Carbon cutting projects to qualify for UN-backed interest-free loans

April 23rd, 20123:49 am @


Interest-free loans are to be made available for carbon-cutting projects in some of the world’s least developed countries under a pioneering new UN scheme.

The loans will be made available to support the design, validation and registration of projects under the UN-approved carbon offset scheme, the Clean Development Mechanism (CDM).


The CDM allows countries to meet their emissions reduction commitments under the Kyoto Protocol by investing in independently approved emissions reduction projects in developing countries. Over 4,000 projecst in around 70 countries are approved under the scheme, which aims to funnel green investment into developing economies.

However, critics have long argued that the expansion of the scheme has been hamstrung by the cost of registering projects for CDM approval and auditing projects to ensure they deliver promised emission reductions. As a result, the majority of CDM projects are located in large emerging economies such as China and India, while poorer countries have tended to struggle to access the scheme and the financing it can deliver.

Under the new loan scheme poor countries and those with fewer than 10 projects registered under the CDM will be eligible for interest-free loans supported by the UN Framework Convention on Climate Change (UNFCCC), the UN Environment Programme (UNEP) Risoe Centre, and the UN Office for Project Services (UNOPS).

In order to access loans, projects will have to meet a number of criteria, including a high probability of registration and a reasonable expectation of generating at least 7,500 certified emission reduction (CER) credits per year for projects in least developed countries (LDCs) and 15,000 CERs per year for projects in non-LDCs.

Christiana Figueres, UNFCCC executive secretary, said the loans would help expand the carbon trading mechanism, adding that the new financing would be offered at an opportune time given that from next year the EU is expected to limit the number of CERs it buys from industrial  gas projects in China.

“The CDM Loan Scheme is a chance to improve the access to and spread of the CDM, particularly in Africa,” Figueres said at the African Carbon Forum in Addis Ababa, Ethiopia, last week.

“I hope during next year’s Africa Carbon Forum, we will see the positive impact this scheme has made towards ensuring the active participation of the continent in the CDM.”

Applications are now being accepted for the first round of reviews for the loan scheme, which will end in June.

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