EcoSecurities Says Cancun Might Spur Tighter EU Carbon Target

Alexander Sarac, general counsel at JPMorgan Chase & Co.’s EcoSecurities unit, comments on the climate talks in Cancun, Mexico -- on national emissions targets and on United Nations offset trading. Dublin-based EcoSecurities invests in greenhouse-reduction projects.

The European Union has committed to cutting emissions 20 percent by 2020 from 1990 levels and has said it will boost its reduction target to 30 percent if other countries also strengthen their commitments. UN offsets can be used for compliance in the EU. Sarac commented by e-mail.

On country emission targets:

“National targets and national schemes like the EU emissions trading system are setting the future demand and it is not just the political signals here that create the demand for offset credits. From a market perspective it will be interesting to observe the EU reaction to this outcome, in particular if this will induce activities to address the 30 percent question but also what will be the impact on other regional schemes such as Australia and U.S. China seems to be including carbon markets as policy solutions in its next five-year plan, which will also create market opportunities.”

On the Cancun text:

“Including a reference to markets and the market-based mechanisms in the convention text -- which is also endorsed by the U.S. -- and reiterating the importance of markets in Kyoto Protocol sends a positive signal that global policy makers understand that these mechanisms will play an important role in solving the climate challenge. Since Bolivia had tried to specifically block market approaches it is clear that the political will necessary to include these references must have been substantial.”

On investments:

“The Clean Development Mechanism text includes short-term improvements that address some of the governance and technical issues that historically lead to delays in the registration process. Equally standardized baselines approaches may over time allow for more scale and more predictable timelines for CDM projects. Combined with positive long-term signals this creates trust that there is a growing understanding of international policy makers that market participants will need a level of certainty and predictability in order to continue to invest in climate-finance schemes, whether old or new.”

On standardized baselines:

“There are already a number of methodologies that include a level of standardizations and many companies have projects and methodologies in mind and it shouldn’t be too long to see the first methodologies submitted. Currently it takes up to a year to have a methodology approved but the text also includes a mandate to shorten these timelines so hopefully we see a number of projects developed and registered before December 2012 -- showing that this was the right approach to allow for more scale in the CDM.”

Projects seeking credits for cutting emissions must use approved methodologies, according to the rules of the CDM program.

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