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Global Carbon Exchange to Launch on Time - UN

Date: 09-Aug-06
Country: UK
Author: Gerard Wynn

The International Transaction Log (ITL) will allow developing nations to sell pollution reduction in units called carbon credits to rich countries.

Rich nations can then count these credits towards their greenhouse gas emissions targets under the Kyoto Protocol, from 2008-12, in an emerging global carbon market, seen the most cost-effective way to combat climate change.

Investor and broker worries about the ITL are already complicating carbon trading in contracts under the Kyoto pact, some of which are for as early as 2007 delivery.

"UN work has been proceeding in advance of our award of the contract," said Richard Kinley, officer in charge of the secretariat.

"We've staked our reputation on doing this (by April) and we stand by that."

The ITL will also be a pre-requisite for carbon trading in the second phase of the European Union's carbon trading scheme, also from 2008-12.

The UN will meet a November test-run date for the exchange, said UN climate change spokesman John Hay. The closeness of that date had prompted carbon market worries.

"It (the award) has been protracted because it's a long-term contract, from now until at least 2012," said Hay.

The project winner will both develop the exchange software and support this when the trading scheme is up and running.

The EU carbon market accounts for the emissions of energy-intensive companies, which have to buy pollution-permitting carbon credits if they exceed EU-imposed emissions limits.

They can buy these credits either on the EU market or through the UN exchange -- called Certified Emission Reductions -- for delivery now or in future years, as power companies for example cover power sales for 2007 and 2008.

"People are contracting now to buy CERs but no-one is able to guarantee delivery on a specific date," said James Emanuel, Vice President of Environmental Markets at brokers CO2e/Cantor Fitzagerald.

"Uncertainty relating to the date on which the ITL becomes operational is complicating contracts... Secondary market CER trading will take off when the ITL is operational."

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