Commitment to reduction of carbon emissions

(Brasilia, April 25, 2006).- As part of the efforts of the Andean Development Corporation, CAF, to reduce greenhouse gas (GHG) emissions, its representative in Brazil Moira Paz Estenssoro, and the president of the Brazilian sugar company Jalles Machado, Otávio Lage de Siquiera, today signed an Emissions Reduction Purchase Agreement (ERPA).

The agreement will contribute to the global effort to reduce GHGs as a result of the commitments acquired by the industrialized countries under the Kyoto Protocol, and will significantly promote sustainable development. The agreement covers approximately 110,000 tons of carbon emission reductions generated by the project.

The Clean Development Mechanisms (CDM) Project, in cogeneration with Jalles Machado, was developed by Econergy Brasil, which provided all the technical consulting for the project, and commercial advice on the carbon bonds generated by the project and purchased by CAF.

Econergy Brasil is one of the world leaders in the carbon market with solid experience in the execution of approximately 15 projects around the world, including sanitary landfills, fuel change, cogeneration of energy with biomass, wind, hydroelectric and other projects.

Stimulus for Latin America

The fund, of which these agreements are part, was set up by CAF and the Netherlands government in mid-2002 to facilitate purchase transactions of GHG reduction emissions on behalf of the Dutch government, in an effort to stimulate access by Latin American and Caribbean countries to the GHG market, promote renewable energy, attract new financial resources and cleaner technologies, and create flows of additional revenue to supplement the traditional sources and financial instruments used in the projects.

Through its Latin American Carbon Program (PLAC), under the environment department attached to the Vice Presidency of Social and Environmental Development, CAF has been one of the pioneering institutions in developing the GHG reduction credit market. The purpose of the PLAC is to identify and develop the GHG reductions from projects that qualify under the Clean Development Mechanism (CDM) in the private or public productive sectors in Latin America and the Caribbean, and place them with interested buyers.

The Kyoto Protocol of the UN Convention on Climate Change commits the industrialized countries to reduce their GHG emissions for the 2008-2012 period to below 1990 levels. Emission reductions result from activities that prevent or minimize production of carbon dioxide, methane or other greenhouse gases, or the accumulation of carbon emissions in biomass of forests and soils. The Protocol offers the industrialized countries many ways of complying with their obligations, including transaction of GHG emission reductions from developing countries under the CDM protocol, which governs the operations of this new agreement.

Jalles Machado S. A. is a Brazilian sugar refinery located in Goianésia, Goiás state which produces sugar and alcohol. With the development of the CDM project, the refinery began the sale of renewable energy for the national system for cogeneration of sugarcane bagasse, cooperating in reducing the energy generated by the use of fossil fuel in thermolelectric units, consequently generating carbon bonds.