Kyoto CDM Offset Spending Fell 12% in 2008 – More to Come · Environmental Leader · Green Business, Sustainable Business, and Green Strategy News for Corporate Sustainability Executives

October 23, 2009

Kyoto CDM Offset Spending Fell 12% in 2008 – More to Come

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The 12 percent drop in purchases of carbon offsets under the Kyoto Protocol’s Clean Development Mechanism (CDM) in 2008 may be just the tip of the iceberg, considering the global economic turndown and growing skepticism about the future of the program.

Investment in CDM offsets fell 12 percent in 2008, after peaking at $7.4 billion in 2007, according to the World Bank. The drop in 2009 is expected to be even more precipitous, reports Reuters.

With the Kyoto Protocol to expire in 2012, and a mix of political uncertainty related to the future of international emissions efforts, CDM funding may dry up altogether in the next few years, some predict.

One of the big unknowns is China, which has about 35 percent of the offset projects currently registered under the CDM. Some worry that Chinese offsets will not be valid in most trading markets after 2012.

About 40 percent of the 336 million Certified Emissions Reductions credits issued to date are related to industrial gas projects in China that may not be valid after 2012. These industrial gas CERs have resulted in major profits for the projects, which have made fairly minor investments in emissions cuts.

At least two carbon offset investment managers quoted in the Reuters article said they wouldn’t recommend purchasing Chinese offsets.

If China and India don’t commit to emissions targets, some worry what kind of offsets, if any, will be considered acceptable in any international trading scheme that may succeed the Kyoto Protocol.

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