Penned by Nick
Though Sir Nicholas Stern doesn’t exactly hone in on the underlying carbon credit fundamentals that will determine whether projects are AAA, AA, A, BBB, etc (to use a conventional credit rating system), he does frame out the importance of quantifying and pricing the cost of carbon emissions such that the moral imperative and financial benefits are laid bare: a price on carbon makes dollars and sense.
From a financial perspective, the regulatory system that supports the Kyoto protocol’s CDM and JI mechanisms needs to be tightened up. A first step would be to standardize carbon ratings, followed by a robust international certification system that makes validating tonnes of carbon quite easy.
A third component that transnational organizations such as the World Bank and IMF could support would be an international fund that invests in carbon, helping to integrate disparate regional markets while serving to normalize prices that currently run a wide spread.
With the US presidential election pending, it’ll be interesting to see how these regulatory efforts come together in the US, if it all…