Blog Post

Regulation, Not Economy, Delaying Carbon Projects

Add this to the (small) list of things you CAN’T blame the credit crisis for: carbon project delays.

Reuters has an article this morning on the impact of the credit crunch on the global carbon finance market. The upshot: Carbon markets are strong, yet projects are being delayed anyway. But not by finance hurdles. Instead, the problem is an overwhelmed regulatory process.

The global carbon markets grew to $50 billion in the first six months of 2008 and are expected to double by year’s end, according to Reuters. But the original outline of the carbon markets regulatory scheme didn’t anticipate the huge amount of interest in “Clean Development Mechanism” projects. Such projects allow developed nations to purchase credits from carbon-friendly projects in the developing world. Karan Capoor, a World Bank specialist in carbon and environmental finance, told Reuters, “[T]he regulatory infrastructure is not fully geared to handle this high level of interest.”

The article notes that 63 percent of carbon projects are currently “under review,” and Capoor estimates that delays can reduce their potential tradeable credits by as much as 40 percent. As we’ve noted before, if such regulatory hurdles aren’t sorted out, the market is likely to become less attractive to potential investors, even those looking for a safe haven from the credit crisis.