Matthew Phan, Business Times 7 Nov 2007;
Kyoto Protocol's CDM must grow from US$5b credits in 2006 to US$100b
EXISTING market mechanisms for the trading of carbon credits must be scaled up significantly if the world is to meet targets for reducing greenhouse gas (GHG) emissions, says Yvo de Boer, executive secretary of the United Nations Framework Convention on Climate Change.
If the world is to cut emissions by the 60-80 per cent necessary to mitigate climate change, the Kyoto Protocol's Clean Development Mechanism (CDM), which generated some US$5 billion worth of credits in 2006, must account for US$100 billion worth per year, he said.
But to do so, the CDM 'must be scaled up in applicability and geography', Mr de Boer said at the opening of Carbon Forum Asia yesterday. The event - a two-day trade fair of project developers, financiers and others involved in the carbon markets - is being held for the first time in Singapore.
Under the CDM, developing countries can house carbon reduction projects that generate credits, then sell these credits to developed nations like the EU or Japan, which use them to offset their own emissions.
But certain countries have dominated the market, with China, India and Brazil accounting for nearly four-fifths of all newly registered credits in 2006.
The CDM is market based - 86 per cent of investment comes from the private sector - so funds tend to flow to hot locations for foreign direct investment, said Mr de Boer.
Further, the CDM does not recognise projects in afforestation or which avoid deforestation - though the latter accounts for some 20 per cent of annual emissions. Further work is needed to develop methodologies or ways to obtain and measure GHG reductions in forestry, he said.
Other panellists at yesterday's forum directed participants' eyes to the UN Climate Change Conference taking place in Bali early next month. There, parties will negotiate the next phase of a carbon trading regime, after the current phase expires in 2012.
They are also expected to discuss future national targets for reductions and to try to bring developed economies like the US and Australia on board.
The vision is for a deep, broad and liquid global market for emissions trading. But many said not to expect too much from Bali - the goal is for a clear road map for negotiations, which should be concluded within two years.
Meanwhile, Singapore is putting processes in place to help companies take advantage of the economic opportunities in carbon trading, said Minister for the Environment and Water Resources Yaacob Ibrahim.
For example, it has designated emission credits as a qualifying commodity for concessionary tax rates on offshore trading income of just 5 per cent, to encourage traders to use Singapore as a base.
