Voluntary Carbon Market to Boom in Asia, US

Story by Annika Breidthardt

SINGAPORE - Trading in voluntary carbon markets is booming as companies, in top customer the United States but also in Asia, rush to offset their impact on global warming outside a regulated Kyoto protocol scheme.

Trade in the voluntary carbon market, until now a tiny part of a global carbon market worth at least US$60 billion this year, occurs outside the UN's Kyoto Protocol, which sets mandatory emission limits on developed countries that ratified the pact.

"I see the voluntary carbon market dividing about 50/50 between Asia and America," Anne-Marie Warris, the head of global greenhouse gas initiatives of verification firm Lloyds Register, said on Wednesday in Singapore.

That would be a shift from the current distribution, where companies in the United States, which lacks mandatory limits on the gases and pulled out of the Kyoto Protocol, made up almost 70 percent of the unregulated carbon market's customers.

"The emissions of big organisations here are not capped because their emissions are not part of any system," Warris said.

"I can see them beginning to want to do something about their carbon footprint."

Global voluntary greenhouse trade hit 23.7 million tonnes of carbon dioxide (CO2) equivalent, worth about US$91 million, in 2006. Warris said she expected that to grow to some 1.2 billion tonnes by 2012.

Credibility Gap

Because it is a voluntary market, emission cuts outside the Kyoto trading scheme are not always verified and projects have suffered from a lack of credibility.

Many companies now "offset" their emissions by investing in projects elsewhere such as burning methane from landfills, mainly to enhance their image of environmental stewardship and corporate social responsibility, not traditionally values associated with Asian companies.

Fewer European customers participate in the voluntary market because companies there mostly trade carbon on the regulated EU emissions trading market to meet their countries' mandatory Kyoto Protocol targets.

But some have said that current uncertainty over the future of the UN-led scheme, after Kyoto obligations expire in 2012, as well as delays in the project approval process, will lead to an influx of capital into voluntary trades.

The types of projects in the voluntary market differed fundamentally from the regulated United Nations-administered market and would continue to do so.

"You'll see a lot of replacing light bulbs and those sorts of projects, which are currently very hard to deal with in the CDM (clean development mechanism). They tend to think about much bigger investment projects," Warris said on the sidelines of a carbon market conference in the city state.

Various performance standards are being developed to meet criticism that the voluntary market is plagued by investment in questionable projects that may not actually cut emissions of the gases scientists link to global warming. (Editing by Anthony Barker)

Story Date: 8/11/2007

All Contents © Reuters News Service 2007

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