Eligible Projects

What types of projects are potentially eligible? IFC has a particular interest in projects of the following types:

• renewable energy projects (e.g., biomass, wind, geothermal) that displace use of fossil fuels;
• energy efficiency projects, supply side or demand side, that reduce consumption of fossil fuels;
• recovery and utilization of methane from, for example, waste landfills and coal mines;
• switching from fuels with greater to lesser greenhouse gas (GHG) intensity (e.g., from coal to natural gas);
• recovery and utilization or destruction of industrial gases that are potent GHGs (HFC, N20, PFCs,SF6); and
• in Europe only, certain projects to plant trees or other biomass to sequester carbon on lands that have not been forested since 1989 or later.

What type of funding will be provided? If a project is approved, IFC will make periodic payments (e.g., annually), on behalf of the relevant Facility, to the project company upon certification and transfer of the legal title for the actual credits. Partial advance payments for credits to be generated in the future may be considered, but only under unusual circumstances.

The Government of the Netherlands will use the purchased credits to meet its GHG reduction obligations under the Kyoto Protocol. The credits will be purchased and paid for regardless of whether or not the Kyoto Protocol is in force.

What are the key terms in a carbon contract? A contract to purchase carbon credits will specify:

• the volume of GHG emissions that are expected to be reduced, measured in metric tonnes of carbon dioxide equivalent (CO2 equivalent);
• the price agreed per tonne of CO2 equivalent; and,
• the period over which credits will be purchased and payments made. All credits contracted for must be generated before the end of 2012.

Other terms and conditions will also be negotiated and agreed by IFC and the project company.

Can this contract be used to facilitate conventional financing? The contract will specify a series of cash flows to be paid to the company on delivery of certified credits over a period of time. Conventional providers of financing may choose to consider these additional cash flows when evaluating the capacity of the company to repay debt and/or provide a return on equity. IFC may consider monetizing this forward stream of revenues for projects that are also financed by IFC.

How long will it take to negotiate a contract? A quick initial assessment will determine IFC potential interest in a project. The time required for IFC to evaluate, negotiate and finalize a contract is expected to be about 6 months. However, the need to interact with several other parties, e.g., to validate the project design with an independent auditor and to receive host-country approval is likely to lengthen the total time needed for IFC to process a project to about 6-8 months. Any delays in external processes and approvals could further extend the timeline, as could delays in reaching financial closure on the project itself.