Kyoto Gives Poor Countries US$2.7 Billion Boost

Kyoto Gives Poor Countries US$2.7 Billion Boost

PlanetArk GERMANY

11th May 2006

COLOGNE, Germany - Rich nations' funding of clean energy projects in developing countries reached US$2.7 billion in 2005, through deals allowed under the global Kyoto treaty to tackle climate change, the World Bank said on Wednesday.

The Kyoto Protocol allows companies and investors in richer countries to invest in and profit from cuts in emissions in poorer nations of heat-trapping greenhouse gases.

Developing country investment was part of a global carbon market which grew ten-fold to US$11 billion in 2005, the World Bank's third annual report on the global carbon market, released at a carbon markets conference here, showed.

"The biggest cause for celebration is the participation of developing countries," the World Bank's Karan Capoor, who is also the co-author of the report, told delegates.

The global carbon market is based on the fact that some companies can cut pollution more cheaply than others, allowing them to sell that pollution reduction in units called carbon credits.

Investors in rich countries can profit by playing differences in these carbon credit prices around the world.

"It's a win-win situation, a win for the (host) country and a win for the financial sponsor who makes money on his investment," Malik Khan, Pakistan's environment minister, told the conference. "It shows that protection of the environment will be key for economic development."

Kyoto commits some 40 industrialised countries to binding pollution cuts by 2008 to 2012. While trading is already in full swing, buyers will not be able to book Kyoto project credits in their accounts until next year.

A pipeline of more than 750 projects is nearing an environmental milestone of cuts for delivery by 2012 of 1 billion tonnes of greenhouse gases -- with 940 million tonnes of carbon dioxide cuts so far -- its administrators told the conference.

CHINA SELLS

Europe's carbon market accounts for the biggest slice of the 2005 global pie, at US$8.2 billion, and allows the continent's smokestack industry to meet carbon emission targets by buying carbon credits. Developing countries can sell carbon credits either into this European carbon market or elsewhere. Japan in 2005 was the biggest single buyer, at 38 percent of the total of projected emission cuts.

Japan is struggling to meet its Kyoto target through pollution cuts at home.

The biggest seller of credits was China, at 66 percent of the total. China plans an extra 160 GW of power by 2010, and this huge build, alongside planned energy efficiency savings, offers prime territory for clean energy investment.

"The Clean Development Mechanism is a very good mechanism to bring developing and developed countries together to tackle global warming," Gao Guangsheng, director at the National Climate Change Office at the National Development and Reform Commission in China, told the conference.

Story by Gerard Wynn

REUTERS NEWS SERVICE