Sales of Greenhouse Gas-Credits May Top $3 Billion (Update1)

By Lee Spears and Wing-Gar Cheng

Oct. 26 (Bloomberg) -- Sales of new greenhouse gas credits will rise to more than $3 billion this year from $2.7 billion in 2005, as developing countries sell more of them to industrialized nations, according to the World Bank.

The forecast is in the bank's annual report on the carbon- emissions market, released today in Beijing.

The 1997 Kyoto Protocol lets companies in developed nations buy credits from projects that reduce emissions in developing economies, where cleaning up production processes is cheaper. Those credits can be sold in carbon-trading systems like that of the European Union, helping rich nations meet Kyoto targets.

``All the data show that the carbon market is becoming a powerful financial force supporting clean development,'' said the report's author, Karan Capoor, at a press briefing in Beijing. ``This year we've seen the market's momentum maintain and continue.''

Trading in credits and emissions allowances will double to $22 billion worldwide in 2006 from $11 billion last year, according to the report which was released at Carbon Expo Asia in China's capital.

China sold 60 percent of the developing world's credits in the first nine months of this year, the report said, compared with 73 percent last year. The credits are derived from projects that use renewable energy or take other steps to avoid emitting greenhouse gases.

2012 Deadline

Uncertainty over how developing countries will fund emissions-reduction projects after Kyoto's term ends in 2012 may slow growth in the market, Capoor said.

``It appears the market is looking at this 2012 deadline and bringing on fewer and fewer'' projects, he said.

The Kyoto Protocol, signed by more than 80 nations and the European Union, requires the EU and 35 other industrialized countries to reduce greenhouse-gas emissions by an average of 5 percent below 1990 levels in the five years through 2012.

Countries such as Japan and companies like BP Plc, Europe's second-biggest oil company, are looking for projects that offer a chance to buy credits for less than the cost of curbing greenhouse-gas output at home.

Industrialized nations may spend as much as $100 billion a year in developing countries by 2050 as emerging economies undertake more projects that reduce emissions by using clean energy or manufacturing processes, the United Nations said last month.

To contact the reporter on this story: Lee Spears in Beijing at lspears2@bloomberg.net

Last Updated: October 26, 2006 01:08 EDT

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