Page last updated at 15:50 GMT, Wednesday, 7 May 2008 16:50 UK

Carbon market's value hits $64bn

Pollution from energy plant
Trading carbon is seen as a mechanism to tackle climate change

The market that enables companies to buy and sell the right to pollute doubled in value in 2007, according to a World Bank report.

The value of the carbon market hit $64bn in 2007, from $32bn in 2006.

The market, which was created as a way to tackle climate change, enables firms to buy and sell permits to pollute by trading carbon emissions.

But while the carbon market has boomed, there are signs that this has not prompted big cuts in emissions.

For example, the value of carbon traded using mechanisms developed by the Kyoto Protocol more than doubled to $13.4bn last year, but the amount of actual carbon emissions only fell 7%.

Developing nations

Under the Kyoto Protocol, certain leading industrialised nations agreed to reduce their emissions, measured against 1990 levels.

"It would be a shame for the world to lose its momentum now," said Karan Capoor, head of sustainable development at the World Bank and the author of the report, State and Trends of the Carbon Market 2008.

"At a time that global co-operation to reduce the risk of climate change is more important than ever before, the prospects for developing countries benefiting from the carbon market are in question."

One of the main ideas behind carbon trading is that polluters chose the easiest and most cost-effective way to reduce their emissions.

If, for example, a rich industrialised nation wants to keep polluting, it can gain emissions permits by paying a poorer nation to invest in clean technology and thereby reduce its pollution levels.

In effect, the developed nation is paying another nation to offset its emissions.

The argument is that as countries such as China, Brazil and India expand economically, trading carbon lets those countries grow, but in a more environmentally-friendly way.

The largest single market for carbon was traded under the European Trading Scheme (ETS), in which certain polluting industries such as energy and cement firms face a limit on the emissions they can produce.

This market grew to $50bn in 2007, up from $24.4bn a year earlier.

However, there has been a time-lag between the initial validation of the offsets and other carbon reduction schemes and their official approval, due to bureaucracy and delays, said the reportm often approaching a year.

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