FREE-MONEY: - UN launches interest-free loan scheme to expand CDM carbon trading mechanism

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The UNFCCC has launched a pioneering interest-free loan scheme to support Clean Development Mechanism (CDM) projects in some of the world's least developed countries.

Under the new scheme, launched at the African Carbon Forum last week in Ethiopia, underdeveloped countries and those with fewer than 10 projects registered under the CDM will be eligible for interest-free loans supported by the UN Framework Convention on Climate Change (UNFCCC), the UN Environment Programme (UNEP) Risoe Centre, and the UN Office for Project Services (UNOPS).

Christiana Figueres, UNFCCC executive secretary, said that the loans would help expand the carbon trading mechanism, adding that the new financing would be offered at an opportune time given that from next year the EU is expected to limit the number of CERs it buys from industrial gas projects in China.

"The CDM Loan Scheme is a chance to improve the access to and spread of the CDM, particularly in Africa," Figueres said at the African Carbon Forum, last week.

The loans will support the design, validation and registration of projects under the UN-approved CDM carbon offset scheme. After the project is validated and registered as a CDM project, it can then generate certified emission reduction credits that can be traded in carbon markets.

To access loans, projects will have to meet a number of criteria, including a high probability of registration and a reasonable expectation of generating at least 7,500 certified emission reduction (CER) credits per year for projects in least developed countries (LDCs) and 15,000 CERs per year for projects in non-LDCs.

Applications are now being accepted for the first round of reviews, which will end in June.

The UN's CDM allows countries to meet their emissions reduction commitments under the Kyoto Protocol via third party investment in independently approved emissions reduction projects with the return of carbon credits for sale on the carbon market. Over 4,000 projects in around 70 countries are approved under the scheme, which aims to funnel green investment into developing economies.