A Dutch utility has agreed to pay carbon credit to Nepal to back environmental project.

Eneco – Dutch utility firm – has agreed to pay above market rates of carbon credits to back an environmental project in Nepal under the UN scheme to fund emission reduction projects in poor countries, a press note read.

The project, which was registered last week, aims at providing poor households with new wood-burning stoves that require 60 per cent less fuel, which helps reduce family fuel bills, air pollution and deforestation as well as improving household health conditions, said the Eneco – that is owned by 55 Dutch municipalities – adding that was willing to pay more than the market rate to ensure the project goes ahead.

The deal marks a boost for the UN’s Clean Development Mechanism (CDM), which has helped channel almost $400 billion in climate finance to investors in developing countries but has struggled to attract fresh private-sector cash after the value of the credits plummeted.

“We are a great believer in the value and long-term benefits of the Clean Development Mechanism and to be able to do a project that addresses carbon emissions abatement, deforestation and poverty issues in current market conditions is wonderful news,” said head of Eneco’s carbon desk Mark Meyrick.

The project will distribute some 150,000 energy-efficient stoves to rural households, said Netherlands government’s Development Organisation, SNV that is developing the project.

Eneco has provided the start-up cash for the scheme and has also agreed to buy all the carbon credits generated by the project until 2020.

The SNV expects the first carbon credits to be issued in April next year, and by 2017 the project could be generating around 216,000 carbon credits a year.

Eneco would not reveal the price it will pay for the credits but said it would be at a level above the current spot price for Clean Development Mechanism credits, called Certified Emission Reductions.

Buyers of carbon credits from cookstove projects paid an average of $9.90 per tonne of carbon dioxide emissions in 2012, according to a report published last September, commissioned by the Global Alliance for Clean Cookstoves.

This is well above the value of exchange-traded spot Certified Emission Reductions, which has shrunk to around 0.16 euros ($0.22) per tonne from over 20 euros five years ago, after countries failed to agree a global climate pact that would have spurred demand.

Meyrick said the company would use most of the credits for its own compliance needs and could sell some to customers.

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