(Planetark, Oct 27, 2006) The booming market in credits for cutting greenhouse gas emissions was worth US$21.5 billion in the first nine months of 2006, nearly double the total for all of last year, the World Bank said in a report released on Thursday.
 
But volumes grew more modestly than traded values and the amount invested under the Clean Development Mechanism (CDM), which channels funds to developing nations from industrialised peers, looked set to end the year around 2005 levels.
Traded amounts hit 1.0 billion tonnes, up from 716.6 million tonnes in 2005, according to the "State of the Carbon Market 2006", a report released by the bank and the International Emissions Trading Association.

CDM projects accounted for some US$2.3 billion over the same period compared with US$2.65 billion in 2005, though a few more deals are expected by the end of the year.

"We believe that this year's (CDM) volume is likely to be on a par with last year," said the World Bank's Karan Capoor, one of the report's authors.

Under the Kyoto Protocol, developed countries can fund emissions cuts in developing countries, and then count these towards their own greenhouse gas emissions targets.

China produces the lion's share of these credits, although its portion shrank to 60 percent from 73 percent last year.

However a leap in Indian supply to 15 percent from just 3 percent kept Asia easily in pole position as the top supplier of CDM credits. Although Africa's share of the market more than doubled, it was still a modest 7 percent.

2012 WORRIES WEIGH

Renewable energy is also accounting for a larger portion of CDM credits -- nearly a quarter in the year through September compared with 11 percent in 2005 -- as the stream of profitable projects to reduce emissions of the super-potent greenhouse gas HFC 23 dry up.

That gas, produced by the refrigerant industry, offers easy earnings because it has nearly 12,000 times the global warming potential of carbon dioxide but is relatively cheap to destroy.

In 2005 it accounted for 64 percent of CDM credits, but that was down to just over half in the year through September.

Next year is expected to see a strong crop of around 1,000 new CDM projects.

But concerns about the credits' value beyond 2012, when the current requirements for emissions reductions under the Kyoto protocol expire, will soon start weighing on the market.

"New developments in California, the eastern United States and Australia held the promise of continuity beyond 2012, without which the project-based market might otherwise see a sharp slowdown in transaction volumes," the report said.

The majority of the market value -- nearly US$19 billion -- came from the European Union's Emissions Trading Scheme (ETS), and Capoor added that he stood by a prediction of market turnover of US$25-US$30 billion for the full year.

Average CDM carbon credit prices were up slightly in 2006 at US$10.30 per tonne from US$7.25 in 2005, despite a May plunge in the European market after the EU revealed that industry got some 100 million tonnes more emissions permits than it needed in 2005.

"Volume fell off after that, May and June were almost dead, but it picked up again in the late summer," Capoor said.
 
Source:Planetark