This innovative Fund combined with other EIB carbon and climate change initiatives, the Bank’s EU institutional role and the EU’s global leadership of climate change initiatives, positions the EIB at the centre of global climate change efforts.
The European Investment Bank’s EUR 100 million Post-2012 Carbon Fund was launched today in Ljubljana during the 2007 EIB Forum devoted to the topic of "Investing in Energy – Mastering Climate Change". The development of the Fund is a direct result of on-going cooperation in the field of climate change between the EIB and three leading European national financing institutions: Instituto de Crédito Oficial (ICO), KfW Bankengruppe and the Nordic Investment Bank (NIB).
The Post-2012 Carbon Fund is designed to underpin the market value of carbon emission reduction units produced after the expiry of the current Kyoto Protocol in 2012. The Bank and its partners have designed the Fund to encourage and facilitate investment in projects which will give rise to carbon credits in a longer term time perspective than is currently generally the case. Through the mechanism of the Fund, “patient and catalytic public sector capital” will serve to enhance the role of carbon credits as a project finance instrument.
The Fund will support the development of environmentally beneficial projects including renewable energy, energy efficiency, forestry and methane capture, via the acquisition of carbon credits generated by the mitigation, prevention, reduction and/or sequestration of GHG emissions in the period 2013-22 (i.e. after the second phase of the ETS and the Kyoto Protocol commitment period and for a sufficiently long period to have a material impact on the financial viability of underlying projects). The day-to-day activities of the Post 2012 Carbon Fund will be undertaken, within the terms of detailed operating and policy guidelines, by an independent fund management team.
With its focus exclusively on post-Kyoto credits, the Post-2012 Carbon Fund will be materially different from not only the other carbon finance activities of the EIB, but also those more generally in the market.
Other EIB Carbon Funds
Protection and improvement of the environment, including tackling climate change, are key priorities for the EU and thus for the EIB. As part of its strategy to support the EU’s Kyoto commitments, the EIB has been working closely with national and international financing institutions to establish market mechanisms that will encourage the production and trade of the project-based carbon credits foreseen by Kyoto and the “linking directive” admitting these credits to the ETS.
In addition to the Post-2012 Carbon Fund, the Bank has established three other carbon funds. Structured in different ways, the funds have differing regional focuses, target participants and carbon credit types, but overall are complementary, both mutually and vis-à-vis the Bank’s other climate change initiatives.
- The EBRD-EIB Multilateral Carbon Credit Fund (MCCF): Launched in December 2006 with a commitment of EUR 165 million from six countries and six companies. The Fund will expand the supply of carbon credits in Central Europe and Central Asia. Countries and companies that become members of the Fund can buy carbon credits from emission reduction projects financed by the EIB or EBRD. Country participants can also participate via the MCCF in Green Investment Schemes to facilitate trade in carbon credits between governments.
- The Carbon Fund for Europe (CFE): Launched in March 2007 with a EUR 50 million commitment from four governments and one company, the CFE was set up with the World Bank to help European countries meet their Kyoto commitments. The Fund purchases greenhouse gas emission reductions through the Kyoto Protocol’s Clean Development Mechanism (CDM) and Joint Initiative (JI) from climate-friendly investment projects in the EIB’s or World Bank’s portfolios, as well as standalone projects. The CFE purchases verified emission rights that are compatible with the EU ETS (Emissions Trading Scheme) to assist companies interested in meeting EU allowance allocation obligations.
- The EIB-KfW Carbon Programme: Launched in May 2007 with EUR 100 million of commitments initially provided equally by EIB and KfW, and operational since August 2007, the Programme was established to support EU corporates and/or intermediaries acting on behalf of EU corporates with a special focus on small and medium-sized enterprises. The fruit of early cooperation between the EIB and KfW, the Programme presents a number of features not systematically available in the carbon fund market hitherto, in particular offering guaranteed delivery of carbon credits to small and medium-sized (SME) participants and advance payments to the sellers of carbon credits. Project-based carbon credits may be acquired from projects in any EIB country of operation that has ratified the Kyoto Protocol and where the credits are eligible under the EU ETS (including renewable energy, energy efficiency, forestry and methane). The Programme provides an excellent example of cooperative working between the EIB and KfW, clearly drawing on the respective strengths of each organisation. The KfW Carbon Team, as the Fund Manager, will be responsible for the Fund’s day-to-day operations including deal sourcing, structuring and negotiation. The EIB’s project finance expertise will be deployed in determining the acceptability of making advance payments for certain individual projects. The two institutions will jointly oversee fund management activities.
Collectively these funds are: contributing to the development of a market in carbon rights; helping EU Member States, companies and other institutions to meet their carbon emission obligations; supporting the on-going development of project-based mechanisms such as the Kyoto Protocol’s Clean Development Mechanism (CDM) and Joint Implementation (JI); promoting the EU’s Emissions Trading Scheme (EU ETS); and supporting the financing and implementation of environmentally beneficial projects.
Other EIB climate change initiatives
In its approach to supporting climate change projects the EIB ensures that the investments it finances are compliant with EU environmental principles and standards, enshrined in the European Principles for the Environment (EPE). These are endorsed by the EIB, EBRD, NIB, NEFCO and CEB, with the support of the European Commission and its Directorate-General for Environment (DG ENV).
The EIB has also established its own more general Climate Change Financing Facility (CCFF), which provides long-term loan finance to EU companies participating in the Emissions Trading Scheme, and to companies operating outside the EU developing Joint Implementation and Clean Development Mechanism projects. The Facility finances up to 75% of the costs of projects – and can offer other attractive financing features, e.g. longer grace periods and maturities than normal – that lead to significant emission reductions or contribute to climate change adaptation.
Under the CCFF, the EIB has put in place a simplified and accelerated process, i.e. the Global Authorisation (GA) Mechanism, for the financing of small and medium-scale projects (public or private) aimed at promoting climate change mitigation and adaptation investments, with special emphasis on carbon credit generating projects, outside the EU, facilitated by two teams of consultants.
In addition, the EUR 3 billion “Facility for Energy Sustainability and Security of Supply” approved by the Board of Governors in June 2007 is expected to yield a number of carbon credit generating projects, notably through the China Climate Change Framework Facility, for possible acquisition by EIB-sponsored Carbon Funds.
The Bank also has a Climate Change Technical Assistance Facility (CCTAF) to provide upfront funding for activities associated with the development of project-based carbon assets under the project-based mechanisms, Clean Development Mechanism (CDM) and Joint Implementation (JI) of the Kyoto Protocol.
Finally, a number of studies have been carried out or are being planned which interact with the Carbon Fund activities of the EIB and reinforce the Bank’s strategy in the field of climate change.
Further information on the EIB’s climate change activities is also available on the Bank’s website: http://www.eib.org/climateaction