Green Bonds: New initiatives seek to jump-start emissions trading

Trying to strengthen carbon markets buffeted by allegations of tax fraud, dubious emissions reductions and uncertainty on the part of banks, supporters are preparing multiple ways to increase investment and trading in the markets intended to curb global warming.
"Estimates of the costs to reduce emissions keep rising, but the private sector is increasingly reluctant to invest in new projects," said Imtiaz Ahmad, an executive director at Morgan Stanley in London. The International Emissions Trading Association, of which Morgan Stanley is a member, plans to unveil this week a new mechanism called "green bonds" that could "cut through the current impasse and stimulate clean technologies globally," Ahmad said (Source: Greenwire)

The green bonds, issued by developing countries, could be backed by international lenders such as the World Bank, Asian Development Bank and Inter-American Development Bank, said IETA President Henry Derwent. Developing countries would service their debts on the low-interest bonds in part by issuing emissions permits, kept honest because international lenders could raise the rate of future bonds for a country that does not make genuine emissions reductions.
The association plans to formally introduce its proposal at a three-day carbon trading conference, organized with the World Bank, that begins tomorrow in Cologne, Germany. For green bonds to work, the European Union would need to approve the system's carbon permits.
Connie Hedegaard, the E.U. climate commissioner, plans to outline tomorrow a separate proposal that would make emissions more expensive in Europe. The European Commission, scheduled to vote on Hedegaard's proposal tomorrow, could ask E.U. governments to consider the measure at a June 17 summit. See further NYT: http://www.nytimes.com/2010/05/25/business/global/25carbon.html