First Latin American carbon exchange launched

Costa Rica (pictureed right) is expecting to sell 16 million tonnes of carbon credits as part of Latin America's first carbon exchange and the country is aiming to reach net zero carbon emissions by 2021.

The exchange was launched in October 2013 and provides a forum for tradable certificates that confer the right to emit one tonne of carbon dioxide.

The new BANCO2 market verifies and regulates the sale of Costa Rican Carbon Units (UCC's) but the exchange faces the challenge of saturated international carbon markets and low prices for the credits.

Traders can also buy the so-called Certified Emissions Reductions issued by the U.N.'s Clean Development Mechanism (CDM), the original carbon market created by the Kyoto Protocol. The CDM allows developed nations to purchase carbon offsets by investing in pollution-reducing projects in developing countries.

Earlier this month, Costa Rica's Forest Financing Fund issued the first 1.2 million tonnes worth of carbon offsets at $US5 per tonne.

By 2021, the fund aims to generate 16 million tonnes worth of credits from a range of pollution-reducing projects that can be sold to buyers seeking too offset their emissions, according to the environment and energy ministry.

Prices for carbon credits reached an all-time high in July 2008 at 36.43 euros ($US50.17) per tonne under the European Union's carbon market, the world's biggest.

But when Europe's industrial production stalled after the 2009 financial crisis, supply quickly dwarfed demand, driving the credits to their lowest level of 2.75 euros ($US3.79) per tonne in April, according to data from Point Carbon.

The new carbon market will also work with Costa Rica's central bank to offer reduced interest rates on energy-efficient cars and home improvements in exchange for signing over the carbon emission offsets to BANCO2.