UN Carbon Credit Backlog Slows Climate Change Efforts

By Mathew Carr

Sept. 12 (Bloomberg) -- The backlog of United Nations greenhouse gas-reduction projects seeking emission credits surged more than sevenfold since the beginning of August, undermining efforts to curb climate change.

The number of projects awaiting completeness checks before they can be registered jumped by 253, said David Abbass, a spokesman at the UN Framework Convention on Climate Change, or UNFCCC. That compares with 37 projects beforehand, Abbass said yesterday by e-mail.

UN emissions trading ``is in danger of suffocating before our eyes,'' said Henry Derwent, chief executive officer of the Geneva-based International Emissions Trading Association, whose members include E.ON AG and Goldman Sachs Group Inc. ``It is essential that the UNFCCC grips this problem'' this month, smoothing investment in projects that tackle global warming.

The backlog suggests supplies of emission credits from UN- approved projects will be gradual. The allowances can be used by factories and power stations in the European Union carbon dioxide program, the world's biggest greenhouse gas trading market. About 391 projects have received credits so far, as of Sept. 1, UN data shows.

``The secretariat has acted to increase, on a temporary basis, the number of staff working in this area, and therefore it is expected that in the final four months of 2008 more than 50 requests will be processed per month,'' Abbass said.

Six Months

At this rate, the backlog would take almost 6 months to clear, without accounting for additional projects entering the pipeline in future. In its 2008 management plan, the UNFCCC budgeted to process 600 requests for registration, or 50 a month, he said. Projects are registered under the so-called Clean Development Mechanism executive board overseen by the UN.

``If there is an ongoing need to increase the number beyond the 50 case limit, the board would assess this in the context of the revision of its management plan for 2009,'' Abbass said.

EU carbon dioxide allowances for December rose 68 cents, or 3 percent, to 23.75 euros a metric ton ($33.51) on the European Climate Exchange in London, extending their gain for the past year to 12 percent. UN emission credits for December added 3.4 percent to 19.65 euros. They're up 21 percent since the start of trading on the ECX on March 14.

`Markedly Below'

EcoSecurities Group Plc, the Dublin-based greenhouse-gas credit developer, slumped 14 percent yesterday after warning that the issuance of credits during the next 12 months will be ``markedly below previous expectations'' because of regulatory scrutiny.

CDM regulators and auditors are taking more time to complete verification of emission-reduction projects and issuance, EcoSecurities said. Adrian Fernando, the company's chief operating officer, called on the UN to drop limits on processing project registrations.

The CDM is ``expensive and time consuming'' because it requires project managers to abide by new rules governing the technologies used to reduce emissions, the World Bank said last month.

The world's second-biggest greenhouse-gas market, the CDM allows rich nations to buy emission credits from projects including wind farms and industrial-gas combustion plants in developing nations. It must become more effective in reducing gases blamed for climate change, the World Bank said on the UNFCCC Web site.

``These systems are viewed as cost effective, but they have the drawback of the initial distribution of allowances that are difficult to determine,'' the World Bank said at the time.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net