Multilateral carbon credit fund |
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A joint EBRD and EIB climate change initiative The European Bank for Reconstruction and Development (EBRD) and the European Investment Bank (EIB) established the Multilateral Carbon Credit Fund (MCCF) as a key instrument in their strategy for combating climate change. Fully subscribed, with EUR 190 million in commitments, the MCCF is one of the few carbon funds dedicated specifically to countries from Central Europe to Central Asia. Purpose By joining the MCCF, private and public companies as well as EBRD and EIB shareholder countries can purchase carbon credits from emission reduction projects financed by the EIB or EBRD to meet their mandatory or voluntary greenhouse gas (GHG) emission reduction targets. In addition to the project credits, countries can also participate via the MCCF in green investment schemes. This is an innovative way to facilitate government-to-government trade in carbon credits, whereby the selling country uses the revenue from the sale of carbon credits to support investments in climate-friendly projects. By selling carbon credits to carbon funds, such as the MCCF, the investor increases the financial return on a project. For example, renewable energy projects (e.g. wind, hydro and biomass) are able to boost their internal rate of return by 1-7%. There are also projects such as landfill gas collection and flaring projects at large waste management sites that can be financed almost completely from sales of carbon credits. Project types Carbon credits can be generated from a large variety of project types, all of which reduce or avoid GHG emissions and are of interest to the MCCF:
Various types of carbon credits that the MCCF can purchase
Carbon credit potential of countries in transition The region covered by the MCCF currently contributes around 13% of global carbon emissions, yet it generates just 3% of global carbon credits. The countries in transition have a high potential for generating carbon credits because high carbon and energy intensity industries create significant opportunities for low-cost emission reductions. The marginal cost of achieving an emission reduction unit in such countries is low relative to western countries, whose economies are much more energy efficient and generally less carbon intensive. In addition, certain countries will be below their Kyoto targets as economic contraction has resulted in a sharp drop in emissions since the Kyoto Protocol’s base year (e.g. 1990 for the Russian Federation and Ukraine). These countries are therefore likely to be sellers of AAUs through green investment schemes. Carbon credits from projects in the following countries can be purchased by the MCCF: Albania, Armenia, Azerbaijan, Belarus, Bosnia and Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Georgia, Hungary, Kazakhstan, Kyrgyz Republic, Latvia, Lithuania, FYR Macedonia, Moldova, Mongolia, Montenegro, Poland, Romania, Russia, Serbia, Slovak Republic, Slovenia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan.
Participants The MCCF includes both private and public sector participants through two distinct windows:
Six countries and six companies have provided initial commitments totalling €190 million.
How the MCCF works The MCCF combines the strengths of the private sector, in particular its technical know-how and commercial drive, with those of the two major international financial institutions, which bring expertise in investment appraisal and risk mitigation. For project-based carbon credits the MCCF was developed from the outset using an intermediate structure involving three independent private sector companies (the "carbon managers"). These carbon managers, each covering a specific region, develop, negotiate, sign and monitor carbon credit transactions. The carbon managers work under the supervision of the MCCF Secretariat, a team of dedicated staff from the EBRD and EIB. The carbon managers have appointed Fortis Intertrust Netherlands as service provider for the fund. Fortis will take care of putting in place an operational contracting structure, including amongst others the Stichting CPI (Carbon Purchasing Intermediary). Whilst the Carbon Managers negotiate the Emission Reduction Purchase Agreements with the selling project companies, the actual contracting will be done by the Stichting CPI with the selling project companies, under back-to back off-take agreements with the MCCF Participants (with or without the intermediation of EBRD, depending on whether or not the Participant is a Sovereign). Participants have the opportunity to approve, and decide whether to participate in, each carbon credit transaction submitted to them by the MCCF Secretariat. Project-based carbon credits are allocated amongst participants pro rata to their contributions.
Key MCCF benefits for carbon projects Sellers of carbon credits should appreciate the following strengths of the MCCF:
Carbon manager’s services minimises the workload of the project owner:
The EBRD – EIB’s MCCF is an ideal counterparty for the project owner, adding value and contributing to project quality:
Green Investment Schemes MCCF Secretariat contacts Developers and owners of greenhouse gas emission reduction projects, including sovereign entities, who are interested in bringing these projects forward for financing and carbon credit sales, are invited to contact the MCCF Secretariat using the details below. Jan-Willem van de Ven, Head of the MCCF Secretariat Kristin Lang, Deputy Head of the MCCF Secretariat |
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