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Auctioning emission certificates

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The sale or auctioning of emission certificates has significant long-term potential for de­vel­op­ment financing.

The European emissions trading scheme is designed to reduce carbon emissions and combat climate change. Under the scheme, national govern­ments issue energy sup­pliers, energy-intensive industries and air­lines with certificates that en­title them to a certain quantity of emissions. If they do not use all the cer­tificates allocated to them, they can sell them to bu­si­nesses whose emissions exceed the level per­mit­ted by their allowances.

In the EU around 20 per cent of emissions certificates are cur­rent­ly auctioned through the European emis­sions trading scheme. Some of the revenue is invested in cli­mate change mitigation pro­jects in de­vel­op­ing coun­tries.

The additional funds that Germany has been able to in­vest in inter­national cli­mate pro­jects as a result of the emis­sions trading scheme totalled 120 million euros in 2008 and 230 million euros in both 2009 and 2010. This sum is due to be increased in future through Germany's newly created Energy and Climate Fund, into which all emis­sions re­venue is chan­nelled. Leveraging by means of mar­ket funds – i.e. top­ping up these monies with funds raised by KfW Development Bank on the capital mar­ket – enables even larger amounts of money to be made avail­able for inter­national climate change mitigation and environmental conservation.

In 2011 and 2012 alone this enabled the German Environment Ministry (BMU) and BMZ to make additional com­mit­ments worth 915 million euros.

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