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SINGAPORE: The Asia Pacific region currently accounts for over 70 per cent of the world's clean development mechanism (CDM) projects - which are part of an arrangement under the Kyoto protocol.
They allow industrialised countries to purchase carbon credits from green and clean energy business initiatives, mainly from developing countries, to balance out carbon emissions.
The Kyoto Protocol runs out in 2012, and while concerns have been raised in the investment community as to the future of the carbon trading market post-2012, experts said that there will still be demand for CDM projects in the long term.
"There is a need for continuation of the market mechanism, what ever will be the shape of the market mechanism," said D Daniele Violetti, manager, secretary to the CDM Executive Board, UN Framework Convention on Climate Change.
"Of course there will be adjustment to the existing rule, perhaps modification, and perhaps that is what is happening now in terms of negotiation. But a market-based approach to achieve the emission reduction will be there," he added.
In the past twelve months, carbon projects have taken a hit, as credit was tightened amid the global recession and CDM projects were put on hold. From July 2008 to February 2009, prices in the CDM market slumped 75 per cent.
Some believe that there will still be demand for CDM projects after 2012, as global economies continue to work to cut carbon emissions. But all eyes are on climate change talks taking place in Copenhagen in December.
Henry Derwent, president & CEO, International Emissions Trading Association, said: "What is going to happen in Copenhagen, what sort of deal are we going to get? I would love to believe that we could have a set of numbers, a set of targets for all the developed countries, starting when the current Kyoto protocol targets end in 2012.
"I think that it may actually take longer to negotiate, than the amount of time we have got now. There is a lot of progress being made by the negotiators. But to get from general progress through to actual numbers, for a number of countries to argue what they think is appropriate for them - it could take a little longer than we have got right now."
The global carbon market was valued at US$126 billion in 2008. And estimates suggest that if the EU increases its emissions reduction target to 30 per cent by 2020, combined with other government bills to be passed - future demand for carbon credits could be as much as 600 million tonnes per year.
- CNA/sc
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