Baselines, CO2 Capture May Boost Trade in UN Emissions Credits, BofA Says

United Nations climate-protection proposals to introduce so-called baseline crediting and to allow carbon-capture projects may enhance the world’s second-biggest carbon market, according to a Bank of America official.

“Standardized baselines,” where projects get credits as long as they produce fewer emissions than a minimum level, would make it easier to determine which projects are eligible for credits, according to the draft published Dec. 6 at climate talks in Cancun, Mexico. UN envoys are seeking to make the Clean Development Mechanism market more productive, while trying to improve its environmental credibility.

“The impacts will include reduced transaction costs for project participants and a partial derisking for developers to implement certain types of projects in countries with limited experience hosting CDM projects,” said Abyd Karmali, global head of carbon markets at Bank of America Merrill Lynch and president of the Carbon Markets & Investors Association, the industry lobby group.

The proposals to streamline the market are “looking good, but there is always a lot of horse trading at the end,” said Kim Carnahan, a CDM policy specialist at the International Emissions Trading Association, the Geneva-based industry lobby group. The talks are planned to end on Dec. 10.

The CDM executive board, the market regulator, on Nov. 25 forecast it can achieve an 80 percent decline by Jan. 1 in the backlog of pending submissions from projects seeking credits. The backlog of pending requests worsened in the five months through November, while pending project registrations improved.

Carbon Capture

Envoys are set to approve carbon capture and storage projects in the developing world as CDM offsets, which are used by companies and nations in industrialized countries that are striving to meet their greenhouse-gas emissions limits.

Draft conclusions by delegates would allow the technology to be deployed, providing concerns about leakage, legal liability, environmental effects and measurement are met.

“There’s definitely been movement where there hasn’t been movement for years,” IETA’s Carnahan said yesterday in an interview in Cancun. “There’s a good chance this decision would require the CDM executive board to consider carbon capture and storage methodology submissions.” Each project must comply with an approved methodology to win tradable credits.

Carbon capture and storage, or CCS, is an experimental technology that has yet to be proven. It would siphon off carbon dioxide emissions from power plants and factories and pump the gas underground for permanent storage. CO2 emissions are blamed for damaging the atmosphere. Decisions about whether to include the technology in the CDM have been delayed for at least two years because of questions about whether CCS will work and whether it’s suitable for developing countries.

“The most likely outcome is for CCS to become eligible, but with projects only qualifying once they have passed an extremely tough set of environmental safeguards and related risk appraisals,” said BofA’s Karmali.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

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