Incentive payment calculation mechanism

Upon successful verification of completion of every renewable energy and industrial energy efficiency project, the borrower will be eligible to receive a payment in recognition of its (future) carbon abatement potential (the "Carbon Reduction Compensation" or "CRC"). This incentive payment will be paid by the borrower's bank.

The incentive payment to any borrower is a one-off payment and is equal to the project's estimated annual GHG emission reduction in tCO2e multiplied by the crediting period, a carbon price of €20/tCO2e and a discount rate of 3 per cent to be applied over the crediting period with a maximum of 20 per cent and a minimum of 5 per cent of the disbursed loan amount.


Carbon reduction compensation = CO2e emissions avoided per year (in tonnes) * 20 * 3 years * 0.943*

(minimum 5% of disbursed loan, maximum 20% of disbursed loan)

( * ) rounded figure corresponding to a discount rate of 3% over 3 years


Projects whose greenhouse gas (GHG) emissions are directly covered by the EU Emissions Trading System (EU ETS) may also be eligible to receive a CRC provided that an equivalent amount of EU allowances (EUAs) is cancelled at the benchmark market price in respect of which the CRC is paid, to avoid double-counting of emission reductions. However, a different methodology for the calculation of the CRC will apply for EU ETS capped companies and will be determined by the EBRD, applying market-based principles.


Case studies

Renewable energy


Small Hydro Power Plant

Loan amount:

€1.411 million

Installed capacity:

0.63 MW

Electricity production:

2,578 MWh/year

Avoided tCO2e/year:


Incentive payment = 755 x 3 x 20 x 0.943 = €42,712.03 *

However, this is below the 5% threshold of the loan and thus the incentive payment is €70,550.00 (= 5% of disbursed loan amount).

(*) Note: Applying for a Carbon Reduction Compensation under SlovSEFF III may impact a project's ability to qualify for a feed-in tariff.




Loan amount:


Avoided tCO2e/year:


Incentive payment = 6,020 x 3 x 20 x 0.943 = €340,564.81

However, this is above the 20% threshold (340,564.81 = 35% of the loan), therefore the incentive payment is adjusted downwards to €194,000 = 20% of loan, maximum allowed.


Industrial energy efficiency


Industrial HVAC / Insulation and Processes

Loan amount:


Avoided tCO2e/year:


Incentive payment = 569 x 3 x 20 x 0.943 = €32,189.60

This equals 9.25% of the loan, i.e. it is between the 5 - 20% range and thus the incentive payment is €32,189.60.


The calculation of a project's emission reductions will be based on an approved methodology for project activities under the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC) - (the "Approved Carbon Methodology" or "ACM"). A complete list of the approved methodologies (together with general reference, tools as well as outreach materials such as the CDM booklet) is available here. In the unlikely event that no applicable methodology is available, a project specific approach shall be developed and used instead.

In renewable energy projects which supply additional electricity to the grid, the applicable carbon emission factor (CEF) will be 0.277 t CO2 per MWh. This figure is derived from the CEF published by Act No. 364/2012 on residential energy efficiency (available here), which is adjusted by 5.35% to account for distribution losses.

In energy efficiency projects which reduce electricity consumption from the grid, the applicable CEF will be 0.293 t CO2 per MWh. This is the CEF published by Act No. 364/2012 of the Slovak Republic on residential energy efficiency.