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Trading Carbon : November 2011
support to help local governments measure those emissions. Cities would then be able to trade allowances representing transportation-related emissions if they emit above or below the set carbon caps. "Transportation is one of the major sources of emissions for the country and there are associated co-benefits to reducing emissions," she said. For example, earn financial support for its mitigation efforts, supplement investments in Colombia's infrastructure and, in turn, the country's economic development. In 2006, Colombia became the first country to host a UN registered transportation CDM project after its bus rapid transit (BRT) system in the capital Bogota was approved. The country has expanded the BRT to other major cities, and used the CDM to launch metro and cable car systems. But, while Colombia has had some success with the CDM, particularly in the transportation sector, statistics point to much more modest returns. Of the 157 projects in the pipeline, fewer than 20 percent have been approved by the UN and only 6 percent are generating carbon credits. Roberto Leon Gomez Charry, subdirector of local and institutional development at NGO Fundacion Natura, said the CDM has failed to focus on sustainable development in Colombia. Instead, it has favoured initiatives that the government would have undertaken with or without the availability of carbon finance. He said the CDM has only been feasible for larger- scale projects, and has kept carbon finance away from smaller projects developed by the private sector and small communities. As a result, the carbon market has largely ignored forest protection projects, which present a good opportunity to address conservation, mitigation and adaptation all at once, he said. For this reason, Gomez's Fundacion Natura, the Colombian Mercantile Exchange and the Bogota Chamber of Commerce have joined forces to launch a voluntary carbon market exchange for domestic and international buyers. The bourse aims to slash a half-million tonnes of carbon emissions over four years. The platform, which has received financial support from the Inter-American Development Bank and the UN's Global Environmental Facility, as well as other institutions, will initially enable buyers and sellers to trade 371,200 verified emission reductions (VERs), which have already been issued to Colombia-based forest carbon projects. The bank will also support the development of at least five forest carbon projects in two different countries in the region until they are ready to generate tradable VERs. In addition to bringing Colombian offset projects to a wider market, the project also aims to help private Colombian companies calculate, monitor, manage and mitigate their carbon footprints. "I think our country -- and more specifically the private sector -- is really open to try new market mechanisms to achieve environmental goals, because we think that command and control instruments have demonstrated to be not very effective," said Gomez. He added that even though Colombian companies do not have compliance obligations to slash their emissions, the VER exchange will facilitate companies' efforts to reduce their emissions. This is because of potential climate-related commercial requirements that may emerge due to new free-trade agreements the country has signed with the US and will finalise with the EU, as well as for corporate social responsibility reasons. Gomez said that the idea of the exchange came about in 2008, when his foundation started receiving requests from big companies in Colombia to help them measure their GHG emissions and to offset them with forestry credits. He had observed back then that there was a real shortage of forest carbon projects. "That led us to understand that there was an interesting opportunity to promote voluntary mitigation/offsetting in Colombia, but there was a non-existent supply of credits that would facilitate it," he said. "So, we decided that developing a sort of exchange ... in Colombia could be a very effective way to connect a growing demand for mitigation services to an insufficient supply of Colombian carbon credits, and generate a growing dynamic in the market," he said. Gomez hopes that the exchange will kick start a domestic offset market, which could later be scaled up to a regional carbon market for the Andes or all of South America. l 31 SPECIAL REPORT LATIN AMERICA Colombia is open to try new market mechanisms Roberto Leon Gomez Charry, Fundacion Natura November 2011
December - January 2011