LONDON (Reuters) - Rich nations are scouring the globe for greenhouse gas credits to help them meet climate change targets, but red tape in one of the Kyoto Protocol's main markets is hampering their search.

Calls to streamline CDM, which allows rich nations to claim credits from projects in poor countries, will reach a crescendo at a major United Nations climate change conference in Montreal, Canada later this month, market sources said on Tuesday.

"There will be major pressure in Montreal to increase funding for the CDM's executive board, and to strengthen the procedures, to speed up the process," said Pedro Moura Costa, managing director of UK-based carbon trader EcoSecurities.

"CDM will be a major issue because now the private sector has real (climate change) liabilities, it's not a joke anymore, it's a reality," he told Reuters.

Other markets sources said a modest increase in funding to the CDM executive board of a few million dollars could be enough to improve the situation.

Calls to overhaul the scheme come as governments and companies from Europe, Japan and elsewhere step up the hunt for CDM credits, which potentially offer them a cheaper way to meet Kyoto emissions reduction targets than curbing pollution in their own backyards.

Some forward trading of credits which are expected to be earned against future projects is already under way, and brokers say the CDM market could be worth about 35 billion euros ($41 billion). Trading in a secondary market, which is also expected to emerge, could potentially be worth much more.

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The number of projects officially registered under CDM has grown sharply in the last six months and currently stands at 35. But 400 projects are waiting to be approved in a queue which has grown by 100 in the last two weeks.

"There is a bottleneck of projects in the pipeline, there are hundreds waiting to go through," said Moe Moe Oo of environmental markets broker GT/SKM.

CDM credits, or Certified Emissions Reductions (CERs) have been issued against two hydro-electric power projects in Honduras, in which Italy and Finland have invested.

Those credits that have been issued are in limbo in a temporary holding account and not available to the open market because an electronic system to track Kyoto credits is not yet online.

A spokesman for the secretariat of the United Nations Framework Convention on Climate Change said the electronic log needed to launch the international market for CERs and other Kyoto credits was expected to be online next year.

He defended the CDM's project approval process, saying much of the time leading up to project registration was spent listening to the views of observers like non-governmental organizations.

"This is very important for the integrity of projects," he said.

Critics say the CDM is running out of time to make a big contribution to rich countries' compliance. Under Kyoto, they will have to cut emissions of carbon dioxide by at least 5 percent below 1990 levels by 2008-12.

"Overall the amount of CERs is insignificant," said Sascha Lafeld of Germany-based 3C Climate Change Consulting. "The speed of registration must be much higher to use as compliance."