Friday, July 25, 2008

Kyoto Protocol Pollution Credits Benefitting Asia Most

The Kyoto Protocol, the United Nations air pollution trading system, does not directly reduce the amount of greenhouse gas emitted to the atmosphere, since each ton of carbon dioxide cut in a developing country allows someone in an industrialized country to pollute that same amount. Yet, the idea is to transfer money to poor countries to encourage construction of environmentally sensitive factories and spur alternative energy use. Otherwise, global greenhouse gas emissions would grow more quickly as developing nations like China expand their economies. Credit sales were initiated under the U.N. program in 2004.

Estimates of pollution credits as of April 2008 (carbon credits* in millions):

China------------------------------------- 44.6

India-------------------------------------- 42.9

South Korea----------------------------- 27.2

Brazil-------------------------------------- 21.5

Vietnam------------------------------------ 4.5

In Europe, the carbon credit market is mandatory. Carbon credits on that market have been trading in the $20 to $30 range. In the U.S. voluntary market, prices range from $1 to $10/credit. A credit is equal to 1 metric ton of carbon dioxide or equivalent greenhouse gas. Credit prices on the Chicago Climate Exchange (CCX) reached a low of $1.85 in January 2008 and traded as high as $4.55 in February 2008.

* Certified emissions reductions

Sources: United Nations Environment Programme Risoe Centre, International Monetary Fund, The Wall Street Journal

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