From: Reuters
Published August 6, 2008 11:22 AM

U.N. to tighten rules on earning carbon offsets

LONDON (Reuters) - The U.N.'s climate change agency on Wednesday proposed to make it more difficult for speculators to earn carbon offsets from emissions-cutting projects which were already profitable.

Under the U.N.-run Kyoto Protocol, industrialized nations can meet limits on their output of planet-warming gases such as carbon dioxide by funding emissions cuts in the developing world in a scheme called the Clean Development Mechanism (CDM).

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The scheme is meant to cut the world's overall output of greenhouse gases, but has drawn criticism for counting emissions cuts from projects, for example in wind and hydro power, which were already profitable and likely to go ahead regardless of the U.N. scheme.

Such criticism has threatened to impact demand in the $13 billion market, for example in the European Union where policy officials have expressed concern about the quality of projects.

Projects in future would have to show that emissions cuts were a direct result of the U.N. scheme, for example demonstrating that banks had lent money because of the prospect of offset sales, a U.N. climate panel responsible for setting rules proposed in a consultation note.

"The primary focus... should be on exploring which types of project activities are potentially very profitable even without considering additional revenues from the CDM," the panel said in a call for public comments, issued on Wednesday.

Any new rules would initially apply to new biomass plants using waste to generate power, but could be widened to other projects, the panel suggested in proposals found here -- here

That call followed separate changes which U.N. climate officials agreed last week to the project approval process.

From this week, developers will have to inform the local environment ministry and the U.N.'s climate agency within six months of starting a new emissions-cutting project, in a step which may make it more difficult to exaggerate the role of the U.N. scheme in the commercial decision to launch a project.

Details of that decision can be found here --

http://cdm.unfccc.int/EB/041/eb41_repan46.pdf

(Reporting by Gerard Wynn)

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