The European Investment Bank and Carbon Finance

Carbon finance initiatives form an integral part of the European Investment Bank’s response to the challenges raised by climate change. In line with European Union policies, the Bank supports climate change mitigation and adaptation activities as well as initiatives that promote the carbon markets.

With the adoption of the Kyoto Protocol, signatory industrialised countries are committed to reducing their greenhouse gas emissions by an average of 5.2% compared to their level in 1990. The flexible mechanisms established by the Protocol to allow trading in greenhouse gas rights and the purchase of carbon credits from low-carbon projects help countries comply with their emission reduction obligations.

The EIB has established market-based instruments to encourage carbon trading, in cooperation with other public and private financing institutions, at national and international level. By getting involved in carbon fund sponsorship, the EIB aims to promote the use of both public and private sector capital to support low-carbon projects.

EIB-sponsored carbon funds specifically focus on the less developed areas of the carbon market. They aim to help EU Member States and companies, as well as other institutions, to meet their carbon emission obligations under the Kyoto Protocol and the European Union’s Emissions Trading Scheme (ETS). They also help promoters in economies in transition and developing countries to raise finance for low-carbon investments.

With different objectives, structures, regional focuses and participants, EIB-sponsored carbon funds have all been designed to extend market capacity and complement rather than replace private sector participants in the carbon market. EIB carbon funds also seek to anticipate market developments and promote confidence in regulatory developments, in particular for the period beyond 2012 and the Kyoto Protocol.