Climate change, sustainable energy & carbon finance: the kyoto bond

The Kyoto Protocol requires a 5.2% reduction of greenhouse gas emissions from developed countries. This is an important starting point both to prevent climate change and to start to implement new Sustainable Energy policy for a Sustainable Economy. At the local level (from regions to cities) lower cost/risk energy portfolios can be developed by adjusting the conventional mix of energy sources and by including low cost Rational Use of Energy and Energy Efficiency tools, greater amounts of fixed- cost Renewable Energies and by using the additional financial resources coming from carbon finance. The carbon market can increase investment in renewable energies. This paper proposes a new financial instrument called the Kyoto Bond. Kyoto Bonds would have the following characteristics: G G G G The capital collected would be invested in local projects that would help reach local energetic policy targets, and allow investors to invest their cap- ital in tangible and controlled operations; The performance of Kyoto Bonds has two different natures: - Financial performance: a fixed coupon bond with a lower percent- age performance than other over-the-counter instruments; - Non-financialperformance:theincreaseofsocialandenvironmental benefits; Double parallel accounting showing the real value of non-financial performance that, summed to fixed earning, is higher than market medium performance. The implementation of energy policies at the local level is more cost- effective and reliable than generalized and unrealistic energy policies. The implementation of energy policies at the local level is more cost-effective and reliable than generalized and unrealistic energy policies. In the paper the authors suggest a different method, one that would increase the efficiency of programs and derive environmental and social benefits: the Kyoto Bond. For success, the Kyoto Bond requires the following: 1. involvement of public local investors; 2. concrete programmes and efficient actuation; 3. environmental and social benefits valued by the local population. The Kyoto Bond would mix public and private investors, focusing the beneficial effects of renewable energy and energy efficiency programs by offering an innovative financial instrument that would give great transparency to the results of environmental and energy policy.