Carbon credit investors call for post-Kyoto clarity

Wed Nov 7, 2007 1:36pm GMT

By Annika Breidthardt

SINGAPORE (Reuters) - Billions of dollars set to be invested in projects to reduce carbon emissions could be withdrawn unless global environment leaders promise a successor to the Kyoto Protocol next month, carbon market traders said.

The United Nations' clean development mechanism (CDM) scheme allows rich countries to meet domestic greenhouse gas emissions limits by buying carbon offsets from developing nations, investing in emissions-cutting projects.

Project developers and offset traders are calling for clarity ahead of a meeting of world governments in Bali, Indonesia, next month that aims to begin negotiations on mapping out a plan to fight global warming to succeed the Kyoto Protocol, which expires in 2012.

"The big problem with the system is its unclear future post-2012, so it's hard for us to convince project managers even though we ourselves know it is going to continue," said Dang Hong Hanh, deputy director of Vietnam Energy and Environment Consultancy, on Wednesday.

"We need some clear, official signal that it will," said Hanh, whose company has five approved projects in Vietnam, all hydropower, in its portfolio, and another 18 in the approval process. She was speaking at a carbon market conference in Singapore.

The 2012 cut-off has project developers rushing to get schemes up and running in time to turn a profit by then. One of these, EcoSecurities, said on Tuesday earnings would not meet expectations, blaming U.N. red tape for slowing its business.

Carbon trading under the CDM was worth $5 billion last year, part of a global carbon market that is expected to be worth at least $60 billion this year.

"Unfortunately I can only trade until 2012 because there's no pricing data available and there's no certainty beyond that," said Eric Boonman of Fortis Bank.

"Given the fact that the banks in the CDM and the EU carbon market are providing a lot of liquidity, it would be good if they got something, so we could get the market off the ground and start trading," he added.

The price of offsets, called certified emissions reductions (CERs), trade at about three times the price of carbon credits in a less regulated voluntary emissions reduction (VER) market.

Hanh said more capital would turn to the VER market, if officials in Bali did not send a clear signal.

U.N. climate chief Yvo de Boer said he was confident Bali could deliver on these goals.

"The market is beginning to get positive signals from statements from governments," he told the conference.

(Reporting by Annika Breidthardt)

© Reuters2007All rights reserved.

Read more... Sphere: Related Content