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Carbon credits finance green energy at Bulgarian paper mill
Netherlands fund & EBRD to boost Kyoto-style emissions trading in region
By switching from oil and gas to biomass energy, an EBRD-financed Bulgarian
sack kraft paper mill is going to reduce its greenhouse gas (GHG) emissions by
the equivalent of that released by 60,000 Dutch households annually, and sell
the ensuing carbon ‘credits’ using the new Kyoto Protocol.
By purchasing these carbon credits, the Netherlands Emissions Reduction
Co-operation Fund, managed by the EBRD, is helping PFS (Paper Factory
Stambolijski) cut GHG emissions, blamed for climate change, and reduce its
costs. In switching to bark and other renewable biomass materials from the
papermaking process to fuel its boilers, the mill expects to cut its carbon
dioxide and methane emissions by about 360,000 tonnes by 2012. PFS is the
Balkans’ biggest sack kraft mill.
The transaction – the first undertaken by the EBRD for the Dutch fund – is in
accordance with the Kyoto Protocol, an international treaty to reduce GHGs
that comes into force on 16 February. The Protocol and new European Union
emissions rules have created a market in which companies and governments that
reduce greenhouse gas levels can sell the ensuing emissions ‘credits.’ These
are purchased by businesses and governments in developed countries – such as
the Netherlands – that are close to exceeding their GHG emission quotas.
EBRD President Jean Lemierre said the EBRD region – former centrally planned
economies of central and eastern Europe, Russia, the Caucasus and central Asia
– is rich in possibilities for using the Protocol to reduce emissions and
energy waste and costs. Such economies are highly energy inefficient: it takes
twice as much energy to produce a unit of GDP in Hungary and Czech Republic as
it does in western Europe and 10 times as much in Russia and Ukraine.
Energy inefficiency is a major issue not just for global warming but also for
the region’s competitiveness, Mr Lemierre said. The EBRD has long been a
leader in financing energy efficiency improvements in the region, funding a
record-breaking €467 million in such projects in 2004 alone.
Emissions trading in the Bank’s countries of operations has lagged that in
Asia and Latin America but is rapidly growing thanks to Russia’s Kyoto
ratification in late 2004. An acceleration in the creation of carbon credits
and in trades is expected in the coming months as governments and businesses
seize their opportunities in this arena. Through its connections with sellers
from the Bank’s countries of operations, and with potential buyers and other
participants in these markets, the EBRD will facilitate the development of
this activity to benefit the region, Mr Lemierre said.
Once the paper mill’s €5 million switch to biomass energy is complete, the
resulting GHG emissions reductions will be independently verified and the
carbon credits generated. The EBRD, as manager of the €32 million Dutch fund,
will then acquire the mill’s credits for the account of the Netherlands. The
biomass project not only generates carbon credit cash for the mill but the
energy savings should quickly translate into greater profits for the mill,
which is jointly owned by the EBRD and the International Finance Corporation.
In addition to this project PFS has identified other energy efficiency
measures which could lead to reduction of GHGs by a further 250,000 tonnes by
2012.
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