Carbon-trading boom could go bust

In a sign of the upbeat scenario, executive director of Thailand Greenhouse Gas Management Organisation (TGO), Sirithan Pairojboriboon, revealed last week that 27 projects had been approved and the figure would exceed 100 by the end of this year.

Until last July, when TGO was established, only 17 projects had been approved for carbon trading. Since then, 10 more have been approved.

The carbon-credit business is new globally. Some businessmen jokingly call it a trading of emptiness, while some activists claim it is tantamount to making money from global warming.

This business is based on a tool called the clean development mechanism (CDM), initiated and designed as part of the Kyoto Protocol.

Rich countries agreed to reduce their greenhouse gas emissions, especially carbon dioxide, within an agreed timeframe. However, because of the impact it could have on their economies, the CDM was devised as an alternative.

The CDM allows these countries to buy carbon credits from poor countries, which could reduce emissions despite their obligation under the protocol.

"It is new and many opportunities are available. However, it is also an unstable business," said Anat Prapasawat of Advance Energy Plus.

"Rules and regulations related to this business change rapidly, depending on the ongoing negotiations, and information about global warming is constantly updated by the United Nations Framework Convention on Climate Change. You have to be prepared," he said.

"There is high potential in Thailand, especially in the energy sector. We can invest more on technology to reduce carbon emissions and gain carbon credits for selling to clients," a businessman said.

But researchers like Bantoon Setsirot said cherry-picking would soon end. Though there is still plenty of room for growth, running the business will slowly get tougher.

Anat agrees with Bantoon. He says today's carbon-credit business in Thailand deals with easy medium-to-large companies.

"Future projects will be smaller, heading to small and medium entrepreneurs (SMEs), such as gaining carbon credits from converting waste of pig farms to biogas generation," he forecast.

This means, something needs to be done today in order to prepare for this challenge. Will the government support trading of carbon credits among SMEs?

TGO should have a proactive strategy and not repeat past mistakes that let private companies lead authorities. It must study the potential, set the right policy for the trade and then act as facilitator.

It is a big challenge but if it fails to rise to it, the present boom in carbon trading will go bust.