Tuesday, April 15, 2008

Pain in the carbon market

Several countries have accepted targets for greenhouse gas emission reductions. Reducing all these gases at home is expensive. It therefore makes a lot of financial sense to reduce greenhouse gas emissions somewhere else.  This explains the growing market in certified emission reductions (CERs) through the use of the Clean Development Mechanism under the Kyoto Protocol. After a reckless start, the market is starting to come to grips with the rules that will govern its future. The problem is an interpretation on the rules how much additional carbon is reduced (beyond what would have happened anyway) that can be sold as credits through certain interventions.  According to the United Nations, carbon credit brokers and independent auditors have interpreted the rules for additionality far too broad. A UN crackdown is starting to bite prominent carbon middlemen like EcoSecurities who will not deliver one-quarter of its credits.  

For more, read the full story Two Carbon-Market Millionaires Take a Hit as U.N. Clamps Down in the Wall Street Journal.

As Africans try to tap into the CDM market, it will be wise to check the credentials of middlemen and auditors operating in this field and to make an effort to understand emerging UN rules on the carbon credit markets.

For related blogpost see Electricity crises and the CDM.

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