IDB Invest, Engie to speed up decarbonisation in Chile
IDB Invest signs world's first monetization agreement for the decarbonization of power plants in Chile
IDB Invest, the private sector arm of the Inter-American Development Bank (IDB), has developed an instrument to lower the financial cost of renewable energy projects for companies that own coal-fired power plants.
On Thursday, IDB Invest announced that it has signed the energy sector’s first monetisation of absolute emission reduction activities. The agreement has been struck in Chile with the local unit of France’s Engie SA (EPA:ENGI) -- Engie Energia Chile -- which has two coal-fired plants in the country. Their closure would eliminate up to 1.2 million tonnes of carbon dioxide (CO2) emissions.
“Monetizing the reduction in emissions consists in putting a value on the greenhouse gas emissions that are avoided, as a result of the early withdrawal of a thermal coal power plant,” IDB Invest explained.
This initiative is directly related to Article 6.4 of the Paris Agreement, which establishes the basis for an emissions trading system.
In May 2018, Chile announced its “Energy Route” programme to decarbonise the energy mix, under which coal plants in the country will gradually be shut down and electromobility will be encouraged. Renewables are expected to fill in part of the gap left by coal. The agreement with Engie could shorten the timeframe for decarbonisation, according to IDB Invest.
The Climate Investment Funds (CIF) Clean Technology Fund is backing this pilot project.