Exim to Launch Carbon Fund to Promote Green Growth
By Kim Jae-kyoung
The Korean government is gearing up to transform the country into a green economic power with its "low-carbon, green-growth" vision by capitalizing on new economic opportunities created by global climate change.
The Export-Import Bank of Korea (Korea Eximbank) ― as a policy lender ― is working toward the realization of this vision and making every effort to enhance the competitiveness of Korean firms in green sectors such as renewable energy, improvement of energy efficiency, and waste gas/heat utilization.
Most notably, the state-run lender is set to establish a "carbon fund" worth 100 billion won to purchase emission reductions from Clean Development Mechanism (CDM) projects developed and implemented by Korean entities.
CDM refers to an arrangement under the Kyoto Protocol allowing industrialized countries with greenhouse gas reduction commitments to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries.
Eximbank Chairman Kim Dong-soo said that the bank will invest 15 billion won to establish the fund, with the remaining 85 billion won coming from the Ministry of Knowledge Economy, energy-related public firms and private businesses interested in CDM projects. The bank chose the Korea Investment Trust Management Company as a fund manager and is now trying to attract investors.
"Since many public companies and energy-related businesses are showing interest in the carbon fund, I believe that we can attract 100 billion won by the end of September, without difficulty,'' Kim said.
``We will work together with multiple parties to successfully launch the fund, which will purchase carbon credits generated by Korean companies investing in CDM projects in developing economies,'' Kim said.
"The fund will serve as a stepping stone for the establishment of the carbon trading market here and the promotion of green finance."
In the global scene, green finance has been rapidly growing. Advanced countries such as the U.S. and Europe have driven the growth of the carbon market through emission trading, carbon funds and other mechanisms since the Kyoto Protocol.
According to the World Bank and the Korea Capital Market Institute (KCMI), global emission trading markets are expected to grow to $150 billion in 2010 from approximately $64 billion in 2007.
Advanced countries have developed diverse financial services for the emission trading market, such as carbon funds, carbon asset management, emission trading insurance and carbon banks. Currently, there are over 30 carbon funds around the world with assets of some $2.5 billion.
Korean firms are coming under increasing pressure from their trading partners, particularly in Europe, who say they need to do more to cut greenhouse gas emissions and help avert the ongoing climate change.
As an alternative to more expensive emission reductions here, many local businesses are seeking to invest in projects that reduce emissions in developing countries, as well as to earn credit to emit CO2 and other greenhouse gases at home. Under the CDM, companies can also sell credits in the open market.
Eximbank has placed a top priority on CDM projects to assist developing countries achieve sustainable development and to prepare for the Post-Kyoto Regime, considered an extension of the Kyoto Protocol with a new set of rules that will likely oblige Korea to reduce greenhouse gases.
The lender utilizes its solid network with the governments of developing countries to facilitate the development of CDM projects by Korean firms. Furthermore, it uses a diversity of financial instruments to provide optimized financial solutions for the projects.
Eximbank launched its Green Finance Department to supply more funds for green industry projects. The department is devoted to mitigating global warming and provides projects in this sector with various financial tools such as export-import credits, overseas investment credits and project financing.
"With the green industry growing faster than ever, this department ensures that overseas projects of Korean firms are provided with timely and innovative financing frameworks and favorable financing conditions,'' an Eximbank executive said.
"Eximbank will continue to address climate change by devoting significant resources to environmental conservation and improvement projects. Simultaneously, it will support global expansion efforts by Korea's green industries to help secure new growth engines for sustainable development," he added.
He also said that Eximbank strives to fulfill its social responsibilities and obligations as a corporate citizen and contributes to the overall welfare of society through various activities.