Businesses must lead calls for governments to adopt more ambitious national carbon emission reduction targets, according to an overview board appointed to address the crisis afflicting the UN's flagship carbon offsetting scheme.
Panel members told reporters that "confidence in the carbon markets has already evaporated considerably" and as such the UN's Clean Development Mechanism (CDM) "could collapse" if urgent action is not taken.
The CDM allows low-carbon projects in developing countries to generate saleable credits, known as Certified Emissions Reductions (CERs), improving the investment case for emission reduction projects while allowing companies in richer countries to offset their emissions. But an oversupply of credits, doubts about the extension of the Kyoto Protocol that provides the legal foundations for the CDM and controversy over whether projects are achieving genuine emissions reductions has seen prices tumble well below the level analysts say is necessary to drive green investment.
The high-level panel this week published recommendations to bolster the market, which included calls for tougher national emissions targets that would increase demand for CERs and help provide investors with the confidence they need to return to the carbon market.
Next page: Burden of proof on business