Reducing greenhouse gas emissions – and, therefore, global warming – will require a suite of solutions. The scope of traditional conservation efforts is limited, since most of the world is adopting developed-world lifestyles and consumption habits as their incomes rise. Experts and politicians cite technological advances as a primary source of long-term reductions, but they also realize that technology alone cannot solve the problem overnight.

In light of these challenges, much of the world has adopted market-based cap-and-trade systems to control greenhouse gas emissions. I have been thinking a lot about these systems, and have asked myself the following question: what can a cap-and-trade system, especially one that provides incentives for financing projects in the developing world, do to help the BoP, who are most vulnerable to climate change?

This may not be a new question, but it is one that deserves ongoing attention. One provision of the Kyoto Protocol has been established to clearly address the BoP – the Clean Development Mechanism (CDM). The CDM allows developed countries to offset their greenhouse gas emissions by paying poor nations to develop clean energy projects or to create carbon sinks that cut global emissions.

Emerging markets are seeing an influx of investment from these offset payments. According to Scientific American, the market for clean development mechanism credits accounts for about $4.4 billion annually. In theory, this investment should lead to job creation and opportunities for the BoP to develop clean wind, hydropower and biomass projects from India to Brazil.

Despite the influx of capital, a Reuters article posted on NextBillion in August 2007 highlights an unfortunate reality: CDM financing is not going where it is supposed to go:

(This post continues past the break. Click "Read More" to continue.)