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Japan Bank for International Cooperation (JBIC) has signed a cooperation agreement for promoting Clean Development Mechanism (CDM) projects in Peru with two Peruvian government agencies.
The signing took place in Lima with the National Environmental Council (Conam), the governing body of activities concerning the Kyoto Mechanisms, and the National Environmental Fund (Fonam), an agency charged with identifying and promoting domestic CDM-related projects.
The agreement seeks to promote CDM-related projects through JBIC financing and support acquisition by Japanese firms of emission credits generated from such projects. Specifically, the agreement sets forth that: (a) Conam and Fonam provide JBIC with their information on domestic candidate CDM projects and offer cooperation for obtaining national approval of CDM projects in which JBIC is involved; (b) JBIC provides such information for Japan Carbon Finance Ltd, a company set up to help the Japan GHG Reduction Fund (JGRF) acquire emission reduction credits, as well as other interested Japanese firms; and (c) JBIC considers financial support for the candidate CDM projects on which JBIC received information and provides advice on their financing.
In Latin America, efforts to promote CDM projects are well underway. About one half of all CDM projects registered at the CDM Executive Board up to August 2005 are located in this region, and Peru is one of the countries pushing such efforts. The agreement will enable JBIC to gain relevant information from the two agencies, thereby helping Japanese firms acquire emission reduction credits and contributing to achieving Japan’s greenhouse gas (GHG) emissions reduction target.
Under the Kyoto Protocol that came into effect in February 2005, Japan has an obligation to reduce GHG emissions by 6% from the 1990 level. To achieve this target, the Japanese government laid out the policy of utilising the Kyoto Mechanisms, including the CDM, in addition to domestic reduction efforts.
Amid these moves, JBIC, as the only official financial institution responsible for advancing Japan’s external economic policy, has been making active efforts to advance the Kyoto Mechanisms by making maximum use of its long-cultivated ties with developing country governments through loan and guarantee operations and its overseas network through the representative offices around the world.
JBIC has already been cooperating with multilateral institutions including the World Bank. In addition, JBIC set up JGRF with Japanese private firms in December 2004. The signing of the cooperation agreement represents part of these efforts being made by JBIC. With the agreement, JBIC has made a total of 14 similar cooperation pledges and agreements.
The Clean Development Mechanism (CDM) allows industrial countries to undertake joint projects with developing countries and use emissions reduction credits (called Certified Emission Reductions (CERs)) generated from such projects to meet their own emissions reduction targets.
The Kyoto Mechanisms are economic arrangements set out in the Kyoto Protocol to enable industrialised countries and countries with economies in transition (EITs) to achieve their greenhouse gas (GHG) emissions reduction targets. The mechanisms consist of the Clean Development Mechanism (CDM), Joint Implementation (JI) and Emissions Trading.
The objective of the JGRF is to purchase emission reduction credits generated from GHG emissions reduction projects implemented in developing countries and EITs and distribute them among the contributors. Under the mechanism adopted for purchasing emission reduction credits, JCF purchases them first and sells them to the JGRF.