Expert: CDM markets durable despite financial crisis, low oil prices

Markets for CO2 emission reduction credits produced from renewable projects developed under the Kyoto Protocol remain strong despite the global financial crisis and lower oil prices, Greg Cassus, a lawyer with law firm GreenbergTraurig's energy practice, told BNamericas. "The credits have been rather durable," Cassus said. "The effect the economic downturn could have [on CO2 credits] was a concern we all had across the industry. We didn't know, for example, if the price would go down as much as oil." "There's been a dip, but it hasn't nearly as much as you've seen for oil or gas. Emissions credits are still hovering around US$17-18/t," he said. Carbon markets are being sustained by governments' commitments under the Kyoto Protocol and could see significant increases if the US were to sign on to the treaty under the new administration. "International governments have said they are going to stick with this. They're not going to cave on Kyoto. There's no choice," Cassus said. Latin America, meanwhile, is full of opportunities for increased development of CDM projects. "Some low-hanging fruit might just be going in and getting involved in landfill renovations and landfill capture," Cassus said. "You clean up a landfill that might be polluting a watershed. You capture the methane which is polluting the air and you use that methane to produce power." The region could most benefit from the Kyoto Protocol's technology transfer aspect. "The clean technology that is being developed in the US and Western Europe is being sent abroad to areas of the world where they rely on the old way of doing things by burning dirty coal or diesel. With this transfer, you'll see more of an exponential decrease in emissions," Cassus said. Perhaps the largest threat to the industry in the wake of the financial crisis is the availability of financing. But funds are available and the industry is seen as a safe place to invest. "What we are seeing is that investors are being much more careful. Projects are being financed and companies are getting the financing they need. It's just taking a little longer to get there than two or three years ago," Cassus. "You're not investing in nothing. You're investing in a hard asset that is going to produce power. From a securitization prospective, that money is secure because there's an asset you can go and get," he added. The complete interview with Cassus will be published in an upcoming issue of Perspectives. Cassus is set to speak on negotiating and structuring sales contracts at the upcoming Carbon Markets conference in Miami.