Funds News

Carbon market players say open to self-policing

* CO2 market group says will consider self-policing rules

* Comes after call to action from new UN climate chief

* CMIA said more political will needed in post-Kyoto treaty

* Future markets to be more complex, fragmented -Figueres

By Michael Szabo

LONDON, June 1 (Reuters) - Carbon market players said on Tuesday they will consider developing self-policing rules after a call to action by the UN’s new climate chief, but warned that more political will is needed by governments to spur investment.

Christiana Figueres, who officially starts her new role in July, on Friday said market participants had “seriously impaired the trust of governments, civil society and non-profits,” through several scandals that rocked the largely unregulated $144 billion market last year.

“I believe that if the private sector itself does not develop self-policing mechanisms, somebody else will step in and do it for you,” she told a carbon conference in Germany.

The Carbon Market & Investors Association, one of three trade groups identified by Figueres, said it would consider Figueres’ proposition, CMIA director Miles Austin told Reuters.

Last year, the market’s reputation was rattled by allegations of carbon credit theft, tax fraud and trade in recycled credits.

“We cannot aspire to more advanced financial mechanisms ... if current transactions are not squeaky clean,” Figueres said.

“Market participants need to hold themselves to a higher standard. This market needs public trust ... without it, it does not function.”

Figueres, speaking in her first public appearance since being appointed on May 17, said the market also faced criticism for not contributing to sustainable development or improving the quality of life for families in developing countries.

Through one market scheme under the Kyoto Protocol, companies can invest in clean energy projects in poor nations and in return get carbon credits which can be sold for profit.

But administrative delays, along with the global economic slowdown, caused the scheme, called the Clean Development Mechanism, to fund only half as many emissions cuts last year than in 2008. [ID:nLDE64P0J3]

Figueres said the firms that audit the emissions cuts made by projects needed to “staff up” in order to cut delay times.

She also said companies need to invest in more projects that widely distribute green technology like efficient light bulbs and clean-burning stoves to large numbers of poor families.


“Investments are in place and those investments are at risk, meaning the private sector cannot sit on the bench and wait for others to solve the problem,” Figueres said.

CMIA’s Austin said private sector funding will not flow without more regulatory certainty for investors.

“Of the $100 billion proposed annually by 2020, according to EU figures, $66 billion is supposed to be coming from the private sector. That won’t happen in the absence of political will, so there needs to be realism on both sides,” he said.

UN climate talks to agree a climate pact to succeed Kyoto resumed on Monday, exposing familiar rifts between rich and poor nations which delegates said would delay the start of formal negotiations. [ID:nLDE64U1LL]

Talks have yielded little progress to date as nations have for years squabbled over who should take responsibility for leading the global effort to curb greenhouse gases.

Figueres said she was confident carbon trading will continue post-2012, the year Kyoto’s first leg expires, but warned that future markets are likely to be more complex and fragmented, and should not be taken for granted.

“The harsh reality is there is no entitlement to the carbon market because it stems from a political agreement that is still in the making,” she said. (Reporting by Michael Szabo; Editing by Keiron Henderson)