Carbon investment funds: growing faster

Research Report No. 7, November 2005 Ariane de Dominicis Tel. +33 (0)1 58 50 98 20 ariane.dedominicis@caissedesdepots.fr Carbon investment funds: growing faster Since the launch of the first carbon investment fund by the World Bank in 1999, the mechanisms for purchasing the carbon assets created by Kyoto projects have grown to where their total volume now exceeds 3 billion. Market participants are now looking to acquire emissions allowances at low cost in anticipation of insufficient future emission reductions induced by governmental measures and policies. In 2005, investment volume rose substantially, mainly as a result of massive inflows from the private sector and financial institutions. Previously, the market had been dominated by the European governments. This shift in investment trends is undoubtedly due in part to a stronger institutional basis for the carbon asset market. Without a clear signal for the post-2012 era, however, the growth in carbon financing will necessarily be limited. Relative size of various carbon investment funds (november 2005) Mixed funds 17% Other mixed funds (public and private sector) 8% Netherlands 10% World Bank multi-investor funds 11% Governmental Canada funds 50% 20% Private-sector 33% Private-sector funds 33% Source: CDC, Climate Task Force Finland 0,3% Spain 6% Austria 8% Sweden 0,4% Denmark 2% Belgium and Flanders 2% 1

In 2005, the European CO 2 emissions trading market was established and the Kyoto Protocol entered into force after being ratified by Russia. These two events confirmed the emergence of carbon finance, based on a new form of financial asset: CO 2 assets. These carbon credits materialize emissions reductions and are traded in these new markets. With the gradual structuring of climate change agreements and the onset of the first application period for the Kyoto Protocol, some market participants are beginning to stock up on carbon credits, in anticipation of price increases between now and 2012. These investments, which started off slowly in 1999 and later gathered steam, are directed mainly at so-called project mechanisms introduced by the Kyoto Protocol: the Clean Development Mechanism (CDM) for projects carried out in developing countries and Joint Implementation (JI) for projects in industrialised countries (mainly Eastern Europe and Russia). In both cases, the carbon credits are issued in exchange for emissions reductions. In the case of the CDM, they may be issued once the project has been approved by the United Nations. For the JI, they will be issued as from 2008. Moreover, these credits will be transferable through the European CO 2 emissions trading scheme. The price of these credits is currently below the European market price. Four types of market participants are involved in the purchase of CO 2 assets: - The governments of the industrialised countries which pledged to meet emissions reduction targets in the context of the Kyoto Protocol may purchase carbon credits in the market in order to offset emissions that exceed the targeted limits under the Protocol. These governments anticipate that they will have difficulties in meeting their commitments without resorting to the purchase of emissions allowances in the international market, and would like to make these purchases as early as possible to avoid paying too high a price. - Companies subject to national emissions reduction requirements (in particular within the European Union) or voluntary reduction targets (such as Japan) may want to realise a portion of these objectives through project mechanisms. The companies have this option in the same way as have the governments. - Financial investors may purchase emissions allowances in the hope of realising a capital gain after 2008. - Voluntary market participants may, for example, wish to purchase carbon credits to ensure their own carbon neutrality by offsetting their emissions. 1- The rollout of carbon investment funds In 1999, the World Bank established itself as a pioneer in the carbon investment field by creating the Prototype Carbon Fund (PCF), which brought together public and private-sector investors and took in $180 million. Several months later, this initiative was followed by another from the Netherlands, which launched the "ERUPT" purchasing programme. These two innovative programmes were designed to find growing opportunities for carbon asset investments in an uncertain environment. Since then, the number of carbon investment funds has increased. At end-2001, four funds had been launched, with a total volume of less than 250 million. By the autumn of 2005, the number of these funds had increased to 34, with more than 3 billion in assets. The number of funds and their investment volume has grown exponentially. During the year 2002, four new carbon investment funds had been launched. By 2005, this number had jumped to 11. The potential investment volume doubled between the end of 2004 and September 2005. Moreover, the 2

average size of these funds continues to grow steadily, having risen from 50 million at end-2003 to more than 100 million in 2005. Change in the number of carbon asset funds and total investment volume since 1999 4000 40 3500 34 35 Total volume ( millions) 3000 2500 2000 1500 1000 9 13 23 1 752 3 458 30 25 20 15 10 Number of funds 500 0 4 3 679 149 1 484 209 241 1999 2000 2001 2002 2003 2004 2005 5 0 Année Total volume ( millions) Number of funds Source: CDC, Climate Task Force This trend in part reflects the growing needs of governments (European countries, Canada, Japan), which are increasingly mindful that they will not be able to comply with their Kyoto commitments simply through the emissions reductions on their own territory (see chart below). It also reflects the financial world s appetite for carbon assets, which are being increasingly recognised as institutional risk decreases. The entry into force of the Kyoto Protocol has certainly helped to hasten the pace of these investments in recent months. 3

France Sweden UK Portugal Finland Belgium Netherla Denmark Austria Germany Spain Italy Japan Canada Kyoto compliance -8-4 -2 +7 +9 +12 +15 +19 +24 +28 Difference between emissions recorded in 2003 and Kyoto objective for 2008-2012 period (in tco2m) +72 +95 +165 +180-10 40 90 140 190 Source: UNFCCC Example: In 2003, Germany emitted 28 million metric tons more than its annual allowance during the period 2008-2012 in order to comply with its Kyoto objective The growing role played by carbon asset investments, and in particular project mechanisms, will have two immediate consequences. The first will be competition between funds for multi-investor funds, and in particular private funds to attract investors. The second will be the search by fund managers for a growing number of CDM and JI projects to generate emissions reductions. While the potential opportunities in developing and transition countries appear enormous, the challenge lies mainly in the procedures needed to obtain project approval. The CDM Executive Board has difficulty processing the cases presented to it. In one year, only 35 projects have been approved. Bottlenecks that hamper investment fund activity are therefore to be expected. In addition, the lack of visibility on the post-2012 era negatively affects investment fund policies. No fund, with the exception of a few managed by the World Bank, foresees investments after the initial implementation period of the Kyoto Protocol. This too short horizon therefore limits the scale of carbon asset investments. 4

2- The investors: a rapidly changing landscape Today, three different types of investment mechanisms exist: funds open exclusively to private-sector investors; governmental investment funds; and mixed funds open to both types of investors. This latter category includes several funds created by the World Bank since 1999. Completely private funds appeal to two different types of investors: 1) industrial companies that have made commitments to reduce emissions (as in Europe and Japan) and would like to purchase credits to fulfil a portion of those commitments; 2) financial institutions that have a more traditional investment goal and are seeking to realise a capital gain on the sale of the carbon assets. European governments were the leading investors in carbon investment funds up until early 2005, when the arrival of new market participants marked a turning point in the composition of investors. The Netherlands, a forerunner in carbon investing The Netherlands was the first country to begin buying carbon credits. The country s cost of emissions reductions is estimated at 100 per metric ton of CO 2 avoided, which is double the European average. The Dutch government therefore announced that it would meet half of its Kyoto commitments (or 100 million metric tons of CO 2 emissions reductions) by purchasing CDM and JI credits. Only a few months after the creation of the Prototype Carbon Fund, the Netherlands launched its ERUPT tender programme to purchase credits from JI mechanisms, and built up a reserve of 736 million to acquire carbon assets. This investment pool is allocated into several investment schemes, including seven mechanisms managed by different types of entities (World Bank, governmental agencies, private sector banks, etc.) and created between 1999 and 2003. Today, the Netherlands has nearly completed its investment objectives. The increasingly important role played by European governments Other European governments followed in the footsteps of the Netherlands, and are currently very active in carbon financing, either through their participation in funds involving other investors (for example those created by the World Bank) or through the creation of other public-sector investment mechanisms. A non-exhaustive list would include Denmark, Sweden, Finland, Italy, Austria and Spain. These mechanisms are likely to be adopted by other countries in the years ahead (Portugal, for example, recently announced its intention to acquire CDM and JI credits to meet its commitments). Some European countries, however, are choosing to meet their Kyoto objectives without using these mechanisms or national investment programmes. The United Kingdom is one such country. 2005: new participants step onto the carbon financing stage At end-2004, European government carbon investment programmes accounted for nearly 65% of the total investments. This investment landscape changed dramatically in 2005, since by October European governments accounted for only 30% of the total, with the Netherlands alone representing 10%. The first reason for this change is that two non-european governments announced the establishment of sizeable investment programmes: Japan, which plans to invest approximately 200 million 1, and Canada, which plans to invest approximately 700 million, of which a portion will serve to purchase Canadian domestic carbon credits. 1 However, this investment decision has yet to be incorporated into the Japanese government s budget. The corresponding amount was therefore not included in the charts. 5

Government participation in carbon investment funds Country Germany Austria Belgium Canada Denmark Spain Finland France Iceland Italy Japan Luxembourg Norway Netherlands Portugal U.K. Sweden Switzerland Means of participation Participation in KfW Klimaschutzfonds and Baltic Sea Region Testing Ground Facility Governmental programme and participation in CDCF Federal government and Flanders state government programmes, participation in CDCF Governmental programme, participation in PCF, CDCF and BioCF Governmental programme Governmental programme Governmental programme and participation in PCF Announcement in 2005 of a governmental investment fund Participation in Baltic Sea Region Testing Ground Facility Governmental programme and participation in CDCF and BioCF Announcement in 2005 of governmental investment fund Participation in CDCF Participation in PCF Seven governmental programmes and participation in PCF and CDCF Announcement in 2005 of governmental investment fund No known governmental investment programme Governmental programme and participation in PCF Announcement in 2005 of an investment programme funded by a tax on fuel Moreover, the entry into force of the Kyoto Protocol and events in the European market appear to have attracted private-sector participants who had previously been on the sidelines for the most part. By end-2004, three entirely non-governmental carbon funds had been created, including a fund comprising Japanese industrial companies (which are subject to voluntary emissions reduction commitments) and the European Carbon Fund, which comprises European financial institutions. In 2005, the number of these funds more than doubled, with the launch of four new private-sector funds and a total volume of 700 million. Among them is the Greenhouse Gas Credit Aggregation Pool, which comprises some 30 private-sector investors (mainly energy sector industrial companies), has a total investment volume of more than 450 million and is administered by the broker Natsource. Thus in the autumn of 2005, the completely private-sector funds accounted for nearly one third of investments, up from less than 20% at the beginning of the year. 3- The administration of carbon investment funds Although all carbon investment funds purchase carbon credits for future use, they vary in their investment approaches and strategies. Despite the growing interest from the private sector, the leading public-sector financial and multilateral institutions provide the benchmark for asset management. In addition, the types of assets sought by funds are increasingly diversified as the international institutional framework becomes more established. Asset management: the role played by large financial institutions The World Bank launched the world s first emissions reduction investment vehicle in 1999. Its expertise in this area is widely acknowledged today and the governments of the Netherlands, Italy and, 6

more recently, Spain and Denmark have entrusted it with the task of buying emission reductions on their behalf. The World Bank currently administers eight carbon investment funds (in which it is not an investor), with assets of more than 500 million, or a total of approximately 15% of the investments. It has thus become the leading asset manager for carbon assets. Other multilateral financial institutions such as the EBRD and the EIB also manage investment vehicles on behalf of governments. Public-sector financial institutions also play a particularly important role in the creation and administration of investment facilities. These institutions have already created three funds: the European Carbon Fund (ECF) by Caisse des Dépôts; the Japan GHG Reduction Fund, which includes Japanese industrial companies through two public-sector financial institutions (JBIC and DBJ); and the KfW-Klimaschutzfonds by KfW. These funds include two completely non-governmental funds (the ECF and Japanese funds). Investment strategies Some funds have chosen to base their purchases on sector or geographic investment criteria. For example, two World Bank funds the Community Development Carbon Fund (CDCF) and the BioCarbon Fund purchase carbon credits from small-scale community projects in less developed countries and from forestry projects. Similarly, the Baltic Sea Region Testing Ground Facility, which comprises Baltic region states, invests solely in this region. The geographical criteria of the carbon investment funds reflect both geopolitical considerations (a privileged relationship between a country and a geographic region, such as Spain and Latin America, or Japan and Southeast Asia) as well as country risk. Carbon credits created through CDM and JI projects are therefore the primary target for these investment facilities, and until recently were the only assets worthy of their interest. Demand has started to become broader-based, however. Indeed, several funds have announced their intention to purchase European allowances 2 and Kyoto allowances 3, which are allocated to States that have binding commitments to reduce emissions to a set level. The Canadian investment facility intends to purchase a portion of its carbon credits within Canada by using a so-called domestic offset project system. Under this system, carbon credits are allocated to projects on Canadian soil, with a portion of these credits then acquired by the Canadian fund. The interest in the growing number of carbon credits is recent and demonstrates the increased popularity of carbon financing. 4- Conclusion Investments in Carbon investment funds are growing at a rapid rate, which reflects the growing interest in the carbon markets and the strengthening of their institutional basis. This means that a sufficient number of projects will need to be found in order to generate between 350 million and 400 million metric tons of CO 2 emissions reductions. This constraint nevertheless appears to be attainable, given the diversification of investment assets and the growth in the number of projects today. The pace of new fund creation will need to ebb, however, given the strong uncertainty regarding the post-2012 era, i.e. once the Kyoto Protocol s initial application period expires. Beyond that date, a new system remains to be developed, and it is impossible at this point to project the price or even existence of the carbon assets currently traded. The current surge in carbon financing does not protect against its Achilles heel, namely institutional uncertainty. 2 Transferable CO2 allowances allocated to European industrial companies 3 Assigned Amounts Units (AAUs) 7

Summary table of carbon investment funds 8

Appendix I: Glossary of CO 2 assets One unit of each asset corresponds to one metric ton of CO 2 equivalent. Assigned Amount Unit (AAU): units attributed to participating States by the Kyoto system for the period from 2008 to 2012, corresponding to the maximum amount of GHG that they can emit. Green AAU: unit that corresponds to AAUs whose sale proceeds are reinvested in GHG emission reduction programmes or other environmental projects. Certified Emission Reduction (CER): credit delivered to projects under a Clean Development Mechanism (CDM). Emission Reduction Unit (ERU): credit delivered to projects under a Joint Implementation (JI) mechanism. In fact, the country hosting the project converts one of its AAUs into an ERU. 9

Appendix II: List of carbon investment funds In this list, we distinguish between three types of funds: governmental, mixed (governmental/private) and completely private. Within each category, the funds are classified according to their composition and/or administration. I Funds open to governments and private-sector investors The Prototype Carbon Fund (PCF): Created in July 1999 by the World Bank to explore the nascent opportunities in carbon finance and demonstrate the potential of public/private partnerships in this area. Among its investors, the PCF has six governments and 17 companies, including six Japanese regional utilities, the Mitsubishi and Mitsui groups, British Petroleum, Gaz de France, five other energy sector companies and three banks. It has been designed to cease operations in 2012. The Community Development Carbon Fund (CDCF) comprises nine governments and 15 companies in its investor group (mainly energy producers, but also the German bank KfW and Swiss reinsurance company Swiss Re). Launched by the World Bank in July 2003, this fund plans to invest in energyrelated, small-scale CDM projects that help local communities, mainly in the Least Developed Countries (LDCs). The BioCarbon Fund is the World Bank s fund dedicated to carbon sinks (sequestration of CO 2 by vegetation growth or soil). Created in November 2003 and operational in May 2004, it currently comprises three governments (Italy, Canada and Spain), five Japanese companies, the French company EcoCarbone and the French Development Agency. This fund will participate in the financing of projects that meet the Kyoto criteria (afforestation and reforestation), but also projects outside this framework (conservation, long-term forest management, agro-forestry, etc.), which for the time being do not qualify for carbon credits. The projects will have to factor in bio-diversity components, soil conservation and development, notably on behalf of communities living in a rural environment. The fund s expected life will be between 15 and 18 years. The Italian Carbon Fund was launched in the autumn of 2003 by the World Bank and Italian government, which has already invested $15 million. Unlike the Dutch funds administered by the World Bank (see below), this fund is open to Italian public and private-sector investors. The Danish Carbon Fund was launched in early 2005 and operates along the same lines as the Italian fund; in other words it is open to Danish public and private-sector investors. The Danish Environment and Foreign Affairs ministries have already invested in the fund, along with two energy producers, for a total of $35 million. Of this total, $5 million will be invested in the CDCF. The KfW-Klimaschutzfonds: KfW, the German financial institution that is 80%-owned by the federal government and 20%-owned by the Länder (states), created a carbon investment fund that initially planned to raise 50 million. It wound up raising 80 million. The investors include the German government, which contributed 8 million, KfW and 20 companies from Germany, Austria, Luxembourg and France. The Baltic Sea Region Testing Ground Facility (TGF): This fund was created following the September 2003 signing of the Baltic Sea Region Testing Ground Agreement (TGA) by several Baltic Sea states, as part of their efforts to position themselves with respect to the Kyoto Protocol and its mechanisms. The fund was created in December 2003 and launched in early 2004 by the governments of Denmark, Finland, Iceland, Norway and Sweden, with an initial total contribution of 10 million by these governments. The German government announced in December 2004 that it would contribute 5 million to the fund. A second tranche is now open to the private sector, with a target of 30 million in all. This fund is administered by Nordic Environment Finance Corporation (NEFCO). It will purchase JI credits from 10

projects primarily small energy projects implemented in the Baltic countries, Russia and Poland, i.e. the TGA member states. The fund may also purchase AAUs. Two other multi-investor funds are in the process of being structured. The most advanced is the Multilateral Carbon Credit Fund (MCCF), created by the EBRD, and open initially to governments and later to private-sector investors. The principle behind this fund is to use the EBRD s know-how and the projects that it finances in Eastern and Central Europe and in Central Asia. As the EBRD currently administers a fund on behalf of the Netherlands, projects identified in this context may be used, once the Netherlands has completed its purchases. The MCCF will also be able to purchase European allowances created through projects. Finally, the European Investment Bank is working with the World Bank to create the European Partnership Carbon Fund, which aims to raise 50 million and will be open to the public and private sectors. II Governmental funds A- Funds administered by international institutions The Netherlands has invested in four carbon investment funds administered by international institutions. Two of these investment funds are administered by the World Bank: the Netherlands Clean Development Mechanism Facility; and the Netherlands European Carbon Facility. Both were created in 2002. In addition, a carbon investment fund was created with the Corporación Andina de Fomento (CAF): the CAF-Netherlands CDM Facility, which plans to purchase emissions reductions created through projects in Latin American and Caribbean countries. The amount has not been specified. Lastly, the Netherlands launched the Netherlands EBRD Carbon Fund, administered by the EBRD. Created in October 2003, this fund will invest in JI projects between 2004 and 2006. Spain, meanwhile, has created two carbon investment funds. The first is the Spanish Carbon Fund, with 170 million in assets, launched at end-2004 and administered by the World Bank. This fund will focus its purchases in Latin America (Spain is currently in the process of signing a series of framework agreements with Latin American countries to implement CDM projects). Eventually, it may be opened up to private-sector investors. In addition, the Spanish government announced in October 2005 that it would create a 47 million fund administered by the CAF. The Iniciativa Iberoamericana de Carbono will invest exclusively in Latin America. B- Funds administered by national agencies The Netherlands The Netherlands has two carbon investment funds administered by Senter Internationaal, a Dutch agency that serves several ministries. These funds include the Emission Reduction Units Procurement Tender (ERUPT) and the Certified Emission Reduction Units Procurement Tender (CERUPT), which are mandated by the Ministry of the Economy and the Ministry of the Environment, respectively. As part of its Kyoto commitments, Austria has pledged to reduce emissions by 13% relative to their 1990 level. To meet this objective, it has implemented the JI/CDM programme, with assets of 12 million for 2004, 24 million for 2005 and 36 million per year as from 2006. The goal is to purchase between 3 million and 5 million metric tons of CO 2 e per year during the period 2008-2012. This investment programme consists of three parts: - an investment in the CDCF; 11

- the Austrian CDM Small-Scale Project Facility, a fund aimed at purchasing carbon credits created through small-scale projects in Central America and the Caribbean. Its goal is to acquire 1.25 million metric tons of CERs between 2006 and 2012. This fund is administered by EcoSecurities and Kommunalkredit Public Consulting (KPC); - bilateral purchasing agreements. Finland As from 1999, Finland launched a pilot programme with total assets of 10 million to acquire carbon credits created by small-scale CDM and JI projects. It has also invested in the PCF and TGF. Sweden In 2002, Sweden launched the Swedish International Climate Investment Programme (SICLIP), administered by the Swedish Energy Agency. Sweden does not intend to use the credits created by project mechanisms to achieve its Kyoto objectives during the first period. The programme s main goal is to gain experience and facilitate the establishment of these funds. The acquired credits will therefore in all likelihood be set aside for the post-2012 era. Denmark To achieve its Kyoto objectives of 21% emissions reductions, Denmark planned to invest 125 million to acquire credits arising from CDM and JI projects between 2003 and 2007, and for that purpose created Danishcarbon.dk, administered by the Danish Environmental Protection Agency. This facility invests in three funds: the Danish Carbon Fund, the TGF, and the fund created by EcoSecurities and Standard Bank (see below). In addition, it issues projects tenders and over-the-counter purchases on projects in Eastern Europe and Central Asia. Belgium In September 2004, the regional government of Flanders launched a call for tenders to purchase credits created through CDM and JI projects. Another call for projects was launched in 2005 by the Belgian federal government. It breaks down into six project categories (renewable, bio-energy, smallscale projects, geographic category, etc.). Canada In 2005, Canada announced the creation of an investment fund that would total at least CND 1 billion, or 700 million, making it the largest carbon investment vehicle on record. This fund would have the distinguishing characteristic of investing in both international credits (CDM, JI and green AAUs) and in credits created through domestic offset projects implemented in Canada (see Research Report No. 5), with an emphasis on the latter. More information on this fund will be released at the COP 11 meeting in Montreal. C- Public-sector funds administered by the private sector After having created funds administered by multilateral institutions and national agencies, the Netherlands brought in a private-sector company to administer the purchasing of credits. Rabobank has been mandated by the government since January 2003 to purchase 10 million metric tons of CO 2 at a maximum price of 4.5 per tonne. The projects will be concentrated first and foremost in countries where Rabobank has branches (most of the projects studied involve China, India, Brazil and Mexico). Denmark, through its Ministry of the Environment, has invested nearly 10 million in a fund administered by EcoSecurities and Standard Bank. III Private-sector funds 12

The European Carbon Fund (ECF) launched by Caisse des Dépôts et Consignations and Fortis has a total investment volume of 130 million, with eleven investors, including Caisse Nationale des Caisses d Epargne, Dexia, Société Générale, the Portuguese bank Caixa de Depositos, two French insurance companies (AGF and CNP Assurances), two Spanish investors and a North American investment fund. This fund is the first to be underwritten entirely by the private sector and not for the purpose of transferring credits to investors but to sell them in the market to generate a profit. The financial administration of this fund was entrusted to the IXIS investment bank. The credit purchases will take place in the period 2005-2009; they will subsequently be sold on the market between 2008 and 2012. The Japan GHG Reduction Fund: Initiated by two leading Japanese banks the Japan Bank for Investment and Cooperation (JBIC) and the Development Bank of Japan (DBJ) this fund was launched on 1 December 2004. Originally, the fund was to be capitalised in the amount of $100 million, but wound up taking in $140 million given the heavy demand from investors. It is currently closed to new investors. The investors include some 30 Japanese companies, among them regional utilities, large groups such as Mitsubishi, and oil and electronics companies. JBIC and DBJ are the main investors, each with stakes of $10 million. To be eligible for this fund, the projects must be certified compatible with Japanese environmental standards. The projects will be chosen with an eye towards geographic and sector distribution. The investments will take place until 2008. Currently, the fund intends to purchase green AAUs, created through greening programmes. The ICECAP investment fund was created in 2004; it aims to purchase 20 million metric tons of CO 2, and is still looking for investors. Several private-sector carbon funds were launched in 2005, which attests to the emergence of an institutional framework favouring investor visibility: - The Greenhouse Gas Credit Aggregation Pool (GG-CAP), administered by the broker Natsource, currently has 26 investors including Japanese and European energy producers, for a total investment volume of 455 million. - Climate Change Capital, a UK-based financial company specialised in fighting climate change, also launched a fund, with an investment volume of more than 80 million, to purchase CDM and JI credits as well as European allowances. The names of the investors have yet to be made public. - Trading Emissions is an investment fund launched by a group of financial institutions, including Crédit Suisse, HSBC, Société Générale and JP Morgan. This fund has a total volume of 135 million ( 258 million); like the ECF, this Fund aims to generate a profit and not transfer carbon credits to its investors. In addition to purchasing CDM and JI credits, the fund will offer active emissions allowances management, with a financial return, to European companies bound by emissions reduction commitments. Lastly, a portion of the investments will be directed toward US carbon assets, or even SO 2 allowances (these investments would represent less than 30% of the total). - In September 2005, RNK Capital, a US carbon investment fund, launched a $25 million call for tenders for CDM credits during the 2008-2012 period. 13

Thanks. The author would like to thank the following persons, for the information they were kind enough to provide. Elisabeth Ellegaard, Belgian JI/CDM tender Chris Mc Dermott, Canadian Climate Fund Kate Page, Canadian Climate Fund Louis Perroy, Climate Change Capital Lars Linnemann, Danishcarbon.dk Henrik G. Lund, Danishcarbon.dk Jan-Willem van de Ven, EBRD Gautier Queru, European Carbon Fund Helen Crook, ECX Neil Eckert, ECX Kari Hämekoski, Finnish CDM/JI programm Greg Dunne, ICECAP Akika Ichikawa, JBIC Wolfgang Diernhofer, Kommunalkredit Björn Zapfel, Kommunalkredit Dirk Forrister, Natsource Ash Sharma, NEFCO Susana Ketterer, Spanish Carbon Fund The author nevertheless assumes all responsibility for the contents of this report. 14

Research reports of the Caisse des Dépôts Climate Task Force Research report N 1 : Carbon investment funds: general assessment of the market Ariane de Dominicis, January 2005 Research report N 3: CO2 emissions exchanges and the functioning of trading systems Romain Frémont, June 2005 Research report N 5: «domestic offset projects» Ariane de Dominicis, September 2005 Research report N 7: Carbon investment funds: growing faster Ariane de Dominicis, November 2005 Executive summary of the report: Expanding the means to combat climate change through domestic offset projects Emmanuel Arnaud, Ariane de Dominicis, Benoît Leguet, Alexia Leseur, Christian de Perthuis, November 2005 All publications and Climate taskforce s quarterly newsletter available in English at: http://www.caissedesdepots.fr/gb/espace_presse/fiche3.3.php All publications available in French at: http://www.caissedesdepots.fr/fr/espace_presse/fiche3.3.php 15

This research report was written on behalf of the Caisse des Dépôts Climate Task Force. The analyses and opinions do not bind Caisse des Dépôts. The Caisse des Dépôts Climate Task Force is a company-wide unit that conducts and coordinates research and development work in the field of fighting against climate change. Publication Director: Christian de Perthuis Climate Task Force contacts: Emilie Alberola +33 (0)1 58 50 41 76 Emmanuel Arnaud : +33 (0)1 58 50 98 19 Ariane de Dominicis : +33 (0)1 58 50 98 20 Romain Frémont : +33 (0)1 58 50 79 52 Céline Lauverjat : +33 (0)1 58 50 73 96 Benoît Leguet : +33 (0)1 58 50 98 18 Alexia Leseur +33 (0)1 58 50 41 30 Lê anh Pham : +33 (0)1 58 50 41 86 Christian de Perthuis : +33 (0)1 58 50 22 62 Caisse des Dépôts et Consignations Sustainable Development Division 56, rue de Lille 75356 PARIS 07 SP www.caissedesdepots.fr - Tel: +33 (0)1 58 50 00 00 16