Citi to Purchase 1.17 Million Tonnes of Carbon Credits in Innovative Microfinance Deal with MicroEnergy Credits and Mongolia’s XacBank

NEW YORK, Apr 26, 2012 (BUSINESS WIRE) — In a deal that combines microloans in Mongolia with the sale of carbon credits on the European Union Emissions Trading Scheme (EU ETS), Citi’s London-based Environmental Products Trading and Origination team, working with Citi Microfinance, has agreed to purchase 1.17 million metric tonnes of carbon credits over the next seven years from Seattle-based social enterprise MicroEnergy Credits. The carbon credits will be generated by capturing reductions of greenhouse gas emissions following the installation of more efficient household insulation and heating fixtures in Ulaanbaatar, the capital and largest city in Mongolia. The purchase and installation of the fixtures will be funded through microloans from Mongolia’s XacBank.

Under the arrangement, a XacBank customer will purchase an energy efficient stove or home insulation products like a “ger blanket,” which covers a ger, the traditional and ubiquitous Mongolian portable tent-like structures in which more than one quarter of the Ulaanbaatar population lives. Gers are traditionally under-insulated and heated by inefficient coal-burning stoves that contribute to Ulaanbaatar’s especially severe air pollution. Ger blankets greatly increase heat retention, and, like energy efficient stoves, lower the rate of fossil fuel consumption and carbon emissions.

The reductions in household emissions accrued through the use of energy efficient fixtures will be earned by XacBank clients and then assigned to MicroEnergy Credits, which develops carbon finance projects and brings clean energy to low income microfinance households in developing countries. MicroEnergy Credits will then quantify, aggregate, and sell the credits to Citi, who will monetize these credits on the open market through its Environmental Products Trading and Origination team. Portions of the proceeds from Citi’s carbon credit purchase will be distributed by MicroEnergy Credits back to XacBank, allowing the Mongolian lender to expand its clean energy program, build additional marketing and distribution centers, and increase access to affordable clean energy loans.

“Citi and our partners collaborated to design a carbon credit financing chain that connects and values energy saved at the household level with global emission reduction targets and markets,” said Bob Annibale, Global Director of Citi Microfinance and Community Development. “Together, we are creating the capacity for Ulaanbaatar residents, living in gers, to access credit to make home energy efficiency improvements, save money, and limit their harmful environmental impact. It is a great example of using creative microfinancing to address client and community needs, and a model that can be applied in other initiatives and countries.”

“We are very excited to be at the heart of a deal which combines the best of Citi’s environmental products market expertise and our track record in the microfinance sector to deliver tangible positive outcomes for local communities and the environment,” said Stuart Staley, Global Head of Commodities at Citi. “Under this arrangement, we are implementing an innovative market-based strategy to tackle real challenges faced by developing countries.”

“MicroEnergy Credits is proud to partner with Citi in this landmark agreement, which brings microfinance households access to clean energy incentives typically only accessed by large agencies and corporations,” said April Allderdice, CEO, MicroEnergy Credits. “Microfinance institutions like XacBank have the reach to impact the energy-use options of millions of low-income households around the world. MicroEnergy Credits provides the carbon monitoring and aggregating system to be sure these carbon incentives reach the people that can use them. Agreements like this one allow low income families to use microfinance to clean the environment and improve their quality of life.”

“As a triple bottom line bank, dedicated to working for People, Planet, and Profit, XacBank is committed to tackling air pollution in our capital city- now the most polluted city in the world in the winter,” said Bat Ochir Dugersuren, CEO of XacBank. “With access to carbon revenues through our partnership with MicroEnergy Credits and agreement with Citi, XacBank’s Eco Banking Department will expand our services so that all Mongolian families have access to energy efficient products to reduce pollution, improve their health, and save money.”

The first carbon credits are expected to be available for purchase by Citi in March 2013. The program is in the process of being registered and approved through the Clean Development Mechanism run by the United Nations Framework Convention on Climate Change (UNFCCC).

About Citi

Citi, the leading global bank, has approximately 200 million customer accounts and does business in more than 160 countries and jurisdictions. Citi provides consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, transaction services, and wealth management.

Additional information may be found at http://www.citigroup.com | Twitter: @Citi | YouTube: http://www.youtube.com/citi | Blog: http://new.citi.com | Facebook: http://www.facebook.com/citi | LinkedIn: http://www.linkedin.com/company/citi

About XacBank

XacBank ( http://www.xacbank.mn ) is one of Mongolia’s largest banks, serving Micro customers, Small and Medium-sized Businesses as well as large corporations with a range of inclusive banking, fair investment and other financial products and services. It operates in all 21 provinces and the capital city, serving more than 500 thousand customers through its 97 retail and business branches, as well as specialized banking outlets including 400 mobile banking agents and 70 Savings and Credit Cooperatives. The Bank aims to create a sustainable value for its customers, shareholders and institutional investors, while promoting a triple-bottom line vision and mission as built around the “Planet, People and Profit.”

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Price of Carbon Credits set to Go Up

Carbon credit prices may go up after deal on Kyoto extension
Namrata Singh, Times of India news

MUMBAI: Carbon credit prices , which have crashed to euro 5 per unit currently, way below the psychological euro 10 per unit level, are expected to revive at least on one count: The continuation of Kyoto Protocol for another five years, thus securing the long-term fundamentals of the Indian greenhouse gas (GHG) emission reduction market.

While the uncertainty on the extension of Kyoto was causing much concern among Indian project developers, a key factor which led to a fall in prices of carbon credits was the Eurozone crisis which continues to bog the business of environment . A positive outcome at the Durban climate meet, announcing the extension of the Kyoto Protocol from 2013 to 2017 has, however, put to rest speculation surrounding the future of clean development mechanism (CDM) projects.

Experts believe prices of carbon credits could rise to the euro 8-10 range in 9-12 months. By 2013, these may even appreciate to euro 12-15 per unit. However, there was no immediate reaction of the Durban outcome on carbon credit prices which continue to rule low.

P Ram Babu, CEO, General Carbon Advisory Services, said carbon credits are expected to start appreciating in the next two to three months. “Indian companies are enthusiastic about the outcome on the climate agreement at Durban. Companies are expected to once again gear up on the CDM projects front,” said Ram Babu.

Carbon credits, which are also called certified emission reductions (CERs), are offsets of international emission trading scheme implemented to mitigate global warming. A CER is a type of emission reduction unit issued by the CDM executive board under the Kyoto Protocol to projects which mitigate GHG emissions . One CER is issued per tonne of carbon dioxide (CO2) mitigated by a project.

“At least, now there is no uncertainty with respect to Kyoto Protocol’s continuation. We will continue to invest into technologies which will help our projects reduce GHG emissions ,” said Seshagiri Rao, joint managing director, JSW Steel, whose two projects are registered with the CDM with issued CERs of nearly one million .

In the last couple of months, prices of carbon credits fell by more than 50%, thus halving the total value of the CER market to $ 5 billion. Indian carbon credits account for about 25% of this market, which is around $1 billion.

According to Ashutosh Pandey, CEO – advisory business , Emergent Ventures, an integrated climate and clean energy company, “The Durban outcome would create an even bigger carbon market. Longer term fundamentals are good, although we don’t see much change in the short-term .”

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India: Himachal carbon credit project to be replicated in other states

Indian Express: After getting the Mid-Himalayan Watershed Development Project registered with the United Nations Framework Convention on Climate Change (UNFCCC), Himachal Pradesh has become the first state in India to implement the clean development mechanism (CDM) project. Under the project, world’s largest, the World Bank will buy carbon credits from the new forests being developed on degraded lands.

With the granting of approval by the UNFCCC, the state may get an additional annual revenue of Rs 8-10 crore through carbon credits.

The project, in the public sector and spread over an area of 4,004 hectares surpasses a 3,500-hectare CDM project of China, would involve direct benefit to the villagers who would raise the plantations.

R K Kapoor, the chief project director of the Rs 337-crore Mid-Himalayan Watershed Development Project said, “The Ministry of Rural Development has adopted this project as a model for replicating it in other parts of the country. I have been invited by the ministry to make a presentation as to how Himachal Pradesh has achieved this. A few more ministries are keen to replicate Himachal Pradesh’s initiative”.

Chief Minister Prem Kumar Dhumal, too, is ecstatic. “World Bank’s Hurber Nove Josserand, (deputy country director) who was present to sign the agreement with state government had said that the Himachal’s project was innovative and would make it first state in India to achieve what most countries have failed to do. There is a need to support the project to help state become carbon neutral,” Dhumal added.

For the records, Himachal Pradesh is aiming to become the country’s first carbon-free state and the world’s second and as a part of the endeavour, the state government has mandated all its departments to begin environment audit from this year.

Meanwhile, the broad objective of the CDM project is to sequester greenhouse gases by expanding forestry plantations on mostly degraded lands apart from creating a carbon sink. The project aims to sequester 828,016 tonnes of carbon by the year 2026. One tonne of carbon dioxide converted into biomass under new plantations is counted as one credit.

Spread over 11 watershed divisions in 177 gram panchayats across 10 districts under the watershed project, the CDM agreement with the World bank is estimated to fetch a carbon revenue of at least Rs 20 crore for the first crediting period of 20 years.

The carbon revenues have been calculated at a modest US $5 per tonne of carbon dioxide accumulated in tree biomass, above as well as under the ground.

Under this agreement, benefit accruing to the community and private landholders will be about Rs 2,500 per hectare, depending on growth of trees and other factors.

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What are carbon credits?

Carbon credits are generated by enterprises in the developing world that shift to cleaner technologies and thereby save on energy consumption, consequently reducing their greenhouse gas emissions. For each tonne of carbon dioxide (the major GHG) emission avoided, the entity can get a carbon emission certificate which they can sell either immediately or through a futures market, just like any other commodity.

The certificates are sold to entities in rich countries, like power utilities, who have emission reduction targets to achieve and find it cheaper to buy ‘offsetting’ certificates rather than do a clean-up in their own backyard.

 

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world’s first rail network to earn carbon credits


Delhi Metro officials tour metro train facility in New Delhi, Sept. 17, 2002.
The passenger rail system in India’s capital has become the world’s first rail network to earn carbon credits from the United Nations for helping to reduce greenhouse gas emissions.

The so-called Delhi metro has become a popular mode of transport in its nine years of operation, a rare success story in a country where government projects are often criticized for being cheap or badly implemented.

Launched in 2002 in a city of about 14 million people, the system runs partly underground and partly on elevated tracks through some of the city’s most crowded areas, carrying about two-million passengers a day.

The U.N. statement says the system has reduced emission of harmful gases and pollution levels in the city by 630,000 tons a year, mostly due to a regenerative braking process that helps save energy by nearly 30 percent.

Anumita Roy Choudhury at the Center for Science and Environment in New Delhi calls it a significant step in the global fight to reduce greenhouse gases.

“In the future, cities which are increasingly car centric will make the fight on global warming difficult unless we are able to make significant improvements in public transport systems,” she said.

Environmentalists have long focused on the need to reduce the amount of carbon-emitting vehicles on roadways of India’s mega cities, and it is estimated that New Delhi’s metro eliminates about 90,000 such trips every day.

The carbon credits afford the rail network $9.5 million annually over the next seven years, part of a U.N. scheme that incentivizes companies in developing countries to cut greenhouse gas emissions.

Only a handful of public transport systems globally have earned carbon credits. New Delhi’s metro is the first rail network to qualify.

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Introduction to Carbon Credits

INTRODUCTION

Everyone has been poluting for a while and getting away with it. Within the last decade, governments have agreed to tax this pollution in an effort to reduce global pollution and climate impact as a result. The conclusion of that agreement created Carbon Credits. A commodity to be traded like gold or oil, this product can also be generated.

Its simple, adopt a technology or method with measurable emission reduction and you can have that evaluated to be a carbon credit. How the common man can generate a carbon credit is still being debated. However, the markets are now in the hundreds of millions and fines for pollution trickle down to the common man.

ORIGIN

In 1997 a protocol to the UNFCC (United Nations Framework Convention on Climate Change) was initially adopted for use, in Kyoto Japan, and is commonly known as Kyoto protocol. This protocol legally binds the parties (industrialized countries) to the protocol to reduce their Green House Gas (GHG) emissions.

This protocol defines mechanisms like Emissions Trading and Clean Development Mechanisms that allow industrialized nations to meet their GHG obligations by buying GHG reduction credits from other countries. Thus allowing third world countries to carry out projects under Clean Development Mechanism and make a profit by trading the carbon credits with developed countries. In essence it means that if a country cannot meet its Green House Gas reduction target, it can buy credits from other countries that have credits in excess.

As a result Carbon has become a commodity, which like other commodities, is traded in open market, called carbon market. According to pointcarbon.com report “The total traded volume in the global carbon market grew from 1.6 Gt (1.6 billion tonnes) in 2006, to 2.7 Gt in 2007 — an increase of 64 percent (see Figure 2.1). The value of the carbon traded grew even more, by 80 percent in the same period, from €22bn ($33bn) to €40bn ($60bn).

The Differences

Its easy with the lack of information to get, carbon credits and offsets confused. Fundamentally, carbon credits and offsets are the same thing, both being equal to one metric ton of GHG emissions. Some people argue differently, however. Most of the differences in their interpretation relate to the various scenarios in which the words are used, and for what purpose the credits or offsets are used. The carbon language everyone is using at the moment is still new and therefore changes regularly. We hope that for everyone’s sake it will develop over time and become clearer.

The European Union Emissions Trading Scheme (EU ETS)

Also known as the European Union Emissions Trading System, this is the largest multi-national carbon emissions trading scheme in the world and a major pillar of EU climate policy. The EU ETS carbon credit scheme currently covers more than 10,000 installations with a net heat excess of 20 MW in the energy and industrial sectors which are collectively responsible for close to half of the EU’s emissions of CO2 and 40% of its total greenhouse gas emissions.
Besides receiving this initial allocation, an operator may purchase EU and international carbon credits. If an installation has performed well at reducing its carbon emissions then it has the opportunity to trade its remaining carbon credits and make a profit. This allows the carbon trading system to be more self contained and be part of the stock exchange with little government intervention.

Kyoto-CERs (Certified Emissions Reduction)

The Kyoto Protocol is an agreement made under the United Nations Framework Convention on Climate Change (UNFCCC). Countries that ratify this protocol commit to reducing their emissions of carbon dioxide and five other greenhouse gases (GHG), or engaging in emissions trading if they maintain or increase emissions of these green house gases.

The Kyoto Protocol now covers more than 170 countries globally but only 60% of countries in terms of global greenhouse gas emissions. As of December 2007, the US and Kazakhstan are the only signatory nations not to have ratified the act. The first commitment period of the Kyoto Protocol ended in 2012, and international talks began in May 2007 on a subsequent commitment period

VERs (Voluntary/Verified Emissions Reductions)

Both refer to the emerging market for carbon credits and carbon trading outside the Kyoto Protocol compliance regime. The voluntary market may at present be smaller and less liquid than the compliance market for carbon credits, however, general market opinion is that the wider scope of the voluntary market, and growth led by the private sector, not public policy, means that it has strong potential to outstrip the market size of the compliance regime.

CONCLUSION

Whether you see it or not, you are being fined for your impact on the environment. This process is here to stay and will only grow over time. Whether you love the environment or not, there is profit to be made in this commodity market.

This market is well defined and companies make money in it today. This community was engineered to help you find ways to generate and trade carbon credits. The principals are sound and there is no reason why together, communities, NGO’s, neighbourhoods, schools, etc cannot impact the environment while benefiting from carbon credits.

Carbon offsetting is set to be one of the largest global industries, estimated to be worth $3 trillion by 2020, twice the size of the oil industry.
This sector has been quietly growing over the last 10 years and has until now been dominated by large corporations, with very little opportunity for individuals to gain their share of this fast growing market.
This is all about to change, the carbon offsetting industry is set to explode and Ausante is uniquely positioned to help you take advantage.  to see how you can make a profit from this industry visit us at http://www.ausante,com/topgun
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