The supply of carbon credits across countries from Central Europe to Central Asia will be increased significantly under the EBRD-EIB Multilateral Carbon Credit Fund, which became active today with a commitment of EUR 165 million from six countries and six companies. It is the only carbon fund dedicated specifically to this region.

The inefficient use of energy, a legacy of the region's command economy past, means these countries have huge potential for cost effective reduction of greenhouse gas emissions - responsible for global warming - through energy efficiency improvements. The region currently contributes around 13 per cent of global carbon emissions, yet it generates just 3 per cent of global carbon credits, created when projects reduce or avoid greenhouse gas emissions. The potential is much higher, at about 20 per cent. Under the Kyoto Protocol carbon credits can be traded between buyers and sellers.

By joining the MCCF, countries - which must be a shareholder of either the EBRD or EIB - and companies can buy carbon credits from emission reduction projects financed by either institution. In addition to the MCCF, which is fully subscribed, sovereign participants can also participate via the MCCF in Green Investment Schemes, which are innovative ways of facilitating trade in carbon credits between governments whereby trade revenues are used to support investments in more climate friendly projects in the selling country.

Speaking at the first MCCF assembly meeting in London, EBRD President Jean Lemierre said the region has huge potential to address the issues of climate change and energy security, which are two themes that dominate the global agenda. The EBRD is helping the region to realise this potential by financing the efficient use of energy that will cut demand and imports, and also reduce pollution and adverse climate change, said Mr Lemierre. The by-product of these actions are carbon credits, which have financial benefits for those generating the credits and at the same time help MCCF participants meet their own Kyoto targets, he added.

Simon Brooks, Vice-President of the EIB, said that it is now clear to the international community that sustainable economic growth and development require determination and market-based action to bring about tangible and rapid results. The EU policy on environmental improvements is providing leadership and concrete support to countries and businesses eager to ensure a better future worldwide. MCCF is an important step in this direction and a solid foundation for extended cooperation among committed parties in other regions as well.

Typical projects under the MCCF will include industrial energy efficiency, power plant and district heating renovation, renewable energy (for example, biomass, wind and mini-hydro) and landfill gas extraction and utilisation projects across all 29 EBRD countries of operations, where the EIB also works extensively.

Fund participants include: Belgium (on behalf of Flanders), Finland, Ireland, Luxembourg, Spain, Sweden, and six private participants: Abengoa (Spain), EEZ (Czech Republic), Gas Natural (Spain), Endesa (Spain), PPC (Greece), and Union Fenosa (Spain).

The negotiation, contracting and monitoring of carbon credit transactions will be outsourced to private Carbon Managers selected by a competitive process.

A key strength of the MCCF is that the projects from which carbon credits will be sourced will be financed and appraised by either institution - or both, if projects are co-financed - in line with standard requirements for project viability and sustainability, integrity and corporate governance.

The EBRD, owned by 61 countries and two intergovernmental institutions, aims to foster the transition from centrally planned to market economies in countries from central Europe to Central Asia.

The European Investment Bank (EIB) is the financing institution of the European Union supporting its policies. Established in 1957, it operates within the 25 EU Members States and in more than 130 countries outside.