“Post 2012″ strikes fear in carbon market players
No pun intended but for the world’s carbon community, times are looking a little black.
The global financial crisis, or GFC as it is being called this week during Australia’s largest ever carbon market gathering, is deeply troubling many participants. But a larger, more worrying issue remains “post 2012″.
This is when the Clean Development Mechanism under the current phase of the U.N. Kyoto Protocol runs out, along with the hundreds of CDM projects already approved and the 3,000 still awaiting approval by a U.N. board.
U.N. talks at the end of next year aim to agree on a broader replacement for Kyoto from 2013 and market players are hoping those talks don’t fail. Already there are fears that some rich nations will use the financial crisis as an excuse to say now is not the time to be negotiating tougher emissions curbs that might hurt industry and cost jobs.
“The volume of primary CDM activity is declining. Every month virtually this year, the number of new CDM transactions has been in decline. And that’s because the 2012 deadline is approaching and we’re running out of runway,” said Paul Bodnar, Manager of Carbon Markets at London-based Climate Change Capital.
In China, the largest source of Kyoto offsets called CERs, the number of projects there are in decline, just as they are elsewhere, said Alex Wyatt, director of Emissions Zero, which helps Chinese entities to become carbon neutral.
“If you wanted to put it on a scale, the financial crisis and the post-2012 uncertainty, many times more significant is the post-2012 uncertainty. If you know what’s going on past 2012 you can invest with a much longer-term horizon,” he told Reuters on the sidelines of the conference on the Gold Coast in Queensland state.
A lot of people are still taking the risk to invest in CDM projects, said Wyatt, whose company has about 130 projects in China, many of them focused on renewable energy.
“But the willingness to do so is decreased. You see it now. People are investing a lot more in short-term projects that will only take a year or so to build.”
He said the financial market had yet to affect CDM project development in China.
“It’s too early to see any real effects. Projects take a long time. But if there are any effects, they will be seen in a few months.”
“The impact on the VER market is a lot more direct in the sense that a VER is like any retail good. It’s discretionary spending,” he said, referring to verified emission reductions, which must meet firm standards but are outside the Kyoto Protocol.