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New Climate Change Capital Carbon Fund Makes Major Investment in China
(LONDON - 11 September 2006) The largest ever private sector syndication of a Clean Development Mechanism (CDM) project in China, arranged by Climate Change Capital (CCC,) is also the first investment for the new carbon fund managed by CCC. The transaction will achieve 29.5 million tonnes of carbon dioxide equivalent certified emission reductions (CERs) over 6 years, the equivalent of more than 1/3 of the annual greenhouse gas (GHG) emissions for UK households.
The investment is in the carbon credits generated by Zhejiang Juhua Co Ltd, a Chinese chemical company. Its refrigerant process generates a GHG (HFC-23) that is rated 11,700 times more powerful in global warming potential (GWP) than carbon dioxide. The gas is among those considered pollutants by the Kyoto Protocol, and is currently released into the air, but now, using proven technology, will be incinerated. These CERs can then be sold or traded on the European Union Emissions Trading Scheme (EU ETS.)
CCC structured the pioneering syndicated deal with assistance from Deutsche Bank who financially guaranteed the underlying payment structure. The syndication members include CCC's Carbon Fund 1 and Carbon Fund 2, Centrica, Deutsche Bank, Morgan Stanley Commodities Group, investment funds managed by Och-Ziff Capital Management Group and Stark Investments.
Mark Woodall, CEO of Climate Change Capital said:
"This type of transaction is exactly why we created our funds within this new global asset class. Without our involvement, the equivalent of nearly five million tonnes of extra CO2 would enter the atmosphere every year. This is an example of the 'green economy' playing its part to combat global warming. A tonne of carbon is a tonne of carbon wherever in the world it is taken out of the atmosphere."
"Climate Change Capital, with our combined talents of advisors, investment bankers, environmentalists and significant capital has the capability to pull this type of deal together."
Kevin Rodgers, Managing Director Global Head of Currency and Commodity Complex Risk for Deutsche Bank said:
"Following the signing of the Kyoto protocol, organisations have become more aware of their environmental responsibilities, which has created a new market for commodity players. Deutsche Bank was one of the first banks to participate in the World Bank's ground-breaking Prototype Carbon Fund, which was launched in 2000. This new Chinese transaction underlines Deutsche Bank's growing expertise in environmental finance and our commitment to the environment and sustainability".
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Notes to Editors:
How carbon trading reduces emissions.
The Kyoto Protocol, set up to combat global climate change by reducing greenhouse gas emissions, includes the Clean Development Mechanism (CDM.) This mechanism enables companies or groups in industrial nations, such as Britain, to identify a source of greenhouse gas (GHG) emissions in a developing country, such as China, and to finance a project to reduce those emissions.
Each industrial nation who ratified the Kyoto Protocol agreed to an annual quota of tons of carbon dioxide equivalent emissions that they would emit. The CDM allows these nations to meet their emission targets by accessing cost-effective opportunities to reduce emissions or remove carbon from the atmosphere in other countries. The certified emission reductions (CERs) created under the CDM can be used to offset the emissions of these nations or they can be sold.
The global, policy driven market for Carbon Assets was created to give an incentive to countries to reduce GHG emissions, create demand for Carbon Assets and encourage the financing of GHG emissions reduction projects. This market is referred to as the "carbon market".
Critics say that the system may encourage some businesses to attempt to buy their way out of trouble but as James Cameron, the vice-chairman of Climate Change Capital says: "It doesn't matter where in the world a ton of pollutant is taken out of the atmosphere, whether it be Beijing or Burton-on-Trent. A ton of carbon is still a ton of carbon and it matters to us all."
