Emissions market heading for supply crunch: World Bank

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Nov. 2 : The global market for emissions credits is heading for a ‘‘supply crunch’’ because bottlenecks are preventing approval of projects needed to reduce the output of greenhouse gases, a World Bank official said.

Western Europe, Japan and Canada together may need as many as 3.5 billion metric tons of credits in the five years through 2012 to meet their commitments under the Kyoto Protocol, said Charles Cormier, a team leader in the World Bank’s Carbon Finance Business unit. They may struggle to get 40 percent of the amount needed in that period, he said yesterday in London.

The cost of compliance for those three regions may be 30 billion euros ($36 billion) at recent credit prices. The 1997 Kyoto Protocol is an international treaty curbing greenhouse-gas output that the U.S. refused to join, citing the cost to industry.

A United Nations executive board that approves projects to attract credits in developing nations isn’t ratifying projects fast enough, Cormier said at the Carbon Finance conference.

‘We see a significant supply crunch,’’ he said.

Nations including Italy and the Netherlands are buying because measures to curb emissions may not be enough to meet their Kyoto targets. With domestic energy consumption continuing to rise, developed nations can buy credits from projects that curb emissions in developing nations. These are known as Clean Development Mechanism credits or certified emission reductions.

Nations and companies may also buy credits from projects that cut emissions in other industrialized nations, known as joint- implementation credits.

As a last resort, they may be tempted to buy credits from nations such as Russia and Ukraine, which have spare credits known as Assigned Amount Units because their economies shrunk in the 1990s. CERs were priced at about 8 euros a ton in May.

In order to reach 1.4 billion CERs, the United Nations CDM Executive Board needs to approve as many as 2,200 emission- reducing projects in developing nations, Cormier said.

That board had registered 33 projects as of yesterday, Christine Zumkeller, secretary of the board, said at the conference. A day earlier, she said funding needed to hire more officials to approve projects had not appeared.

The CDM executive board needs to boost its number of project officers to about 18 from four by the middle of next year, Zumkeller said Oct. 31 on the sidelines of the conference. She expects registration of about 400 projects next year.