What We Do

The Carbon Finance Unit is IFC's in-house resource for all carbon finance-related issues. The Unit has several investment professionals as well as support staff to assist project sponsors in emerging markets to access the market for carbon credits. The Unit also works with buyers of emission reductions.

Emission Reduction Purchase Facilities

IFC manages bilateral carbon facilities with the arrangement that IFC will purchase carbon credits for the benefit of the Government of the Netherlands under the international emission reduction transfer rules of the Kyoto Protocol.

IFC presently has approximately $175 million available through the IFC-Netherlands Carbon Facility (INCaF) for Clean Development Mechanism (CDM) projects and the Netherlands European Carbon Facility (NECaF) for Joint Implementation (JI) projects. Payments for carbon credits purchased will be made to eligible projects in emerging markets and will provide them with additional revenue. About $50 million has been committed to six projects, and the balance is expected to be committed by June 2007.

Financial Products and Services for the Carbon Market

The Unit also takes the lead within IFC to develop new products for the carbon market, including a Carbon Delivery Guarantee and monetization of forward contracts, both for qualified sellers of Certified Emission Reductions (CERs). The Unit advises on investments to provide flexible financing, including equity, to carbon-rich projects, and is considering targeting debt facilities with local banks who will lend to sponsors of emission reduction projects.

Carbon Delivery Guarantee (CDG)
Capitalizing on IFC's ability to assess and manage long-term project and credit risk in emerging markets, IFC continues to facilitate the development of a commercial carbon market by delivering innovative financial products that unlock the value of carbon assets of developing country clients and assist developing country partners in meeting their commitments to mitigate climate change. IFC's new Carbon Delivery Guarantee is a credit enhancement product wherein IFC, which is AAA-rated, will guarantee delivery of carbon credits from quality projects in developing countries to buyers in developed countries. IFC will thus be able to help projects get a much higher value for their credits, while eliminating the risk of underdelivery of carbon credits for compliance buyers in developed countries, especially in Europe.