The United Nations emissions regulator in Bonn will probably need expanded authority to approve new national markets for UN compliance, according the Carbon Market Forum in Brussels.
With few nations expected to agree on extending the 1997 Kyoto Protocol when its targets for industrialized nations expire this year, national governments will probably take the lead in creating carbon markets over the next few years, Andrei Marcu, head of the Centre for European Policy Studies’ Carbon Market Forum in Brussels, said in an Oct. 5 paper.
The UN coordination would help ensure new markets generate sufficient trading volume and allocate resources efficiently to emission projects, he said. The role of the UN’s Clean Development Mechanism Executive Board should be expanded to authorize or oversee national markets seeking to make their permits eligible for international compliance, Marcu said. Currently the board approves individual projects for eligibility rather than markets. Countries that don’t want to link with global markets wouldn’t need more oversight, he said.
“Only those activities which, if not regulated internationally, would affect the integrity of the international climate change regime, should be regulated internationally,” Marcu said.
The UN needs to develop the so-called Framework for Various Approaches under the UN Framework Convention on Climate Change to help oversee domestic programs, Marcu said in the paper. Climate science shows the planet will be imperiled if it waits for nations to agree a global treaty, according to the report. Envoys from almost 200 countries are meeting for another round of talks starting Nov. 26 in Doha, Qatar.
Countries wanting to create credits or permits for global markets could choose one of two tracks to win approval, according to the Centre for European Policy Studies paper.
Under the first track, a so-called Market Regulatory Board would review and approve the domestic market for recognition, allowing its permits or credits to become International Compliance Units.
Alternatively, the board could set up a peer review of the domestic market. After the review, which would ensure compliance with yet-to-be-agreed environmental standards, the market could be recognized as international and its credits could be converted to international units.
“It should be underlined that the Clean Development Mechanism Executive Board is an international regulator that already exists,” Marcu said. The proposal “does not call for the creation of new bodies under the UNFCCC, but simply the transformation, and possible amalgamation, of existing ones.”
Plans to link the European Union and Australian greenhouse-gas-reduction programs also demonstrate an urgent need to make sure national or regional programs can fit together by meeting minimum standards, according to the paper. All but the largest nations will probably need linking rules to achieve enough trading volume for market liquidity, he said today by phone from Toronto.
“We do not have the luxury of time,” Marcu said in his paper. “National systems are evolving rapidly, and they are starting to link. A failure to react in time will make future actions to ‘retrofit’ more expensive, when the need for harmonization becomes evident.”
Australia said Aug. 28 it will allow its emitters to use international credits including EU permits and UN Certified Emission Reductions for as much as half of their compliance needs, tightening the specific limit on UN offsets to 12.5 percent from 50 percent. The nation would scrap a floor price of A$15 ($15.24) a metric ton that was set to take effect in 2015.
The two regions will start a partial link of their carbon markets by July 2015, allowing Australian companies to purchase European allowances immediately for future compliance.
UN CERs for December dropped 4 cents today to 1.79 euros ($2.34) a ton on the ICE Futures Europe exchange in London at 11:35 a.m. They’ve dropped 78 percent in the past year because of a supply glut.