Kyoto clean energy projects to dry up

By Gerard Wynn

LONDON (Reuters) - Funding for new projects to supply carbon offsets under the present cycle of the Kyoto Protocol will dry up over the next two years, underlining uncertainty about the pact's future, a project developer said.

Kyoto allows rich countries to meet greenhouse gas emissions targets between 2008 and 2012 by buying carbon offsets from developing and former communist nations, funding projects there for example to install renewable energy.

But present Kyoto emissions targets expire in 2012, and because projects take up to two years to develop they will soon only generate offsets for sale after then, when there's much less certainty about a market.

"That's probably it for pre-2012," said Jack MacDonald, chief financial officer of project developer London-listed EcoSecurities (ECO.L), referring to an end-2009 cut-off.

"We're not going to stop project origination. We are already buying post-2012 volume."

World leaders agreed in June in Germany to try and clinch a new deal to fight global warming by 2009, with serious negotiations expected to kick off in Indonesia in December.

EcoSecurities is one of the world's biggest project developers with a pipeline to deliver 163 million tonnes of carbon offsets, mostly to 2012. Each tonne implies 1 tonne of avoided carbon dioxide emissions.

Some projects perform closer to forecast delivery than others, and MacDonald said applying a 25 to 30 percent discount to EcoSecurities was "probably right".