Asian nations emerging as center of carbon trade program

SINGAPORE–Financial market analysts here expect increased participation of Asian countries, including the Philippines, in the carbon credit trade, with most of them cornering big investments in clean development mechanism (CDM) projects.

In a briefing to formally launch the Carbon Forum Asia 2008 in Singapore, Asia Carbon Global group director Yuvaraj Dinesh Babu revealed that securing 1 or 2 percent of CDM projects would make a big difference in carbon trading in Asia, which is fast emerging as a center for the global emissions market.

The carbon trade takes off from the Kyoto Protocol signed in Japan by some 180 countries in December 1997.

It calls for 38 industrialized countries to reduce their emission of greenhouse gases that come from the burning of fossil fuel like coal and oil.

Carbon trading is similar to the exchange of securities and commodities where carbon is given an economic value.

A carbon credit allows the holder to emit a ton of carbon dioxide.

Credits are awarded to countries or groups that have brought their greenhouse gas emissions below their set quota.

For example, if an environmentalist group plants enough trees to reduce emissions by one ton, the group will be awarded a credit that it can sell in the carbon trading market.

If a steel producer has an emissions quota of 10 tons, but is expecting to produce 11 tons, it could purchase the carbon credit it needs to meet its quota from the environmental group or invest in “clean” energy sources or CDM projects to earn credits.

The carbon credit system looks to reduce emissions by having countries honor their emission quotas and offer incentives to go below them.

Dinesh revealed the influx of investments in the waste treatment sectors in Malaysia, the Philippines and Indonesia in lieu of Certified Emission Reduction (CER) credits.

He also said that Malaysia, Indonesia, the Philippines and Vietnam “are emerging significantly in the palm, cement, starch, fuel switch, geothermal, hydro and biogas sectors.”

To date, the single largest bilateral and unilateral carbon market exists in Asia, particularly in India and China, and the carbon credits-based project financing structure in the region is growing.

China has so far cornered 46 percent of CDM projects in Asia, followed by India with 36 percent.

Malaysia is a distant third with 5 percent while Indonesia and the Philippines have 3 percent each of the carbon market in Asia.

Sustainable Energy Association of Singapore (SEAS) executive director Kavita Gandhi expressed confidence that initiatives undertaken by the Singaporean government, such as the setting up of a $20-million fund to promote and develop solar capability and technologies would “position Singapore as a meaningful clean energy hub.”

“Asia is experiencing a period of rapid economic growth and governments across the region are striving to meet the ever-rising energy demands of their populations and industries,” Gandhi said.

She added: “This need for more energy, coupled with rising oil prices, increased consumer awareness on environmental issues and the certain threat of climate change make an excellent case for sustainable energy and to ensure that Asia leapfrogs onto a clean technology development path.”

International Emissions Trading Association (IETA) president and chief executive officer Henry Derwent revealed that there was confidence in the overall picture of the emissions market.

But for the countries in the southeast Asian region, including the Philippines, “they have a long way to go before their full potential (to immerse into carbon trading) is realized.”

He told the Philippine Daily Inquirer that the Philippines seemed “reluctant” to invest in carbon trading, which is why it has cornered only a small share of the market.

Carbon Forum Asia is the leading trade fair and conference on opportunities presented by carbon markets and mechanisms in the Asia-Pacific region.

The third forum will be held from Nov. 12 to 13 at the Suntec International Convention and Exhibition Centre in Singapore.