Norway will buy 21 million U.N. backed certified emission reductions (CERs) for an average price of 2.28 euros each in its international tender to purchase carbon offsets, said the financial institution in charge of the deal on Monday.
The Nordic Environment Finance Corporation (NEFCO), which manages the tender for Norway, said in a newsletter that it is closing the first procurement under the NorCaP (Norwegian Carbon Procurement Facility), which buys carbon offsets above market prices to give a lifeline to projects that risk collapse.
Landfill gas flaring initiatives in Latin America and projects to destroy nitrous oxide (N2O) resulting from the production of nitric acid dominate the portfolio, said NEFCO.
"Waste management is a growing contributor to the rising amount of harmful GHG emissions in Latin American cities and the CDM has proved to be the single most effective climate policy instrument to finance mitigation of methane emissions", said Ash Sharma, head of Carbon Finance and Funds at NEFCO.
Several developing countries have developed projects under the U.N.'s Clean Development Mechanism (CDM) to collect and destroy methane, a potent greenhouse gas, from landfills.
And many of these projects depend on the sale of the emissions reductions to finance their activities.
Among the projects chosen by Norway are the Manaus and Aura landfills, in northern Brazil, and the Dona Juana landfill, in Bogota, Colombia.
These three projects alone are expected to account for 7.8 million certified emission reductions from the total of 21 million that NEFCO is buying.
"We are pleased that the first NorCaP purchases can preserve the capacity of these facilities to continue to mitigate climate change", said Sharma.
The Norwegian purchasing program is an extremely favorable opportunity in the current carbon market situation and received proposals capable of delivering seven times the initial amount to be purchased.
An oversupply of credits and weak demand have sent prices for certified emissions reductions to historical lows, below 20 cents of euro each for December delivery.
For comparison, these credits were traded at over 20 euros each six years ago.
NEFCO said a second tender would be launched probably in September. The credits bought by Norway will be used to help the country meet its targets to reduce emissions under the Kyoto Protocol.
(Editing by Lisa Shumaker)