From our US desk
“…that 40% to 50% of the carbon credits anticipated
under the Kyoto protocol will never be delivered, carbon traders and analysts
say.”
Los Angeles Times
The rush to go green could end in the red
The carbon
credits produced under Kyoto may fall far short amid failed projects and faulty
expectations.
By Fiona Harvey and Jonathan Wheatley, Financial
Times May 7, 2007
The rush to go green suggests easy money for investors
in projects that reduce carbon dioxide output. The reality is otherwise: Many
carbon projects turn out to be high risk.
Project failures and
over-optimism among developers, together with a tendency to exaggerate in
applications, mean that 40% to 50% of the carbon credits anticipated under the
Kyoto protocol will never be delivered, carbon traders and analysts
say.
The treaty, which the United States has been criticized for refusing
to sign, requires developed countries to slash their greenhouse gas emissions
below 1990 levels by 2012.
Tom Frost, carbon analyst at Numis Securities,
said: "I would expect that about half of the credits would not come through in
the end."
The Kyoto treaty requires qualifying projects to be certified
by the United Nations' clean development mechanism board. In the same grand
buildings on the banks of the Rhine in Bonn where the Marshall Plan was drawn up
after World War II, the U.N. clean development board scrutinizes
applications.
U.N. officials say developers tend to overestimate the
number of credits their projects will generate, in part because they incorrectly
assume that the number in their application request will act as a
ceiling.
In fact, developers can claim more credits, provided that extra
emissions curtailment can be verified. Other projects suffer long delays or are
abandoned.
For instance, the Financial Times visited a project aimed at
generating energy from waste at the University of Rio de Janeiro, which began
seven years ago.
"We've had a lot of delays and a lot of difficulties,"
said Henrique Saraiva, UsinaVerde's chief executive. "We were approached by
buyers [of carbon credits] long before we were ready to sell."
He said
the main problem was in building partnerships with engineering companies. Two
firms worked on the project and pulled out before UsinaVerde finally reached an
agreement with a smaller outfit.
The pilot project has been monitored by
Bureau Veritas Quality International, a Paris-based certification company. By
the end of May, its voluntary emission reduction credits should be up for sale,
three years after its pilot unit began operating.
If the project is taken
up by city councils and reproduced on a larger scale, plants should qualify for
U.N. emission reduction certificates. UsinaVerde's technology was approved as a
clean development mechanism by Brazilian certifiers in October
2005.
Another project that would set up solar panels in South Africa,
from which the German charity Atmosfair was hoping to buy U.N. credits, appears
to have been delayed indefinitely because the city of Cape Town has hit
difficulties finding financing.
However, the U.N. said that its
processes, which have been criticized for being lengthy, bureaucratic and
expensive, produced carbon credits of a reliably high standard.
The U.N.
credits fetch about 25% more than equivalent credits in the unregulated
voluntary market.
The board sends projects back to the developers for
amendment if there is evidence of fraud, malfeasance or incompetence. By late
March, officials said, 570 projects had been approved and only 14 sent back, all
for incompetence. They attributed the low failure rate to the stringency of the
process.
"If you were fraudulent, you would be less likely to apply under
the CDM," one official said.
The Full story is here
http://www.latimes.com/business/la-ft-carbon7may07,1,3464191.story?coll=la-headlines-business&ctrack=1&cset=true
