
energy sector activities have an additional average annual
emission reduction potential of 1.8 million metric tons.
According to Ulloa, transportation, manufacturing, and
construction may also present interesting greenhouse gas
reduction opportunities.

---------------------------------
THE CATCH: REGULATORY UNCERTAINTY
---------------------------------

6. (U) However admirable the goal of becoming a key host of
CDM projects, domestic regulatory uncertainty has limited
Bolivia's ability to attract investors in emission reduction
projects. As it stands, each venture is different, with
individual firms forced to negotiate the division of CER
credits with GOB officials; percentage shares vary across and
within sectors, and companies find it difficult to rely on
precedent to build their arguments. Political uncertainty
has delayed the passage of a law establishing basic
guidelines, and officials expect little movement, as
Bolivia's attractiveness as a CDM host appears to be low on
the government's list of priorities.

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COMMENT
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7. (U) Bolivia's drive to reap the rewards of the clean
development mechanism may be off to a slow start, but its
early experience has proven useful. Bolivian companies have
acquired more sophisticated technologies, and the rigorous
CDM approval process has boosted transparency and encouraged
greater public-private cooperation. End comment.
GOLDBERG

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