CO2 Trade "Pointless" Versus China Growth-Trader

Gerard Wynn, PlanetArk 1 Dec 09;

LONDON - Trade in permits to pollute is "largely pointless" when compared with the scale of growth in greenhouse gases in China and must be scaled up, one of the carbon market's most senior traders said on Monday.

Countries and companies in the developed world can buy emissions rights by investing in carbon cuts in developing nations, under a Kyoto scheme called the clean development mechanism (CDM) meant to cut the cost of fighting climate change.

But those cuts were tiny compared with rises in the world's top emitter, said Garth Edward, head of emissions trading at Citigroup, and formerly head of trading at Shell.

"The CDM in China is largely pointless as far as reducing its emissions trajectory," he said.

China is by far the largest market in carbon offsets, having delivered cumulatively 99 million tonnes of emissions cuts under the CDM in 2007 and 2008, about 46 percent of the global total.

The country's carbon dioxide emissions from burning fossil fuels and making cement rose by 15 percent or 947 million tonnes over the same time period, U.S. data show.

Critics say that trade in carbon offsets is opaque and benefits traders at investment banks and industry lobbyists who negotiate opt-outs for polluters.

Supporters say it identifies least-cost emissions cuts and is the only scheme mobilizing private capital to fund emissions cuts in developing nations.

Climate negotiators from more than 190 countries meet next week in Copenhagen to try and agree the outline of a global pact to succeed the Kyoto Protocol in 2013.

One topic will be how to scale up the CDM -- and especially move from an individual project approach as now, toward whole sectors for example rewarding the power generation or cement industries once they pass a certain efficiency or carbon emissions standard.

"Let's move forward to proper sectoral targets rather than ad hoc activity," said Edward.

The present CDM business model had become "severely challenged," he added, as a result of greater competition among buyers of carbon offsets and falling carbon prices following recession.

(Editing by Sue Thomas)