<p> 1</p><p>Using the Financial Service Project Finance as a Leverage for Implementation of the Kyoto Mechanisms The financial service project finance refers to lending by financial institutions to legally and economically independent projects, whereby repayment of the principal and payment of the loan’s interested is mainly secured by the project’s future cash-flow and its asset’s. The bank’s decision to finance a proposed project, and the financing conditions, depend the projected cash-flow of the project, not on the overall assets of the promoter. This financial service is the sole financing technique where banks can influence decision making by project promoters and thus a project’s structure. This financing technique is widely applied in the energy sector, which is also the main target sector of climate policy. The use of the Kyoto Mechanisms could have a major impact on the cash-flow of projects. Consequently, the question arises if and how financial institutions active in the field of project finance could promote the application of the Kyoto Mechanisms. This project aims at exploring this question both in terms of conceptual and methodological analysis, and concrete case studies. Basic hypothesis is that financial institutions need to take systematically into account potential cash-flow implications of the Kyoto Mechanisms in order to maintain or enhance their competitive advantage. The project is carried out by the Institute for Economy and the Environment (IWOe) at the University of St. Gallen (HSG) – Switzerland - on behalf of the Ministry of Environment and Transport Baden-Württemberg – Germany - in co-operation with the Landesbank Baden-Württemberg - Germany. Case studies will be based on the bank’s concrete project finance activities in Annex I countries. Project duration is August 2000 to July 2001. Contact details: Josef Janssen, IWOe-HSG, Tigerbergstrasse 2, CH – 9000 St. Gallen, e- mail [email protected], phone + 41 – 71 – 224 25 87, web site www.iwoe.unisg.ch/kyoto.</p>