The credits will be passed on to KFW's industrial clients in Europe.

Carbon credits are a market mechanism set up by the Kyoto protocol, which aims to reduce the emission of gases linked to global warming. Industries in developed countries have limits on the carbon dioxide (CO2) they can emit.

If they exceed them they must pay a fine or buy allowances from companies that undershoot their targets. Being a developing country, Brazil is exempt from Kyoto targets for emission reductions and the nation's companies can sell carbon credits to foreign companies that exceed their caps.

The main beneficiaries of this market are companies with projects that reduce pollution emissions, such as landfill sites, biodiesel or ethanol production, and reforestation.

In total, the Biogas project, which is a partnership with Sao Paulo mayor's office, should generate 8 million tonnes in carbon credits until 2012, which will be negotiated later.

The project receives half of all waste in South America's biggest megalopolis, Sao Paulo, or about 80,000 tonnes per day, and uses the methane gas from the waste to generate 22 megawatts of electric power.

"That is the biggest contract signed so far in the world. We've been negotiating since 2004 and now we got U.N auditing and approval," Marcelo Junqueira, Econergy's vice president for transactions, told Reuters.

He would not reveal the value of the deal, saying only it was above 15 euros per tonne, which is normally paid in the world for deals of up to 500,000 tonnes.

"No project that size has carbon credits that already have been generated, which means they are for immediate delivery," Junqueira said.

Econergy said the world carbon credit market registered deals worth 9.4 billion euros last year, up sharply from only 377 million euros in 2004.

Out of 207 carbon credit projects registered by the United Nations, 45 are Brazilian and 21 are managed by Econergy. These include a wind-powered electricity generation park and power projects based on sugar cane bagasse.