CARBON CREDITS FOR SUB-SAHARAN AFRICA - lumes

The global warming potential of each gas is determined in terms of its equivalent intons of carbon over the course of 100 years (Bayon et al., 2008).3.3 VOLUNTARY MARKETThe voluntary market has grown in response to the increased demand forcarbon credits outside the Kyoto Protocol compliance market and is more informalthan the compliance one. The volume and value of credits traded on the voluntarymarket is far smaller than in the compliance market of the Kyoto Protocol. Eventhough VCMs represent a small proportion of the carbon market as a whole it is arapidly growing market. Similarly to the compliance schemes, there are two types oftransactions in the voluntary market: allowance-based and project-based transactions.The over-the-counter (OTC) market constitutes the largest portion of the voluntarymarket. All carbon credits purchased under OTC scheme are project-basedtransactions (Bayon et al., 2008). The smaller portion of the market represented byallowance-based transactions is covered by the national cap and trade developingschemes such as Chicago Climate Exchange (CCX) or Japanese Voluntary EmissionsTrading Scheme (JVETS), for instance. Allowance-based sector of the VCM is notcovered by the present study.Figure 3. Carbon Markets Volume of Transactions in 2007, 2008.Source: adapted by author from Ecosystem Marketplace, New Carbon Finance, Point Carbon,World Bank.Ecosystem Marketplace (2008) report estimates that the entire OTC markettransacted 42.1 million tCO2e at a market value of US$258.4 million in 2007, upfrom 2006 transaction volumes and market value of 14.2 million tCO2e and US$58.5million, accordingly. The compliance markets also have experienced much highertransaction volumes and market value compared to the previous periods, however, inthe past years OTC markets are experiencing faster growth (194%) than regulatorymarkets (77%) (Ecosystem Marketplace, 2008). In 2007 OTC market experienced thetripling of transactions and the trends continued for the 2008 (EcosystemMarketplace, 2008). Thus, most of the analysis and debate to date have assumed thatdemand for carbon offsets will be high (Wara & Victor, 2008) and thereforedeveloping countries that host such projects will necessarily earn useful revenues. At17