The CFE is an instrument aimed at purchasing greenhouse gas emission reductions through the Clean Development Mechanism (CDM) and Joint Implementation (JI) from climate-friendly investment projects. The fund is directed towards the EU Member States and the European private sector.

While the World Bank brings its expertise in the carbon market to the CFE, the EIB brings its comprehensive knowledge of the European economy, along with a vast project pipeline in developing countries. With the four governments of Ireland, Luxembourg, Portugal and the Flemish Region, along with Statkraft Carbon Invest AS from Norway as participants, the CFE is fully funded and no additional partners are foreseen.

The Flemish Minister for Public Works, Energy, the Environment and Nature describes CFE as “… one of the rare opportunities in the market that fulfils some key elements: large experience in this fast-growing market, a framework for sustainable investments and balanced risk management.” At the same time, Luxembourg’s Minister for Environment, Lucien Lux, perceives “the CFE as a good instrument for further development of the CDM and JI in the interest of the communities involved, and as a tool for the protection of our global climate.”

CDM and JI mechanisms allow industrialised countries to meet a part of their greenhouse gas emission-reduction commitments, by way of projects in threshold and developing countries.

For the developing world, the CDM is a way to attract investment from both the public and private sectors in climate-friendly technologies. A CDM project must answer to the host country’s definition of sustainable development, as well as being above business-as-usual standards. Anyone can submit projects to the CFE, as long as the project is credible and the applicants are financially sound. They should, however, be able to offer a minimum annual emission reduction volume equivalent to 100,000 tonnes of carbon dioxide.

For more information, please visit World Bank’s Carbon Finance website.