Global carbon – a complete disaster in the making?

The world’s only global carbon market is in need of a radical overhaul according to recent piece in the Economist. WHAT would you say about a market that has helped reduce carbon emissions by a billion tonnes in seven years, attracted $215 billion of green investments to developing countries (more than any private environmental fund) and cut the cost of climate-change mitigation by $3.6 billion? The answer, to judge by a United Nations panel looking into the workings of the Clean Development Mechanism (CDM) is: you’d say it is a shambles.

The CDM was set up under the Kyoto protocol to get developing countries to do their bit to reduce carbon emissions. The mechanism allows projects that reduce greenhouse-gas emissions in poor countries to earn a carbon credit (a “certified emission reduction”, or CER) for each tonne of carbon dioxide avoided. The credits can be sold to firms in rich countries which are obliged under Kyoto to cut their emissions. The idea was to encourage carbon saving where it was cheapest (ie, in developing countries), increasing efficiency.

The trouble is that the supply of credits has far outstripped demand. The one-billionth CER was issued on September 7th. But the largest greenhouse-gas emitters either did not ratify the Kyoto protocol (America) or were not obliged by it to cut emissions (China and India). More >>

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