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10 February 2012
Environmental-Finance: Irish finance bill ‘opens door to forest bonds’ carbon credits
Source:
www.environmental-finance.com
Ireland has become the first country in the world to recognise forest carbon credits in its tax regime – paving the way for the issuance of forest bonds, according to a leading banker.
On Wednesday, Ireland’s government published a finance bill which extends the range of carbon offsets recognised in its tax code to explicitly include those generated by projects that reduce emissions from deforestation and forest degradation (REDD).
The inclusion of REDD credits in Section 110 of the tax code makes establishing a special purpose vehicle (SPV) to buy forest carbon credits and then issue forestry bonds “very tax efficient, very cost-effective,” said Paul Harris, head of natural resources risk management at the Bank of Ireland in Dublin.
“This is part of the effort to ensure that Ireland offers the best possible environment for green finance,” he told Environmental Finance.
Carbon credits from forest preservation – coming to Ireland? (Photocredit)
Irish prime minister Enda Kenny, said: “This provision in the Finance Bill is the latest in a series of developments by the Irish government to ensure Ireland is in the best possible position to capitalise on the financing needs of the future green economy – and attract new business and jobs to our shores as well as give a competitive advantage to indigenous companies operating in this space.”
In recent years, the tax code has been amended to recognise mandatory and voluntary carbon credits. The section allows costs associated with the creation of SPVs to be offset, and gives favourable treatment to any profits generated, Harris said.
He added that Ireland’s tax and regulatory environment was already conducive to conventional asset securitisation.
Securitisation involves aggregating a pool of assets – such as car loans, mortgages or, in this case, flows of carbon credits – into an SPV, which issues bonds. The cashflows from the assets are used to pay the bondholders’ interest and principal.
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Sustainable Investment Research Platform
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