Agreement signed between the Andean Development Corporation (CAF) and the Netherlands

The Andean Development Corporation (CAF) announced they have signed an agreement with the Netherlands establishing a facility to purchase greenhouse gas emission (GHG) reductions.

The CAF-Netherlands CDM Facility, signed with the Netherlands' Ministry of Environment, Housing and Spatial Planning (VROM), will enable projects in developing countries to potentially increase their revenue stream via the purchase of emission credits under the Clean Development Mechanism (CDM) established by the Kyoto Protocol to the UN Framework Convention on Climate Change. CAF has a target of placing up to 10 million tons of CO2e, in projects over the next three years.

Enrique Garcia, Executive President of CAF, said, "With this initiative, CAF is extending its catalytic role within the region into the area of environmental services and reinforces its commitment to sustainable development and regional integration. CAF's strengths and expertise will be successfully leveraged to assist its member countries in accessing the emerging GHG market while working with the government of the Netherlands to purchase emission reductions."

The CAF Facility will focus on public and private sector transactions, located in any of the CAF member countries in Latin America and the Caribbean. The CAF Facility will also be open to projects from other Latin American and Caribbean countries who are not currently members of CAF.

Projects eligible for participation include renewable energy, such as wind and biomass power, hydro projects, energy efficiency, recovery and utilization of methane from waste landfills, and switching of fuels to less carbon-intensive sources. This CAF initiative encourages developing countries to access this emerging market for GHG emission reductions as an entirely new source of funding which complements more traditional forms of financing.

CAF has played a pioneering role in developing the market for emission reduction credits through the establishment of its Latin American Carbon Program (PLAC in Spanish). PLAC represents a CAF initiative, established in 1999 in strategic partnership with the Center for Sustainable Development in the Americas (CSDA) and Econergy International (EIC) and is focused on positioning the region and its public and private sector customers in this evolving market, via a learning by doing approach.

CAF strongly supports and commends the Netherlands in taking a leadership position towards meeting their climate change objectives as this initiative successfully converges market mechanisms with environmental stewardship and sustainable development.

According to Jan Pronk, Minister of Housing, the Environment and Spatial Planning for the Netherlands, the contract with CAF enables the implementation of CDM-projects in Latin America, because CAF is the only regional development bank active in the field of Green House Gasses emission reductions. CAF has already proven to have a leading role in the emerging Carbon market with the establishment of its Latin American Carbon Program (PLAC) in 1999.

The Kyoto Protocol of the U.N. Framework Convention on Climate Change calls for industrialized countries to reduce their GHG emissions to levels below those generated in 1990 by the period 2008 - 2012. Emission reductions result from activities that avoid or reduce the production of carbon dioxide, methane or other greenhouse gases as compared to a 'business as usual' situation, or from 'sequestering' carbon emissions in biomass such as forests and soils. The Protocol allows industrialized countries several avenues for meeting their obligations, including cross-border purchases of GHG emission reductions from developing countries under the Protocol's Clean Development Mechanism, which governs the operations of this new arrangement. The market for GHG emission reductions is becoming established and is expected to grow significantly over the next few years.