The agreement with the Sri Lanka Ministry of Environment is to support acquisition by Japanese firms of carbon emissions reduction credits generated by projects that offset greenhouse gas emissions thought to contribute to global warming.
The Sri Lanka government already has approved three small hydropower projects as CDM projects and is in the application process for registration at the CDM Executive Board.
The JBIC agreement provides: Both parties are to exchange Kyoto Protocol information; the Ministry of Environment is to provide JBIC information on candidate CDM projects; JBIC is to provide such information for credit buyer Japan Carbon Finance Ltd. and other Japanese firms; and JBIC is to consider financial support for candidate CDM projects.
The CDM mechanism was established under the Kyoto Protocol to reduce greenhouse gases. It allows industrial countries to undertake joint emissions reduction projects with developing countries and use the resulting credits to meet their own emissions reduction targets.
JBIC previously has provided assistance to Sri Lanka for economic and infrastructure development, such as US$270 million for the 130-MW Upper Kotmale hydroelectric project. However, it has given growing attention to CDM projects as a new area of cooperation for economic development, stable energy supply, and a way to address the global environment.
JBIC also announced establishment of the Environmental Finance Engineering Department to strengthen support for environmental improvement projects.