Blow to Carbon Market Image as Climate Negotiations Heat up

Dec 02, 2010, 11:56 ET from ICIS Heren

LONDON, December 2, 2010 /PRNewswire/ -- The image of the carbon market has suffered a triple blow this week just as climate change negotiations have started to heat up in Cancun, Mexico.

Emissions allowances worth EUR24m have been stolen from a Swiss cement company, while an Italian trading platform has frozen all deal activity due to suspicions of carbon tax fraud. Meanwhile the United Nations is currently investigating whether it is handing out too many carbon credits to projects cutting industrial pollution.

"The fraud, theft and controversy over carbon offsets come at the worst possible time for politicians trying to get a new climate change deal in Mexico right now," Isabel Save, carbon editor at information agency ICIS Heren, said. "A new climate change deal will cost money. The goal will be to make sure the private sector pays, not the taxpayer."

The carbon market is currently the main way of making companies invest in climate change action. But unless the EU, the UN and national governments clean up the market's image, carbon trading as a way of tackling climate change will be a tough sell in Cancun.

"It would be a shame if preventable scandals ruined the chances of getting a global carbon market. The market is already providing a price tag for carbon emissions and an incentive for companies to take the low-carbon route to development. But investment might dry up if new carbon market mechanisms are not ready to take over once the Kyoto Protocol runs out," Isabel Save said.

ICIS Heren data shows that the price of EU emissions allowances (EUAs) has been stable around EUR12-16/tonne this year. UN-backed carbon credits (CERs) have traded mainly between EUR11-14/tonne.

The UN-led summit in Cancun, Mexico, will end next Friday. Politicians are not expecting to reach a legally binding treaty, like the Kyoto Protocol, until next year at the earliest, but will need to make progress on climate action finance.

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    Isabel Save
    Editor - European Daily Carbon Markets
    ICIS Heren
    t: +44-20-7911-1942