|
|
Background on carbon finance
Under the Kyoto Protocol and other
policies to combat climate change, projects that reduce emissions of
greenhouse gases also generate a valuable new commodity. The sale of
emission reduction units, or as commonly known, carbon credits, can
significantly boost financial returns on climate-friendly projects. Today,
companies and local governments across Central and Eastern Europe are taking
advantage of carbon finance to raise financing for their projects.
ISRA MART is
one of Europe's most successful carbon brokers and advisers on such transactions.
Follow the links below to learn more about the background and practicalities
of carbon finance.
Introduction to climate change: Learn how a global environmental problem -
climate change - led to the creation of global commodity market for emission
reductions.
The Kyoto Flexibility Mechanisms: The objective of carbon finance is to find
the lowest cost emissions reduction possibilities. The Kyoto Protocol
created three so-called Flexibility Mechanisms to help countries fulfill
their commitments.
Glossary of terms
|
|
|
The Kyoto
Flexibility Mechanisms
The possibility to raise project finance through the sale of emission
reductions derives from the so-called Flexibility Mechanisms of the Kyoto
Protocol. These innovative but complex mechanisms were created to help
industrialised countries meet carbon cuts agreed in the Kyoto Protocol, an
agreement that is part of a larger web of local, national, and international
initiatives aimed at combating climate change. |
|
|
Joint
Implementation
The Kyoto mechanism known as Joint Implementation (JI) allows governments
and companies in industrialised countries to purchase Emission Reduction
Units (ERUs) from projects elsewhere in the developed world that reduce or
avoid greenhouse gas emissions. ERUs are valuable because they can be used
to help meet Kyoto reduction targets. For a project owner / developer, JI
represents a new source of capital for climate-friendly projects.
|
International Emissions Trading
International Emissions Trading (IET) allows an industrialised (Annex I)
country with an excess of emission units, presumably from reducing emissions
below commitment levels, to sell its credits to another Annex I country that
is unable to meet its commitments on its own.
Trading is probably the most contentious of all the flexibility mechanisms
mentioned in the Kyoto Protocol. Already some countries are moving ahead in
this field - Slovakia has launched a financial structure to support
companies that have reduced their greenhouse gas emissions, whereby the
proceeds from the sale of claims on Assigned Allowance Units (AAUs) are
released to those companies. Such structures are likely to be more widely
used across EEC.
|
|
|
|
|
Clean
Development Mechanism
The Clean Development Mechanism (CDM) allows governments or private entities
in industrialised countries to implement emission reduction projects in
developing countries in order to meet their emission objectives. The
industrialised nations receive credit for these projects in the form of "certified
emission reductions" (CERs). The purpose of the CDM is to promote "sustainable
development" while contributing to the objective of the FCCC. In contrast,
the purpose of JI, according to the Protocol, is simply to help Annex I
countries meet their emission commitments.
|
