The United Nations began work to preserve a key pillar of the carbon market as Brazil and China said the program had no future unless rich countries accept new goals for cutting greenhouse gases.
The UN Framework Convention on Climate Change said it would conduct a yearlong evaluation on how to improve the Clean Development Mechanism, according to a statement yesterday. The CDM program lets companies and nations earn credits to offset fossil-fuel emissions in exchange for sponsoring renewable-energy projects.
The future of the CDM is in question because emissions limits in the 1997 treaty expire next year. Brazil and China, which are pushing developed countries to make new commitments to reduce pollution under the treaty, say demand for the credits will shrivel without an agreement.
“The basic issue about the CDM is about demand,” Andre Correa do Lago, Brazil’s chief envoy at UN climate talks, said at a press briefing yesterday in Durban, South Africa. “You will not be creating the demand, and this is the basis of the CDM.”
The CDM will have “no” future without Kyoto, he said. Japan, Russia and Canada have said they wouldn’t make new commitments under the 1997 treaty.
If the Kyoto emissions limits expire, there’s no reason to maintain the CDM, Su Wei, China’s lead negotiator, said this week in Durban.
“We can’t imagine that if there’s no second commitment period, there would be a continuation for the clean development mechanism,” he said in a joint interview with Bloomberg and two other news organizations Nov. 29. “If there are no targets to implement, what is the utility of having the CDM mechanism?”
China’s position is significant because it’s the biggest emitter of greenhouse gases and the largest developing economy involved in the climate-change negotiations.
The CDM has supported the development of more than 3,600 project in 72 countries, according to the statement. It was worth $1.5 billion last year, according to the World Bank. Offset credits issued under the CDM can be used for compliance by companies in the EU emissions trading system, the world’s largest, even if Kyoto limits are not extended. From 2013 the EU will accept only new offset projects based in least-developed countries and the use of credits linked to some industrial gases will be banned.
The credits neared a record low yesterday. Certified Emission Reduction offsets for December fell 5.3 percent to 5.32 euros ($7.16) a ton on the ICE Futures Europe exchange, near the record reached Nov. 25 of 5.30 euros. The futures contract has lost 53 percent this year.
The UN will issue as many as 29.7 million metric tons of CERs in November, the ninth-biggest monthly total since the system began in 2005. The regulator issued a record 50 million tons of CERs in January. Seven of the 10 biggest monthly totals have been this year.
The CDM “has delivered on mitigation and given concrete expression to what is needed to address climate change, in the form of tangible projects,” Christiana Figueres, executive secretary of the UN Framework Convention on Climate Change, said in the statement. “Now is the time to tap into the experience gained implementing the mechanism.”