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Severe Drop in Demand Threatens Climate Action, Auditors Say
A “severe” drop in demand for greenhouse gas audit firms threatens the world’s ability to protect the climate, said a lobby group for the companies that measure United Nations-overseen emissions reductions.
The number of new projects entering the Clean Development Mechanism is this month heading for its lowest level since July, according to figures sent yesterday by the UN Framework Convention on Climate Change. The number of projects seeking verification by the firms is 159 so far this month, with three business days to go. That’s 28 percent less than the 221 projects entering the program last month. There were a record 276 in November.
Unless they are located in least-developed nations, projects must be registered by the end of this year to be eligible to sell emission credits to factories and power stations in the European Union carbon market, the world’s largest by traded volume.
The UN-overseen regulatory board of the mechanism is this year reviewing the so-called CDM, the the biggest international offsetting system. Under the program, rich nations can offset their own emissions by cutting greenhouse gas in poorer countries. There are about 5,926 projects seeking registration and 2,956 registered, according to UN data compiled by Bloomberg.
“Given the limited participation of parties in the second commitment period of the Kyoto Protocol, and the existence of the Dec. 31, 2012 EU-emissions trading system deadline, a severe drop in demand for validation services, and slowed growth for verification services are expected after 2012,” said Werner Betzenbichler, general manager of the Designated Operational Entities & Independent Entities Association.
‘Significant Risk’
Audit firms may be forced to cut back the services they offer because of the plunge in demand, the association in Freising, Germany, said in a letter to the United Nations review dated Jan. 16.
“The current limited political will for a broad post-2012 regulatory carbon regime and the consequent uncertainty over demand for international emission reduction credits creates a significant risk of losing the considerable experience built up by the new DOE industry over the past decade,” Betzenbichler said.
DOE is the industry’s term to describe the audit firms, which include SGS SA (SGSN), Det Norske Veritas Ltd., Tuev Sued and Bureau Veritas SA. (BVI)
UN emission credits are important because they are used to meet compliance targets in the EU at lower cost. The EU system is one of the only ones in the world with mandatory targets.
UN CDM credits, known as Certified Emission Reductions, for December delivery rose 2.9 percent today to 3.97 euros ($5.23) a metric ton on the ICE Futures Europe exchange in London as of 12:12 p.m. They’ve fallen 64 percent in the past year on flagging demand and surging supply. EU carbon allowances rose 2.5 percent to 7.78 euros.
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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