Clean technologies: the policy challenge

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So, folks meeting this week in Cologne, Germany at the Carbon Expo, are looking for the best value for avoiding greenhouse gas emissions. Why would a marketplace with thousands of project proponents (sellers) and carbon credit seekers (buyers) be important for developing countries? If you consider that 2.4 billion people use wood and other biomass for cooking and heating and that 1.6 billion people do not have access to electricity, you'll begin to understand why.

Developing countries are eager to attract financing to meet their enormous development needs. The governments and businesses of industrialized countries are eager to meet obligations for reducing greenhouse gas emissions at the lowest cost possible.

According to the State and Trends of the Carbon Market 2006, “the overall value of the global aggregated, carbon markets was over US$10 billion in 2005. In the first quarter of 2006, overall transactions worth US$7.5 billion had led some to predict that this new financial market would be valued at between US$25-30 billion in 2006.” On the public sector side, the World Bank aims to increase energy services to those who lack them and simultaneously reduce the environmental footprint of energy development. The World Bank recently presented a paper describing the challenges of clean energy development.

It’s not just the problems of bad policies distorting energy markets, but a huge financing need (in the range of the $10 to $40 billion per year!) - even considering the relatively dirtier technology available to most developing countries than the technologies being shown at the Expo. The World Bank works on the public side to improve these conditions and is now promoting going beyond catalyzing the start of the carbon market to encouraging governments to agree on a longer term regulatory framework that could give stability to the carbon business. But hopefully, business won't wait for complete certainty and press ahead.


Warren Evans

Senior Adviser (retired)

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