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World News

UN climate talks struggle to overhaul carbon trade

CANCUN, Mexico (Reuters) - Countries differed sharply on Wednesday on the future of a $20 billion carbon market after 2012, casting doubt on any overhaul of the scheme at U.N. climate talks in Cancun.

A small house can be seen in front of a coal-burning power station located on the outskirts of Beijing August 17, 2009. REUTERS/David Gray/Files

The Kyoto Protocol allows rich countries to meet greenhouse gas emissions limits by paying for carbon cuts in developing countries, earning carbon offsets in return.

No new emissions limits have been agreed after the first phase of the protocol ends in 2012, stifling investment in the offset scheme, experts told the Nov. 29-Dec. 10 Cancun climate talks.

Some market participants and countries want a formal, U.N. decision in Cancun to commit to proceed with the market after 2012 regardless of whether any new targets are agreed.

“We want a clear indication in Cancun, we leave it to the parties to decide how,” said Henry Derwent, chief executive of the lobby group the International Emissions Trading Association.

“A clear decision would be great. In the absence of that investors will look at intent. The more we hear people saying this must go on, it points in the right direction,” he told Reuters.

The Kyoto carbon offsetting scheme called the clean development mechanism (CDM) was worth $20 billion in 2009.

“Whatever it looks like, an international agreement will provide a signal to the market,” said Lex de Jonge, a Dutch member of the U.N. panel which oversees the CDM.

The 1997 Kyoto Protocol requires industrialised countries to cut greenhouse gases by about 5 percent to 2012, compared with 1990 levels, but no successor has yet been agreed.

Several countries on Wednesday told the U.N. Cancun conference that the CDM’s survival was “vital,” includingAlgeria, Brazil, hosts Mexico and Papua New Guinea (PNG).

But they differed on other issues, including whether or not to widen the scheme to include new carbon-cutting technologies such as carbon capture and storage (CCS), much favoured by Gulf oil states.

CCS involves trapping the greenhouse gas carbon dioxide from power plants, and pumping it into near-depleted oil wells.

As well as stopping the greenhouse gas from reaching the atmosphere, it also has the advantage that it helps push out the last dregs of oil, a process called enhanced oil recovery.

Small island states and Brazil have previously said they opposed embracing the technology in the CDM, on the grounds that it may divert funds from renewable energy projects.

Experts said that only a few of many proposed items to overhaul the CDM would likely be approved in Cancun, and one of those may be to cut the waiting time for project approval.

Reporting by Gerard Wynn; Editing by Lisa Shumaker

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