By Tim Hirsch
BBC Environment Correspondent, Montreal
Business groups are warning that the prospects of cutting greenhouse gas emissions under the Kyoto Protocol are being jeopardised by UN bureaucracy.
Clean energy projects are being hampered by lack of UN resources
They claim that the system known as the Clean Development Mechanism (CDM) is being hampered by delays.
The CDM gives "carbon credits" to clean energy projects in poorer countries; those credits can then be bought by companies in industrialised nations
Critics say the problems will hamper progress towards the Kyoto targets.
This system has officially come into legal existence this week, with the approval at the Montreal conference of the "rulebook" of the Kyoto agreement. But already, negotiators are discussing proposals to reform and streamline the CDM.
At the centre of the controversy is a body known as the CDM Executive Board, based in the German city of Bonn, whose job it is to register projects under the mechanism, and issue what is in effect a new currency, the Certified Emission Reduction (CER).
These are expected to be in great demand as industrialised countries struggle to meet their targets - Canada, for example, has increased its emissions by 24% since 1990, compared to its commitment under Kyoto which is for a six per cent cut.
The CDM was designed to provide win-win solutions: instead of reducing their own emissions, countries in Canada's position could buy CERs from developing states, as could European companies struggling to meet targets imposed under the EU's Emissions Trading Scheme.
Those developing states would gain new clean energy projects, helping them to develop sustainably.
Alternatively they could be awarded credits through carbon-storing land use policies such as forestry.
Forest planting could earn credits
So far only 39 projects have been approved in the entire developing world - about 400 more are in the pipeline, but some analysts argue that the pace of generating these credits is wholly inadequate.
According to John Drexhage of the International Institute for Sustainable Development, the problem is that the CDM board was set up like a typical UN institution rather than one which must respond to the needs of the private sector.
Mr Drexhage told the BBC News website: "The World Bank has estimated that countries may need as many as 1,500 to 2,500 projects annually during the Kyoto period (2008-12).
"At this point in time, even under a much more expedited process, the UN secretariat estimates it would be able to approve between 400-500 projects.
"The potential consequence of this shortfall is either that countries would not be able to comply with their commitments under Kyoto, or would choose to purchase considerable quantities of 'hot air' from Russia and the Ukraine, which would compromise considerably the integrity of the Kyoto agreement."
'Hot air' is the term given to the spare emission credits earned by governments in the former Soviet Union and its satellites when their state-run industries - and with it their emissions - collapsed in the 1990s.
If these are sold onto the world market, countries would technically be able to meet their Kyoto targets without achieving any new reductions.
Another critic of the system, Tod Delaney of the Business Council for Sustainable Energy, said the problem was that by imposing over-rigid rules for allowing projects to qualify for credits, the pace of approvals was simply too slow.
"As opposed to trying to make the process perfect, we should have just tried to make the system work so it would generate enough credits, and then after a period of time we could make the refinements people want," said Mr Delaney.
"Instead what the countries have done is to put the refinements in, and found that they really muddy up how we get credits out of the system."
An example of the practical problems being created was given at a side event at Montreal by Marcelo Junqueira of the company Econergy.
He has been trying to use the CDM to help persuade sugar companies in Brazil to generate green electricity from bagasse, the woody waste from sugar cane plants.
Mr Junqueira said that long delays in registration of the projects, together with downward revisions of the price owners could expect to get for the credits, was starting to put some of them off the idea.
"I've been pushing all of the sugar industry in Brazil to use the CDM as a source of funding for their projects," he said.
"Some of them believed in it, but they are now a bit disappointed with the result.
"Because of this bureaucracy some of these projects will not fly, and that means there will be more emissions of carbon dioxide," said Mr Junqueira.
Keeping it real
But defenders of the CDM say it is too early for condemnation, as the process could only start seriously once the Kyoto Protocol came into force earlier this year.
They also point out that the body which has to consider the projects is badly underfunded by some of the rich countries now complaining about its inefficiency.
Some organisations are concerned that in a rush to "streamline" the system, its environmental integrity could be jeopardised.
Annie Petsonk of the US campaign group Environmental Defense said, "One of the proposals is to remove the criterion called 'additionality', which means that the project has to prove that it is reducing emissions below what would have otherwise occurred.
"You need to have that criterion in, or there is a danger that you will devalue the currency."