Asia takes up Carbon Credit Trade
Submitted by 2point6billion.com Blog
On the outskirts of Bangkok, generators fueled by methane from swine manure make electricity. In China’s Inner Mongolia, wind farms are sprouting up along the breezy steppes. In India’s Andhra Pradesh state, villagers power their tractors with a cleaner-burning diesel substitute pressed from seeds of the mighty honge tree.
Asia is showing signs of increased participation in carbon credit trading with most of the countries cornering big investments in clean development mechanism (CDM) projects, Asia Carbon Global group director Yuvaraj Dinesh Babu told the Philippine Daily Inquirer during the launch the Carbon Forum Asia 2008 in Singapore. Securing 1 or 2 percent of CDM projects would make a big difference in carbon trading in Asia, which is fast emerging as a center for the global emissions market, he added.
China has so far cornered 46 percent of CDM projects in Asia, followed by India with 36 percent. Malaysia is a distant third with 5 percent while Indonesia and the Philippines have 3 percent each of the carbon market in Asia.
The carbon trade took off from the Kyoto Protocol signed in Japan by some 180 countries in December 1997. It calls for 38 industrialized countries to reduce their emission of greenhouse gases that come from the burning of fossil fuel like coal and oil.
Carbon trading is similar to the exchange of securities and commodities where carbon is given an economic value. A carbon credit allows the holder to emit a ton of carbon dioxide. Credits are awarded to countries or groups that have brought their greenhouse gas emissions below their set quota. For example, if an environmentalist group plants enough trees to reduce emissions by one ton, the group will be awarded a credit that it can sell in the carbon trading market.
If a steel producer has an emissions quota of 10 tons, but is expecting to produce 11 tons, it could purchase the carbon credit it needs to meet its quota from the environmental group or invest in “clean” energy sources or CDM projects to earn credits.
The carbon credit system looks to reduce emissions by having countries honor their emission quotas and offer incentives to go below them.
CDM allows reduction in greenhouse gases achieved in developing countries to be sold as carbon credits to developed countries, which have ratified Kyoto protocol, to help them meet their emission reduction targets.
China alone accounts for 61% of global supply of Carbon reduction emission’s (CER’s) followed by India with a 12% share. China, India, Malaysia, Thailand and South Korea together generate a staggering 80% of all the CERs. Almost all the CERs are currently purchased by European companies and governments to meet their own emission reduction targets under the Kyoto protocol.
The bulk of the CER trading takes place through brokers, bi-lateral agreements and personal negotiations. While Asia is still in the process of developing real trading platforms or exchanges for banking or transacting carbon credits, India’s Multi Commodity Exchange launched futures trading in carbon credits in January this year.
According to Oslo-based research firm Point Carbon, the global carbon trade crossed €40 billion in 2007, a growth of 80% over the previous year. In terms of volume, 2.1 billion tonnes of carbon dioxide equivalent credits were traded, a hefty 64% increase over 2006. Carbon trading is estimated to hit €100 billion in 2008. The global carbon market could be worth €2 trillion by 2020, if a greenhouse gas cap and trade scheme takes off in the U.S., Point Carbon told the Climate Change Corp.
