World Bank eyes $250 mln deal to save forests

By Gerard Wynn

COLOGNE (Reuters) - The World Bank is in talks with Papua New Guinea, Costa Rica and Indonesia, and regional bodies in Brazil and the Democratic Republic of Congo to fund forest protection, said Warren Evans, the Bank's head of environment.

The World Bank had previously done deals with Chinese chemical plants to destroy greenhouse gases in exchange for tradable carbon credits and the rainforest project will follow that approach.

The aim is to cut the contribution to climate change of clearing and burning rainforests, responsible for about one fifth of global greenhouse gas emissions.

"Governments have approached the bank in the past six months," Evans told Reuters, speaking on the fringes of a carbon trading conference.

"We'll pilot over the next three years. The Amazon would be a great pilot," he said, adding that that would depend on Brazilian state approval.

The Bank wants to sign deals with three to five countries by 2009 or 2010 to agree to limits on national carbon emissions from deforestation, in return for some $250 million investment.

Evans was unable to comment on what acreage of forest the scheme would protect.

CARBON CREDITS

The World Bank would raise funds from national governments and charitable foundations. Donors may get carbon credits in return, depending on their future eligibility for carbon trade under the Kyoto Protocol.

"Investors would be running the risk of not getting carbon credits, but we hope they will."

Part of the money would be distributed to local people, for example through infrastructure development.

"Poor people make more money from agriculture or logging. We have to deal with livelihood issues," Evans said.

The plan would pilot possible expanded forest protection under Kyoto using a carbon trading model after 2012.

Already under Kyoto rich countries can pay poor countries to cut emissions from other activities, such as the manufacture of refrigerants and fertilizer, but paying countries to avoid deforestation is not yet eligible.

The pilot project depends on support from national governments at upcoming climate talks on extending the Kyoto Protocol after 2012, at G8 meetings in Germany and in Indonesia.

Environmental groups have recently criticized the World Bank for its role in distributing logging rights in DRC. Evans defended the bank's role.

"We allowed the government to eliminate concessions that had been let out, and consolidate them for forest protection and management," he said.