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UN Carbon Offset Market Seen ‘In A Coma’ For Years After Warsaw

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Susanna Twidale, Reuters

The U.N.’s carbon offset market is likely to remain “in a coma” for years, project developers said, after countries failed to agree on measures to encourage demand at last week’s climate talks in Warsaw.

Investment under the U.N.’s $315 billion Clean Development Mechanism (CDM) has ground to a halt as the value of the credits they generate has plunged 95 percent in five years to around 0.30 euros, crushing profits that investors count on to set up carbon-cutting schemes in the developing world.

“As a tradable commodity, it’s in a coma and will be unless and until a 2015 agreement wakes it up,” said Jorund Buen, co-founder and partner at consultancy and project developer Differ.

CDM credits can be used by companies and governments to help meet emission targets, but prices have crashed as industrialized nations delay setting new emission reduction pledges, while registered projects pump out more offsets at minimal additional cost.

The Warsaw talks were meant to advance a global climate accord to be agreed in 2015 and come into force after 2020, but no major nation offered to set or deepen emission targets, while Japan scaled down its 2020 goal.

The talks ended on Saturday with a recommendation that countries announce plans for contributions on post-2020 emission targets “by the first quarter of 2015 for those in a position to do so”, which developers said was too weak to stimulate demand.

The text agreed by almost 200 nations “expressed concern” over the state of the CDM market, but measures that could have helped prop up the scheme were removed as developing nations insisted richer nations set emission targets first.

A proposal that parties should consider setting a minimum price for CDM offsets was deleted, as was a suggestion to invite financial institutions such as the Green Climate Fund to consider buying the credits.

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