New Carbon Finance has released a report that indicates that cheap carbon credits will soon be a thing of the past. The energy research firm is specifically pointing to abatement projects for both N2O and HFC-23 — projects that are very nearly tapped out because the large returns on the credits from such projects led to higher interest.

N2O and HFC-23 are easier to clean up than other greenhouse gases and have more drastic affects as well. These factors, combined with the relatively inexpensive costs of reducing these emissions — approximately $1.50 to clean up the equivalent of one ton of CO2 — have made them a very lucrative variety of carbon credits. The going rate for carbon credits is closer to $30 per ton. But in China, where the majority of the world's N2O and HFC-23 are emitted, 80 percent of N2O emissions that can be reduced through carbon offsets are either developing credit programs or already have them in place. The same is true for all HFC-23 in China.

To meet the Kyoto Protocol targets, New Carbon Finance expects to see more money being directed to renewable energy and energy efficiency projects, rather than carbon credits. The research firm estimates that $14 billion will go to renewable energy and energy efficiency by 2012.

Image — New Carbon Finance