Carbon credits market trebles

Australian
Friday 4/5/2007 Page: 24

THE market in carbon credits grew faster than expected last year, tripling to $US30 billion ($36.6 billion) from $US1O billion in 2005, the World Bank said on Wednesday.

But the fledgling carbon credit industry is struggling to keep up with demand, the Financial Times has found, as there is now a shortage of skilled technicians to monitor carbon reduction projects and verify that the claimed emissions cuts are taking place. Nearly $US25 billion came from transactions under the European Union's emissions trading scheme, while $US5 billion was from the sale of carbon credits by developing countries. China was the biggest beneficiary, selling 61 per cent of last year's carbon credits, while India took 12 per cent and Brazil 4 per cent. Credits normally sell for between $US5 and $USIO. Britain was the biggest buyer of credits, purchasing 50 per cent of the supply.

The World Bank said carbon markets had resulted in capital flows from rich to poor countries of about $US8 billion since 2002, and estimated $US14 billion of further gains to developing countries through investment in "clean" energy technology. Warren Evans, director of environment at the World Bank, said: "The carbon market has become a valuable catalyst for leveraging substantial financial flows for clean energy in developing countries." However, several market analysts and experts told the FT there was a shortage of verifiers, which might hold up the development of carbon reduction projects.

Abyd Karmali, managing director for Europe at ICF International, a consultancy, said: "This is a bottleneck. It's just a matter of time before there is a capacity crunch and we find additional delays to projects." The FT also found that many projects in the unregulated part of the carbon market were not professionally verified, though this was not a problem in transactions overseen by the UN and the EU.

The market in carbon credits was brought into being by the Kyoto Protocol, under which rich countries can meet their targets to reduce emissions by about 5 per cent by 2012 by investing in projects such as wind farms that reduce emissions in developing countries. As well as the market under the protocol and the EU scheme, there is a large unregulated market in carbon credits, set to be worth $US4 billion by 2010. This is known as the voluntary market, as companies buying credits are not obliged to do so.

The World Bank said in its report that problems in the unregulated market could tarnish the main carbon markets: "This high-potential voluntary segment lacks a generally acceptable standard, which remains a significant reputation risk not only to its own prospects but also to the rest of the market, including the segments of regulated emissions trading and carbon offsets."