Loan scheme

Loan scheme

At CMP6 in 2010, the CMP established a scheme to provide loans to cover the costs of the development of PDDs, validation, and the first verification of CDM projects in countries who host fewer than 10 registered projects.

The loan scheme is to be funded by the interest accrued on the principal of the Trust Fund of the CDM, as well as any voluntary contribution from donors. No interest rate will be charged on the loan, and recipients must start repaying their loan from the first year of issuance of CERs (-/CMP.6, Annex, Appendix II).

An implementing agency to administer the loan scheme has not yet been selected by the UNFCCC Secretariat.  Nevertheless, the implementing agency will have the responsibility for:

  1. marketing the loan scheme to project participants and CDM consultants;
  2. receiving and screening applications for loans;
  3. deciding whether to grant loans to the applicants;
  4. executing loan agreements with successful applicants;
  5. disbursing funds;
  6. collecting repayments; and
  7. monitoring the progress of projects funded by the loan scheme and the loan recipients' compliance with the loan agreement (-/CMP.6, Annex 3, paragraph 10).

The Secretariat will approve the implementing agency's operational procedures, detailed criteria for selecting projects, and templates.

The project participants will only be eligible to receive a loan if:

  1. they have integrity, with no past or current record of judicial process for malpractice, fraud and/or any other activity that gives rise to concerns over their integrity;
  2. they have sufficient capacity to implement and operate the project activity.

Projects to be funded by the loan scheme must:

  1. Be located in a country with fewer than 10 registered CDM projects as of 1 January of the year in which the application for a loan is submitted;
  2. Use commercially viable and available technology;
  3. Be financially viable;
  4. Be highly likely to secure project finance;
  5. Be highly likely to be commissioned and completed with regard to permits, licences, and political risk;
  6. Have estimated emission reductions or removal enhancements of at least:
    1. 15,000t CO2e annually over the first crediting period in countries not classified as least developed countries (LDCs) or small island developing states (SIDS); or
    2. 7,500t CO2e annually over the first crediting period in countries classified as LDCs or SIDS.
  7. Meet the eligibility criteria for a CDM project or a CDM programme of activities (-/CMP.6, Annex 3, Appendix I).