Green credits potential boon for emissions markets

SINGAPORE - Tradeable credits from saving forests, wetlands and endangered species is set to be a growth area for investors seeking to fight climate change, the head of a New Zealand-based carbon trading market says.

The world's growing carbon market, worth more than $60 billion a year, lets firms or nations buy and sell greenhouse gas emissions offsets to meet both voluntary and mandatory targets.

But demand is growing for projects that preserve or restore forests and their biodiversity and save rivers and water flows.

In return for protecting such environmental assets, developers sell credits, potentially a major growth area for emissions trading markets looking to sell new products.

"It's not just about the biodiversity credits in terms of plants," Mark Franklin, chief executive officer of TZ1, said.

"Even species biodiversity and water will be big issues in the future, so we're looking at products in all of these areas."

TZ1 is closely linked with New Zealand stock exchange operator NZX Ltd. It plans to formally launch its own carbon exchange using NZX's infrastructure by the first quarter of next year for trading and settlement of carbon credits.

TZ1 also runs one of only four global registries for the voluntary carbon standard (VCS), set by international and environmental bodies to measure carbon emissions and convert them into tradeable units.

"A biodiversity credit is a little bit like an emissions offset but it's something somebody is willing to invest in for the purposes for the next generation," Franklin said.

"It's amazing how much of this stuff is actually happening right now with goodwill and giving money to good causes as opposed to being a commercial venture that has a pay back," he told Reuters from Auckland.

Conservation credit schemes should last for about 50 years to be attractive, Franklin added.

TZ1 has also launched a biodiversity registry and in August listed 1.36 million biodiversity conservation credits from a forest project in the Malaysian state of Sabah on Borneo island.

The Malua BioBank scheme involves the protection and restoration of 34,000 hectares (80,000 acres) of orangutan habitat and a U.S.-backed fund has pledged $10 million to the project, which is to be preserved and managed for 50 years.

In return, investors can buy credits listed by TZ1, with each credit covering 100 square meters of forest. So far, 21,500 credits have been sold at US$10 each.

Franklin said there had been a jump in global interest since TZ1's involvement with the Malua BioBank and New Forests, one of the Sabah project's main backers.

"People are looking at wetlands conservation, moving of water rights, species conservation," he said. "These are things that may have sounded pretty weird about 10 to 20 years ago but there's a real momentum forming."

He said TZ1 was discussing projects with several developers.

"Over time, there will be more and more products than carbon on the registry but I don't think it will get up to 50 percent in the intermediate period. Carbon will be the major product listed on the registry," Franklin added.

Asked about the impact of the financial crisis and a looming global recession on carbon markets, he said players remained focused because carbon trading was simply the way of the world.

But he also pointed to the need for developing emissions trading schemes, such as Europe's, New Zealand's from next year and Australia's from 2010, to be open.

"My view is if most of the countries had open systems then there would be trading and offsetting where people could do it better. That was the whole point of having a global mechanism."