The IFC has signed its first carbon delivery guarantee agreements in Sub-Saharan Africa and South Asia. The new guarantee product aims to mitigate country and project risk to give companies selling carbon credits the chance to access a greater ranger of potential buyers.
Under the guarantee, the IFC helps support the delivery of carbon credits generated from companies involved in emission-reducing projects in the developing world to developed countries. The multilateral acts as an intermediary by selling companies' carbon credits to the market and then passing on a good price back to the projects. This process means that the sellers can then benefit from IFC's AAA credit rating, and the buyers can remove the risk of not receiving the expected carbon credits.
One of the first carbon delivery guarantees was signed with Omnia, a leading South African fertilizer producer. The IFC guarantee covers up to 900,000 carbon credits produced by the company’s efforts to reduce emissions. Omnia was able to reduce emissions and produce carbon credits via a nitrous oxide destruction facility.
The other guarantee was signed in India with Rain CII Carbon. The company has worked with the IFC for the last 15 years, and is now the largest merchant of calcined coke in the world and has production units in India and the US. The guarantee covered a deal for 850,000 carbon credits. The funds raised by the sale of carbon credits via the IFC were channelled back into further carbon reducing projects, with the company installing waste heat recovery facilities that help limit the company’s reliance on fossil fuels, and subsequently generate more carbon credits.
The concept of carbon credit generation was established as part of the Kyoto Protocol, under the Clean Development Mechanism. All carbon emission reducing projects have to be registered under the United Nations Framework Convention on climate change.
IFC has been relatively active in the developing carbon market since 2002, being involved in the IFC-Netherlands Carbon facility and Netherlands European carbon facility. Through these programmes the IFC purchased emissions reductions in developing countries on behalf of the Dutch government, which it would then use to meet its Kyoto protocol targets for emission reduction.
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