The European Investment Bank, the European Union’s lending arm, agreed to buy greenhouse-gas credits that will be delivered after 2012 after prices dropped earlier this year.

The EIB’s Post-2012 Carbon Fund signed two so-called emission reduction purchase agreements with unspecified sellers and agreed likely terms on other deals, Vice President Simon Brooks said today at the Carbon Expo conference in Barcelona.

The agreements will generate about 4 million metric tons of so-called Certified Emission Reduction credits from 2013 through 2020. The fund had deals for about 1.15 million credits as of January.

The projects that generate the credits are windfarms, waste management improvements and energy efficiency projects in Asia, Africa and Latin America, the EIB said in a statement handed to reporters. EIB is attempting to help boost a market that’s stalled by uncertainty because there is no international agreement to curb greenhouse gases after 2012, the final year of the first compliance period of the 1997 Kyoto Protocol.

“Sellers have got the message that prices can go down as well as up,” Markus van der Burg, director of Conning Asset Management Ltd. in London, said today in an interview in Barcelona. Conning helps manage the EIB’s fund. Project developers can use their agreement with the fund to help gain finance from private banks for their project, despite regulatory uncertainty, he said. That’s similar to how windfarms use power- purchase agreements as collateral for loans, for instance.

Price Plunge

Benchmark CER prices, from the Clean Development Mechanism of the protocol, fell 69 percent to 7.39 euros ($10.32) a metric ton on Feb. 12, from a peak in July of 23.88 euros, according to data from the European Climate Exchange in London. They were little changed at 12.80 euros today.

The prices paid by the 125 million-euro fund, assuming they are fixed, were from 6 euros to 8 euros a ton, said Urs Brodmann, an executive board member in Zurich at First Climate AG, which is also helping manage the fund.

The sellers will receive the price no matter if global negotiations fail to establish an international carbon market after 2012, said the EIB’s Brooks. “We are taking the risk.”

The UN will seek to negotiate a successor to Kyoto at multinational talks in Copenhagen in December. Negotiations continue in Bonn June 1-12.


Source: Bloomberg