October 5, 2007 (UN Chronicle): “Without binding commitments and the resulting downward pressure on greenhouse gas (GHG) emissions, there is no carbon market. What’s worse, we might fail in our battle against climate change and that would result in costs that are much higher than the cost of action now”, said Yvo de Boer, Executive Secretary of UN Framework Convention on Climate Change (UNFCCC) at the Carbon Finance World Conference, held on 19 September 2007 in Chicago. Support from the private sector is essential for industrialized countries to realize substantial emission-reduction as a response to climate change and for the continuity in the growing global carbon market, he explained.
The carbon market was worth more than $30 billion in 2006—triple that in 2005. It is expected to again grow substantially in 2007, UNFCCC estimates. “Business leaders are calling for clarity and a level playing field. There is an interest in setting up cap-and-trade markets, not only here in the United States, but also in Australia and Canada”, noted Mr. de Boer. The carbon market, spawned by the Kyoto Protocol, which to date has 175 member parties, “can help us achieve the necessary shifts to green investment and contribute to the additional hundreds of billions of dollars that are estimated to be needed to address to this problem”, he added.
Emissions trading and other Kyoto-inspired, market-based mechanisms, such as the clean development mechanism (CDM), engage the private sector, stimulate investment and help create low-cost opportunities for emissions reduction. With more than 780 registered projects in 48 countries worldwide, CDM, which allows projects that reduce GHG emissions in developing countries to earn certified emission reduction credits (tradable CERs), has grown considerably. According to UNFCCC, the parent treaty of the Kyoto Protocol, there are about 1,320 CDM projects in the registration pipeline. They are expected to generate more than 2.2 billion certified reductions by the time the first commitment period of the Protocol ends in 2012, each equivalent to one tonne of carbon dioxide. “The CDM has provided developed countries with a degree of flexibility in how they meet their commitments under the Kyoto Protocol”, said Mr. de Boer, adding that for the CDM to be truly effective, however, it must be scaled up substantially, which also applies to the carbon market as a whole.
During a press conference at UN Headquarters in New York on 22 September, Mr. de Boer informed that even though the Protocol would ultimately deliver less than a 5 per cent reduction in GHG emissions, the value of CDM projects in the pipeline for 2007 had already reached $25 billion. For developing countries’ long-term green economic future, such projects could generate, in an ambitious scenario, a North-South carbon finance flow in the order of some $100 billion a year, he emphasized.
The UN Climate Change Conference, scheduled from 3 to 14 December 2007 in Bali, Indonesia, will seek to determine the future action on climate change mitigation and adaptation, as well as the global carbon market and financing responses to climate change after the expiration of the Protocol in 2012. Mr. de Boer noted that a breakthrough in Bali “is absolutely essential”.