According to the World Bank, the Kyoto protocol on climate change is stimulating increasing flows of carbon finance to developing and transition economies, even though it is not yet in force. For the second consecutive year, the volume of trade in greenhouse gas emission reductions has more than doubled and stands in 2003 at 70Mt. The value of the carbon market is predicted to increase to US$10bn in 2007, estimate Norway-based analysis group Point Carbon.
The majority of transactions centre round industrialised companies and governments receiving credits for their forecast Kyoto obligations by investing in emissions-reducing projects in transition economies and developing countries. However, the report warns that the market is fragile and that “prolonged uncertainty over the entry into force of the Kyoto protocol might not only delay, but also lead to the cancellation of some project-based transactions.”
The World Bank also voiced concern relating to the role of Africa and small developing countries and their exclusion to the carbon market. The bank commented it was addressing this problem with special funds to invest in developing country carbon sink projects such as planting trees to soak up carbon dioxide.