"In general, carbon prices are seen by international markets as a commodity," Arturo Brandt, CDM senior project manager said in an interview. "Nowadays large-scale banks are participating in this business, buying carbon credits like commodities."

Specifically, the global value of carbon credits reached 64bn euros (US$99.6bn) last year, more than double the 31.2bn euros in 2006. Volumes also increased, albeit not as quickly: 2.98Bt of CO2 equivalent was traded last year compared to 1.75Bt in 2006, according to a World Bank report, State and Trends of the Carbon Market 2008.

Some estimates show that if the US enters the market, carbon trading could go as high as US$1tn, Brandt said, adding the North American country accounts for 25% of global CO2 emissions.

"It's a snowball effect," CDM senior project manager Francisco Avendaño said of the growth in the carbon market's value.

ENERGY PROJECTS, LATAM IMPACT

The carbon market is boosting renewable and efficient energy projects, which account for nearly two-thirds of trading in the project-based markets.

"In 2007 alone, CDM leveraged US$33bn in additional investment for clean energy, which exceeded what had been leveraged cumulatively for the previous five years since 2002," according to the report.

Brazil, meanwhile, has led Latin America in the market, accounting for 6% of the world's CDM projects, according to the report. The "rest of" Latin America accounts for a combined 5% of the global total.

Prices in Brazil span the entire range from 8-15 euros, while other countries in Latin America have not seen such high prices," according to the report.

GREEN BARRIERS

Meanwhile, some fear the carbon market could threaten Latin America's export economy as developed countries increasingly want imports with low carbon footprints.

Chile's former president Ricardo Lagos, who now serves as a special UN envoy on climate change, has warned about the possibility of "green" commercial barriers.

Chile's energy minister Marcelo Tokman also has cautioned that with the growing number of coal-fired plants in the country Chile could face increasing pressure to reduce its CO2 emissions.

First Climate's Brandt and Avendaño acknowledged the threat, saying consumers in developed countries could prefer environmentally friendly imports for premium products like wine, cheese and olive oil.

But the two view the trend as an opportunity as companies create niches by marketing environmentally friendly products that offset emissions by buying up carbon credits. Vineyards, for example, have expressed interest in purchasing credits to offset emissions produced during international transport.

"Opportunities always present themselves in times of critical change," Avendaño said.

Source: Business News Americas, Wednesday, July 30, 2008.