JBIC and ICICI Bank sign loan agreement

GURGAON, INDIA: Japan Bank for International Cooperation (JBIC) Governor Kyosuke Shinozawa and ICICI Bank Managing Director and CEO K Vaman Kamath signed on behalf of their companies an untied loan agreement totalling the yen equivalent of US$200 million.

The loan is co-financed by private financial institutions (Sumitomo Mitsui Banking Corporation (agent bank), The Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd., the Hong Kong and Shanghai Banking Corporation Limited Tokyo Branch, and Société Générale Tokyo Branch), with JBIC providing a guarantee for their co-financing portions.

This agreement is aimed at providing finance, through ICICI Bank, to prospective Clean Development Mechanism (CDM) projects in which Japanese companies show an interest with regard to purchasing emissions reduction credits and obtain a preferred negotiation status for the emissions reduction credits. It is expected that this will amplify the opportunities for Japanese companies to purchase emissions reduction credits and will thereby help Japan achieve its Green House Gas (GHG) Emissions Reduction Target under the Kyoto Protocol. This would also lead to restraining GHG emissions in a rapidly growing India, which would contribute towards prevention of global warming. JBIC and ICICI Bank signed a Memorandum of Understanding for cooperation on CDM in May 2006, which brought about close coordination and discussion between the two banks and culminated in the signing of this loan agreement today.

To achieve Japan's GHG Emissions Reduction Target under the Kyoto Protocol (6 per cent reduction from the 1990 level), it is crucial for Japan to utilize the Kyoto Mechanisms, including the CDM, in addition to making domestic efforts to reduce emissions with various measures. The "Plan to Achieve the Target under the Kyoto Protocol" adopted in the Cabinet decision on April 28, 2005 and revised on July 11, 2006 noted the importance of acquiring emissions reduction credits through the Kyoto Mechanisms and effectively making use of official financing (such as JBIC's International Financial Operations).

Meanwhile in India, where the population exceeds 1.1 billion and rapid economic growth continues at the rate of 7 to 9 per cent, sustaining development whilst caring for the environment is becoming an important policy agenda. As the government of India ratified the Kyoto Protocol in August 2002 and established the process of CDM at an early stage, India became the biggest country in terms of number of CDM projects approved by the UN CDM Executive Board, i.e. 267 projects out of total 757 (as of August 8, 2007). With this background, the loan agreement was signed for the promotion of CDM in India so as to help achieve Japan's GHG Emissions Reduction Target under the Kyoto Protocol, and to contribute towards prevention of global warming.

The Clean Development Mechanism (CDM) is one of the components of the Kyoto Mechanisms. It allows industrialized countries to undertake joint projects with developing countries and use the amount of emissions reduction credits (called Certified Emission Reductions (CERs)) generated from such projects to meet their own emissions reduction target.

The Kyoto Mechanisms are economic arrangements set out in the Kyoto Protocol to enable industrialized countries and countries with economies in transition (EITs) to achieve their greenhouse gas (GHG) Emissions Reduction Targets. The Mechanisms consist of the Clean Development Mechanism (CDM), Joint Implementation (JI) and Emissions Trading.