IFC invests €150m in post-2012 carbon credits fund

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The International Finance Corporation (IFC) on Thursday launched a €150-million fund to forward purchase certified emission reductions (CERs or carbon credits) that were expected to be produced between 2013 to 2020, from greenhouse-gas (GHG) reducing projects, either directly financed by the IFC or by local banks financed by IFC.

This was aimed at helping to reduce GHG emissions, extend carbon markets, and increase access to finance for projects that promote environmentally friendly economic growth.

It gave some certainty to clean development mechanism (CDM) projects after 2012, when the first commitment period − for developed countries to buy carbon credits to offset domestic emissions − under the Kyoto Protocol came to an end.

The IFC would invest up to €15-million in the IFC post-2012 Carbon Facility and leverage the remainder of the money from European power utilities and energy companies, such as Mercuria Energy and Shell Trading, which have already have committed to the facility as anchor investors.

The facility would ensure that projects could continue to benefit from carbon finance during a period of policy uncertainty in the approach to the end of the first commitment period under the Kyoto Protocol in 2012.

Inability to reach legally binding agreements at the global climate change negotiations meant that Kyoto signatories were unsure of whether or not there would be a legal obligation to buy carbon credits to offset emissions after 2012.

The IFC said that this new facility would provide a longer-term high-quality carbon revenue stream and increase financing options for projects that reduce emissions.

“IFC’s investments in the carbon markets at a time of regulatory uncertainty is an important step that will enable private sector companies to continue to develop projects that cut GHG emissions. Supporting carbon finance is a central part of IFC’s efforts to help the private sector address the challenges and capitalise on the opportunities presented by climate change,” stated IFC Climate Business global head Mohsen Khalil.

The IFC said that tackling climate change in developing countries was a strategic priority for the organisation, and it planned to double its climate-related investments to at least 20% of its overall commitments within two years.

IFC advisory services spending on climate change was also expected to double to the same share over the next two years.

“Carbon markets have a vital role to play in addressing climate change. Shell supports the continued expansion of CDM projects following the end of the Kyoto commitment period in 2012. Our focus is on supporting the commercialisation of projects with new structures, enabling them to reduce GHGs and help mitigate climate change,” said Shell Energy Europe president Slavko Preocanin.

“Investing in post-2012 reductions at this time is an expression of Mercuria’s confidence in the increasing role for carbon markets in addressing climate change post 2012, and also a great business opportunity. We feel that investing with IFC provides us with a solid partner in navigating these new waters,” added Mercuria Energy regulatory affairs, environment, and climate change head Andrei Marcu.

Source- Engineers News