Tuesday, December 4, 2007

What Bali means for carbon markets

From Reuters:

About 190 countries are meeting in Bali, Indonesia, aiming to kick-start two years of talks to agree a new global climate change deal to succeed the Kyoto Protocol from 2013.
Kyoto has created a carbon market whereby rich countries can meet their binding greenhouse gas emissions limits by funding emissions cuts in developing nations, through a trade in carbon offsets worth $5 billion last year.

That trade has attracted speculators including investment banks and specialised carbon project developers, and has cut the cost for rich countries of meeting their Kyoto targets.
Some supporters of carbon markets want these extended under a Kyoto successor to include huge emissions-cutting projects.
Following are carbon market issues under discussion at Bali:

Under Kyoto, rich countries can earn carbon offsets by investing in projects to plant trees, which soak up the commonest man-made greenhouse gas carbon dioxide (CO2).
Now some countries want to include forest protection, whereby rich nations earn offsets by paying countries not to chop trees down. Complicating issues include: calculating the CO2 saved; establishing whether these trees were really at risk; and whether the resulting offsets will make it too cheap for rich countries to offset their own emissions....