Carbon Market: A Business Opportunity In Peru

In 1992, the United Nations recognized the evidence showing that human activity was affecting the temperature of the planet, due to the increase of greenhouse gases (GHG) concentration in the atmosphere. In an attempt to control this problem, the United Nations Frame Convention of Climate Change (UNFCCC) was created. Peru is a member of this Convention.

In the Third Conference of Parties (CoP 3, 1997) the Kyoto Protocol (KP) was signed. In this document, developed countries and transition economies made the commitment to reduce, between 2008 and 2012, their GHG emissions in an average of 5,2% of the amount accounted for 1990. In order to accomplish this objective, financial mechanisms that diminish the implementation costs of the reduction measures were created. One of them is the Clean Development Mechanism (CDM), which allows countries with GHG emission reduction commitments to acquire these reductions from projects executed in developing countries. Peru has ratified the KP in 2002; hence, it is possible to be benefited from this mechanism.

In this way, CDM becomes for our country an opportunity:

• To show that businesses and lucrative investments can be done through environment friendly projects.

• For new businesses. Peru has great potential in different sectors to develop projects that reduce GHG emissions.

• To promote investments with extraordinary incomes. CDM could be the last push to finance these new investments.   At this moment, Peru has a 150 project portfolio, which represents estimated investments of around US$ 8,440 million.

• To contribute to the sustainable development, implementing CDM projects that promote transference of technology, use of renewable energies, generation of job posts and the improvement of the quality of life for the society.

Furthermore, voluntary carbon initiatives can also be a great opportunity to develop more carbon projects in potential areas in Peru.

Carbon Market in Peru

Peru has carried out a series of actions for the implementation, promotion and development of projects that could apply to CDM and Voluntary Markets. These had allowed us to be recognized as one of the most attractive countries in this market at  world-wide level.

In Peru, the actions related to the climate change, particularly to the Clean Development Mechanism (CDM), has been managed by two institutions: Ministry of Environment, as the National Environmental Authority, and FONAM, as the promoter of environmental investments.

Peru Achievements in the Carbon Market

• Peru is a member of the UNFCCC and has ratified the Kyoto Protocol.
• We count with agile Institutions for CDM with high technical capacity.
• We have a 45 day-process for the assessment and approval of CDM projects.
• We are recognized as one of the top 6 most attractive countries for the development of CDM projects in the world.
• CDM is promoted in the country by FONAM, with a vision of "promotion of investments, source of job posts, use of renewable energies and contribution to the sustainable development”
• Capacity building has been developed within possible investors in the country. There is an increasing number of companies associations and public sector that knows about carbon reduction potential an how to apply to the mechanism.
• Local capacities in the National Financial System have been developed, in order to generate financial support to Peruvian Carbon projects. Among these financial institutions there are Commercial Banks, Financial Institutions, and Bank Associations.
• FONAM promotes the National Carbon Portfolio in International Carbon Fairs, International Environmental Funds, and among diverse actors of the carbon market including Governments, Carbon Funds, Investors and Technology Suppliers.
• Local capacities have been developed through the participation on international events and the organization of international seminars and forums within the country. These events include:
• Meetings and Conferences of the Parties of the UNFCCC COPs / MOPs
• International Carbon Seminars and Forums
• Other international and national carbon events

• Peru has signed cooperation agreements with: Canada, Austria, Spain and Germany, France, ENDESA and UNDP.

Peruvian Carbon Project Portfolio

At international level, Peru has carried important actions to consolidate its position as one of the most proactive and attractive countries in terms of carbon project development, being considered as one of the ten most attractive Hosts Countries (sellers) at a world-wide level.

By the first semester of 2009, Peru has a portfolio of 150 carbon projects which represents US$ 8,440 million in investments.

• 116 projects in the energy sector with 23.5 million reductions of tCO2e per year.
• 34 projects in the forestry sector: 27 A/R projects, with 53,03 million reductions of TCO2e in twenty years; and 7 REDD initiatives, over 525,778 has of tropical forests.