Mobilising innovative climate finance by harnessing the power of carbon markets

Nefco was a very early starter in project-based carbon markets. Since 2003, Nefco has established and managed several groundbreaking carbon funds to meet the compliance needs of Nordic governments and companies, totalling EUR 280 million in assets over time and generating over 31,6 million carbon credits. Projects were implemented in a wide range of sectors and geographies, providing a testing ground for innovative, market-based approaches. The implemented projects made a significant contribution to broader green growth benefits, including sustainable development and green technology transfer in several developing countries.

The Nordic countries have played a pioneering role in supporting ambitious climate action and sustainable development (in developing countries) and promoting carbon pricing around the world. The Nordics are now taking a leadership role in fostering a new generation of carbon market cooperation in support of the Paris Agreement.

The Nordic and German governments tasked Nefco with establishing a pioneering, regional carbon fund, the Baltic Sea Region testing Ground Facility (TGF), in 2004. Over time the TGF was transformed into a Public-Private Partnership, bringing nine private sector investors onboard, including the largest energy companies in Denmark, Finland and Sweden at the time, with a total capitalisation of EUR 35 million. The facility contracted 11 projects in Estonia, Lithuania, Russia and Ukraine, which delivered a total of 2.6 million tCO2eq of  emission reductions.

Building on this capacity and competence through the management of TGF, Nefco established a global Public-Private Partnership carbon procurement vehicle, the Nefco Carbon Fund (NeCF), in 2008, one of the earliest post-2012 instruments. The fund acquired greenhouse gas emission reductions under the Joint Implementation (JI) until 2012 and the Clean Development Mechanism (CDM) until the end of 2020. At its peak, NeCF was capitalised at EUR 165 million. In total, 19 contracted projects were implemented on three continents and in six countries, with a particular focus on Vietnam, and delivered 6.7 million tCO2eq of emission reductions.

The global Nefco Norwegian Carbon Procurement Facility (NorCaP) was established in 2013 in cooperation with the Norwegian government. It aimed to ensure the continued emission reduction activity of existing but vulnerable CDM projects. Many registered CDM projects were facing discontinuation due to low market prices. At the same time, NorCaP assisted Norway in meeting its climate commitments in a cost-effective way. NorCaP purchased Certified Emission Reduction Units (CERs) from the second commitment period of the Kyoto Protocol (2013–2020); the target for the fund was to procure up to 30 million CERs from eligible projects. In total, 14 projects were supported, delivering 22.2 million tCO2eq of emission reductions.

The Nefco carbon funds achieved significant emission reductions across a wide typology of projects, sectors and geographies and provided a pioneering testing ground for innovative, market-based approaches. The implemented projects have also made a significant contribution to broader green growth benefits, including sustainable development and green technology transfer.

In addition, the carbon funds laid the foundations for facilitating international partnerships to reach the ambitious climate action goals of the Paris Agreement by testing the next generation of carbon markets. Nefco, together with the Nordic countries and the Nordic Council of Ministers, through the Nordic Initiative for Cooperative Approaches (NICA) established in 2018, is currently seeking to operationalise international market-based collaboration under Article 6 of the Paris Agreement to support sustainable development and encourage more ambitious climate action through capacity building via practical pilot activities.

Read more about Nefco’s carbon funds and carbon market activities in our recently published reports:

Summary report of Nefco carbon funds 2008-2021

Summary report of pilot activity development for the Nordic Initiative for Cooperative Approaches (NICA)

For further information, please contact:

Ash Sharma, Vice President of Nefco and Head of Beyond the Grid Fund for Africa, +358 10 618 06 53

Kari Hämekoski, Senior Programme Manager for the Beyond the Grid Fund for Africa at Nefco, +35810 618 0660

About Nefco

Nefco, the Nordic Green Bank, is an international financial institution (IFI) that provides risk capital for Nordic green solutions. Established in 1990 by the five Nordic countries, Denmark, Finland, Iceland, Norway and Sweden, Nefco serves the interest of its owners. Our task is to work with concrete actions to accelerate the green transition. By focusing on small and medium-sized projects with tangible results, we have been able to demonstrate how to implement climate and environmental projects in a sustainable and cost-efficient way. We evaluate our impact against the EU Taxonomy, the UN Sustainable Development Goals and our own environmental criteria. Over the years, Nefco has implemented some 1,500 private and public projects across different sectors all over the world. Nefco’s headquarters is located in Helsinki, Finland. Read more at

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