UN Program Backed by Microsoft Set to Boost Carbon-Credit Demand

  • Demand seen equivalent of 26% of last year's volume on ICE
  • EU doesn't plan to renew buying of UN emission credits

A United Nations program backed by Microsoft Corp. and Sony Corp. that allows companies and individuals to offset their emissions online may spur demand for 50 million carbon credits through 2020, according to one of the project’s advisers.

The forecast, equivalent to 26 percent of the volume of credits traded on the ICE Futures Europe exchange in London last year, is based on current demand plus new buying from businesses that want to be associated with the brands already participating, said Daniel Rossetto, the managing director of Climate Mundial, an emissions trading consultant that’s working with the UN on the program.

UN Certified Emission Reduction credits, used by developed countries to offset domestic pollution by investing in green projects elsewhere, have slumped 98 percent since 2008 amid a glut as nations failed to encourage buying. The European Union, home of the biggest carbon market, doesn’t plan to use CERs after 2020 unless global emissions targets are tightened.

“This is new demand for the CER market,” Rossetto said by phone. Companies are keen to show their customers and potential customers they support sustainable development and climate protection, he said.

CERs for December settled unchanged at 50 euro cents ($0.56) a metric ton on ICE Wednesday. The benchmark contract has fallen from as high as 23.38 euros a ton in July 2008.

Under the UN’s online program, companies wishing to offset their own emissions can buy a corresponding number of credits generated by greenhouse-gas reducing projects such as wind farms and hydroelectric plants in developing countries. The UN then cancels the credits, which reduces the market glut and encourages investment in new projects.

The United Nations Framework Convention on Climate Change in Bonn began setting up its CER-cancellation system last year, backed by Brazil.

Carbon-offset projects can transform communities and spur sustainable
development, Rob Bernard, chief environmental strategist at Microsoft, said
in a statement on Tuesday.

Some buyers may be disappointed as the UN will allow existing projects to sell credits such as those that encourage the use of cleaner fossil fuels, Eva Filzmoser, director of Carbon Market Watch, said Tuesday in an e-mailed statement.

Investors in previous emission-reduction projects must receive fair treatment, or “there is no chance” private companies will rush to participate in future carbon markets planned by governments, Rossetto said.

There will be 38 countries and regions with carbon-pricing systems governing about 12 percent of the world’s emissions by 2017, up from 5 percent in 2011, the World Bank said Sunday.

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