SINGAPORE, Oct 26 — The global carbon industry is expected to perform well this year despite the global financial crisis — but it is fast running out of time, a carbon expert said last week.
What it needs is a clear signal from world leaders that there will be a firm price on carbon past the Kyoto agreement which expires in 2012, said fund manager Josh Carmody of the Asia-Pacific Carbon Fund under the Asian Development Bank (ADB).
Under the global agreement to cut greenhouse gas emissions — regarded by scientists as responsible for climate change — companies from developing countries can convert emission reductions in their business operations into carbon credits.
But due to the lengthy process of getting a Clean Development Mechanism (CDM) project registered, potential projects may not generate enough carbon credits before 2012 to make it an attractive proposition to financiers, Carmody said in an interview with The Straits Times.
The CDM, a scheme under the Kyoto Protocol, allows industrialised countries to invest in projects that reduce emissions in developing countries as an alternative to more expensive emission reductions in their own countries.
“We need a global deal to come out of Copenhagen, which will assure the market that carbon credits generated beyond 2012 will have a value,” Carmody said, referring to a climate summit to be held in the Danish capital in December.
He is bullish about more projects being implemented in Southeast Asia in particular. The region currently supplies a small proportion of total carbon credits, with China and India accounting for the majority.
For this year, the global carbon market has been estimated to be worth more than US$150 billion (RM525 billion), up from US$120 billion for last year, said Carmody, who has more than a decade's experience in the field.
Although the CDM process has its flaws, it has been successful in facilitating wealth transfer from developed to developing countries, and linking the latter to carbon markets.
“What has been less successful is getting the scale, and replicating it throughout Asia,” he said.
To this end, the ADB is ramping up its spending on pollution-reduction projects in Asia. It has spent US$130 million on such projects, investing in more than 1,000 megawatts of renewable power projects across India and China.
The ADB also last year set up a Future Carbon Fund that will provide financing for ADB-supported projects that will continue to generate carbon credits after 2012. The initial target size of the fund is US$100 million. It may be increased to US$200 million if there is sufficient demand.
One main challenge going forward is for clean energy projects to get financing. “We don't just have to meet energy demand, but to source capital to meet these demands, and we need to encourage clean choices rather than dirty ones,” said Carmody. “On a commercial basis, we need a clean power station to be more profitable than a dirty power station and for financiers to see this.”
So all eyes are now on the upcoming climate change negotiations in Copenhagen, where world leaders are expected to broker a successor to the Kyoto treaty. “If policymakers get it right, we'll need to act quickly to build on the success of what they've done. But if the action is not pervasive enough, it will not be able to deliver change to our energy markets,” he said. — The Straits Times
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