UN official predicts carbon market will continue to grow

Top climate official says carbon markets will continue to play role in global fight to curb emissions

The UN's top climate change official has expressed optimism the global carbon market will continue to grow, despite fears uncertainty over the future of the Kyoto Protocol could result in the axing of carbon trading initiatives such as the UN's Clean Development Mechanism (CDM).

The first commitment period of the Kyoto Protocol is scheduled to end at the end of next year, sparking fears amongst carbon traders that the legal foundations for the CDM and the parallel Joint Implementation (JI) carbon offset schemes will be removed.

But speaking to reporters last night ahead of the CBI's International Green Business Dinner, the head of the UN climate change secretariat, Christiana Figueres, predicted some form of international agreement would be reached to allow for the expansion of the global carbon market and the continuation of the CDM.

"The fact is that if you take a long term vision then there is no doubt in my mind that if industrialised countries in particular take deeper mitigation targets, which they all must, then markets will play a role in bringing down the cost of those mitigation efforts, just like the CDM helped bring down the cost of the commitments in the Kyoto Protocol," she said.

Figueres acknowledged that the stand off between industrialised and developing nations over whether or not to agree a second commitment period for the Kyoto Protocol was damaging investor confidence in the carbon market.

"It is evident that there is uncertainty with respect to the future of the market or markets for one very simple reason: the carbon market stems from a political agreement," she said. "It is a commodity that was created out of a political agreement. It is not like other commodities. To go back to a Costa Rican example, it is not about coffee beans and rice. It was created out of a political agreement, therefore the future of this commodity needs to respond to the future agreements that are in the making.

"That makes it very, very difficult for the businesses that are currently in the market to decide how much they should wait around, how much more they should invest."

But she insisted that diplomats were working to address this uncertainty and offered reassurance that the CDM was likely to continue after 2012.

"All the options are on the table," she said. "The CDM has been improved, reinforced and enhanced constantly since its birth and that process will continue. The CDM will not drop off a cliff.

"What governments are still considering is do they want to bring the bigger mitigation efforts that are going to have to go beyond specific individual projects into the CDM and expand the scope of the CDM, or do they want to make a complementary market that will be there side-by-side with the CDM catering to different niches in the market. That decision is not yet taken."

source: www.businessgreen.com