VZCZCXYZ0000
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. 
 
------------------------------------ 
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