• Focus on the poorest developing countries and innovative approaches
  • Support for European companies in emissions trading
  • Purchase of carbon emission reduction certificates until the year 2020
  • New purchase programme to prevent the shortage of emission reduction Certificates

KfW and the European Investment Bank (EIB) have today launched the second tranche of the EIB-KfW Carbon Programme by signing a memorandum of understanding to this effect. The new tranche of the programme focuses on projects in the poorest developing countries. In
addition, it will develop programmatic approaches which will enable small individual measures, such as the broad-scale use of energy-saving lamps across a region, to be combined to qualify for the programme.

Carbon emission certificates (in accordance with the Joint Implementation (JI) and Clean Development Mechanism (CDM) of the Kyoto Protocol) will be purchased with a volume of EUR 100 million up to the year 2020. The intention is to give carbon certificate sellers a eligibility guarantee and to provide advance payment financing. The buyers of the certificates will be pri-marily European enterprises that have to meet their obligations under the European Emissions Trading System (ETS). They will be given a guarantee which ensures that, even after 2012, they will only have to buy certificates that are eligible for compliance with the ETS.

“We want to give a clear message: climate protection continues. Our programme will help to involve in particular the poorest developing countries more strongly in climate protection. This is urgently required.“ said Wolfgang Kroh, Member of the Managing Board of KfW Bankengruppe.

"New methods have to be developed for climate protection in order to increase the potential of projects and in particular to support small measures in the area of energy efficiency and renew-able energies through new instruments. The poorer developing countries can benefit most of all from these measures.“

Simon Brooks, EIB Vice President responsible for the Bank’s climate change activity, also welcomed the initiative at the Carbon Expo in Barcelona. “The EIB is delighted to reconfirm its commitment to the EIB-KfW Carbon Programme with this second fund which clearly demonstrates the importance which the Bank places on the global fight against climate change.”

“In the past, the EIB has signalled its confidence in the existence of a strong post-2012 carbon market. We are hopeful that this renewed collaboration with KfW will go further in ensuring that this market has the necessary support and mechanisms available to it to allow for the develop-ment of sound projects which mitigate climate change.”

Due to the economic and financial crisis, the worldwide market for carbon emission reduction certificates is currently in a very critical phase. In addition, there is great uncertainty about how climate protection will be organised after 2012 when the Kyoto Protocol has expired. Most
lenders show a growing risk aversion and, as such, it is becoming increasingly difficult to fi-nance projects in developing countries. Far fewer climate protection projects are being launched at the moment and, as a result, in only a few years there might be a shortage of carbon emis-sion certificates and price increases for European enterprises.

The EIB and KfW intend to further expand their activities in the carbon market and support its development with this programme. The first tranche of the joint programme had a volume of EUR 88 million and aimed at enabling small and medium-sized European enterprises to better participate in the worldwide carbon market.

The activities of the KfW Carbon Fund were successfully continued in 2008. Overall, around 13.5 million carbon emission certificates were purchased last year, benefiting approximately 20 projects, mainly in the area of renewable energies and energy efficiency. In the framework of the joint EIB-KfW Carbon Programme, agreements were concluded with buyers for a total vol-ume of EUR 88.2 million in 2008.

The European Emissions Trading Scheme (ETS) also allows the use of credits from the flexible Joint Implementation (JI) and Clean Development Mechanism (CDM) under the Kyoto Protocol. JI refers to projects in the industrialised and transition countries and CDM to projects in devel-oping countries.

Interested companies can find further information on the programme under www.kfw.de/carbonfund.

Background information:

The European Investment Bank (EIB) is the long term lending institution of the European Un-ion, financing projects which further European objectives. Carbon finance initiatives form an integral part of the EIB’s response to the economic and environmental challenges raised by climate change. To date, the EIB has established six market mechanisms to encourage carbon trading schemes, 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 companies, EU Member States, and other countries and institutions to meet their carbon emission obligations under the Kyoto protocol and the European Union’s Emission Trading Scheme (ETS), through environment friendly investments. They aim to help companies, EU Member States, and other countries and institutions to meet their carbon emission obligations under the Kyoto Protocol and the European Union’s Emission Trading Scheme (ETS), through environment friendly investments.

KfW Bankengruppe gives impetus to economic, social and ecological development worldwide. A promotional bank under public law founded in 1948, its shareholders are the German federal government (80%) and the federal states (20%). KfW takes a strong stand for climate and envi-ronmental protection both within Germany and abroad. It supports, among others, SMEs and business start-ups, the private housing sector and the development of municipal infrastructure as well as education finance.