Market for carbon credits runs out of steam
The carbon credits market, envisaged at one time as possibly becoming as big in the commodities sector as oil, is deep in the doldrums as a result of the global recession.
A scheme designed to bring the power of the market to the drive to reduce carbon emissions has been a victim of unfortunate timing.
Emission limits set just before the downturn mean that what were once seen as ambitious targets for emission reductions are now just a fact of life.
As a result, a lot of investors and investment banks are sitting on credits that have plummeted in value.
The sector has two distinct areas. One is the compliance market, which operates in the EU, in which the largest emitters of carbon in the union, such as energy companies, have designated quotas.
If these quotas are exceeded the businesses have to purchase carbon credits or quotas from other businesses that have managed to come in below their designated thresholds. In this way a financial incentive is created for reducing carbon emissions.
However, given the downturn in economic activity, the logic of the system has been seriously undermined.
The other part of the sector is the voluntary area.
This is where a company that wants to reduce its carbon footprint can purchase carbon credits that are created by unregulated private operators, usually using recognised methodologies and third-party verification by reputable experts.
Purchasing such credits can allow a company claim it is carbon neutral.
However, interest in the market has been heavily affected by the downturn, according to Niall McManus of Kilkenny-based Cosain, a carbon trading platform for the business community in Ireland.
Credits can be created either by changing activity so as to reduce carbon emissions, or sequestering carbon from the atmosphere by, for example, maintaining the rainforest in Brazil.
Celestial Green is involved in an area of this activity called Redd, or reduced emissions from deforestation and degradation, a scheme first sponsored by the United Nations.
Western businesses have been looking at carbon credit purchases that are directly linked to areas of the developing world connected with their businesses.
So a coffee company might buy its credits from a scheme that is of benefit to communities based in regions where its coffee is produced.
However, there have been concerns that some of the deals involving lands associated with indigenous people or peasants are creating landlord-tenant type relationships between the carbon credit businesses and the local communities.
The sector has had its share of scandals though a number of highly regarded private-sector registers and standards have been created, with the value of credits becoming associated with the quality of their validation.
Nevertheless, the idea of creating a carbon credits market has been seriously undermined by the economic downturn.
According to Andy Ager, formerly with Bache Commodities in London, the carbon credits market is now an "omnishambles" as the model was based on economic growth.