Chile, South Africa top list for German carbon market aid: report

(Reuters) - Chile and South Africa are best placed to receive aid from Germany to cut help cut greenhouse gas emissions and develop new carbon markets that can be expanded worldwide, a new study commissioned by Berlin said on Tuesday. Both countries "qualify as a good choice for further steps" said Netherlands-based consultancy Ecofys in an interim report for a study it expects to complete by the year-end. The report could be used by Germany as a basis for funding. All industrialised nations have agreed raise $100 billion a year by 2020 to help developing nations tackle climate change. The U.N.'s Clean Development Mechanism has helped funnel around $400 billion into emission-cutting projects in developing countries by allowing investors to earn carbon credits they can sell to companies and governments of richer nations that use them to meet emission targets. But investment has dried up as countries stall over setting new emission goals under a global climate pact due to be signed next year. Germany is among a handful of European countries paying above market rates for CDM credits from the world's poorest countries and is funding programmes to encourage emerging economies to pay for more of their own emission reductions. [ID:nL6N0M1304] "Mechanisms such as the CDM no longer provide sufficient incentives ... in this gap period, bilateral agreements between countries provide a basis for piloting market-based approaches," the report said. HIGH POTENTIAL Ecofys ranked emerging economies based on their existing work and future potential to reduce emissions as well as their ability to influence policies among other governments. The report said cash could be given to governments upfront to set up emissions trading systems in certain industries or later should they exceed pre-determined emission levels. This could help Chile build more solar and wind power plants to reduce its need for gas imports from Argentina or to develop its own coal reserves for power generation. Money could also be provided to help cut South Africa's home energy use that could additionally ease the country's chronic shortage of adequate housing, the report added.