Isramart : Carbon trading crying for reforms: WB

Isramart news:
The UN clean development mechanism needs a better regulatory framework and a more streamlineddecision-making if the system is to be scaled up, according to the World Bank.

The mechanism set up under the Kyoto protocol encourages private sector investment in projects in developing countries to offset polluting industries in the developed nations. But it needs to provide a long-term signal by streamlining the project cycle.

Bank officials released the report, titled “10 years of experience in carbon finance”, saying the market mechanism was working but more needs to be done going into the second decade of its functioning.

The Bank established the first global carbon fund to create a demand for carbon credits and to gain experience with the clean development mechanism. The Bank’s carbon finance operations expanded from a nascent carbon market in 2000 to ten funds and facilities with a current capitalisation of more than $2.5 billion, the report said.

The mechanism allows emission reduction projects in developing countries to earn certified emission credits that can be traded and sold and used by industrialised countries to meet part of their emission targets under the Kyoto protocol. “Carbon finance is an important revenue stream for greenhouse gas mitigation projects. It has so far played a catalytic role in leveraging other sources of finance in support of low carbon investments,” the report said.

According to the assessment, the experience of carbon finance has – and continues to be – one of “rich learning”. It says significant capacity-building has occurred which must be sustained and encouraged. “Insufficient predictability in the mechanism is an obstacle to maximising the leverage potential of carbon finance for low- carbon investments.” It also said that some decision of the mechanism had a negative impact on the least developed countries.

The Bank said the experience and initial insights gained from the mechanism were being presented at the climate change meetings to serve as a springboard for discussions and further analysis. The Bank supports greenhouse gas emission reductions through ten funds and facilities, which focus on a number of different sectors and countries. These include the BioCarbon Fund which focuses on forestry and land-use projects, and the Community Development Carbon Fund which focuses on projects in least developed countries that have strong social co-benefits in addition to reducing greenhouse gas emissions.