Russia, EU Don’t Agree on Kyoto Surplus Fix: CDM Watch
Russia and the European Union are among parties that haven’t agreed on a developing-nation plan to limit trading of a 13 billion-metric-ton surplus of Assigned Amount Units under the Kyoto Protocol, according to CDM Watch.
The EU is failing to endorse the plan because of “internal disagreement,” Eva Filzmoser, program director of the Brussels environmental lobby group, said today in e-mailed statements.
“The surplus of Assigned Amount Units in the second commitment period of the Kyoto Protocol is one of the key issues to be resolved before parties can agree on a second commitment period of the Kyoto Protocol,” she said.
AAUs are permits handed out to developed nations under the 1997 protocol and represent a cap on their emissions in the five years through 2012. Countries that emit more than their cap may buy from those that have reduced discharges of greenhouse gases.
Nations have so far failed to agree how or whether to extend the agreement past this year. The CDM Watch surplus estimate is the equivalent of 38 percent of 34 billion tons of carbon dioxide, the world’s emissions from energy use in 2011, according to data from BP Plc (BP/) published in June.
“Countries may get to keep their AAUs, but won’t get to trade them,” Andrei Marcu, head of the Centre for European Policy Studies’ Carbon Market Forum in Brussels, said today in an interview from United Nations climate talks in Bangkok. “The market reaction will be relatively muted to a decision restricting use.”
Nations may make such a decision at talks planned for Doha, Qatar, starting in November, Marcu said. Under the plan to deal with the AAU surplus, carried-over units can only be used for compliance at the end of a second commitment period if emissions are greater than the cap for that period, which could be the period starting in 2013 and ending in 2017 or 2020, CDM Watch said in its statement, which was endorsed by the Centre for Clean Air Policy in Washington, which lobbies governments for climate protection.
Some developing nations are reluctant to allow nations who don’t sign up to a second set of Kyoto targets to use UN offset credits such as Certified Emission Reductions and Emission Reduction Units, Marcu said.
Australia, for instance, is seeking to restrict the use of UN offsets in its carbon market starting in 2015, under rules of its program. The country is proposing to trim the limit on CER use from 50 percent to 12.5 percent under new rules agreed as part of its deal to link its market with the EU market.
UN CERs for December dropped as much as 9.6 percent today to a record 2.45 euros ($3.09) a metric ton and were at 2.48 euros on London’s ICE Futures Europe exchange as of 1:54 p.m.
Supply of ERUs rose by a record in August, according to the UN’s Environment Programme. The volume of ERUs advanced by 51 million metric tons, or 29 percent, to 225 million tons last month, UNEP’s Risoe Centre in Roskilde, Denmark, said in a monthly report on its website. The first offsets were created in March 2009.
ERUs for December dropped 10 percent today to a record 2.20 euros.
It’s unlikely that the Doha talks will generate new demand needed to boost carbon prices, Marcu said.
“It was not really expected to,” he said. “There was the hope of some, including the EU, that things could move faster, or maybe conclude, in defining a new market mechanism.”
An additional market may add to supply, Marcu said. There may be some extra demand during the next few years, from developing as well as developed countries, he said.
“It would be a bonus if the new programs will be investible instruments in the short term, before 2015,” Marcu said. Investible means investors can be reasonably certain of making a return, he said.
The new markets will more likely allow emerging nations to comply with domestic targets, he said.
To contact the reporter on this story: Mathew Carr in London at email@example.com
To contact the editor responsible for this story: Lars Paulsson at firstname.lastname@example.org