Paper
Carbon Projects and Potential Source of Revenue for Microfinance Institutions to Accelerate Renewable Energy Lending in Nepal
Discussing challenges for accessing the carbon market
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This paper discusses Nepal’s experience in obtaining Clean Development Mechanism (CDM) credits. The Kyoto Protocol requires developed countries to limit their greenhouse gas emissions. One of the market-based mechanisms under the Kyoto Protocol is the CDM, which allows emission-reduction projects in developing countries to earn emission reduction credits. Renewable energy technologies (RET) too have the potential to reduce greenhouse gas emissions and are eligible for carbon trading under the CDM and/or the voluntary market.
Currently there are two registered CDM projects and one project in the voluntary market in Nepal. The study reveals that:
- Obtaining CDM credits is not an easy process considering the time required to develop the project, resources involved and uncertainty in carbon price;
- Despite challenges, carbon projects offer MFIs scope for revenue generation;
- MFIs that have the potential for RET lending on a commercial scale can bundle their RETs to develop a carbon project for revenue generation;
- Users can also benefit if they are made part of income streams, and this would accelerate RET lending.
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