EMISSIONS CUTS IN A CANCUN CORNER

Europe Can Lift UN Carbon Market From Cancun Gridlock, Gazprom Says
Ewa Krukowska, December 6, 2010 (Bloomberg News)

"Europe needs to reinvigorate the world’s second-biggest emissions market as global climate talks to reduce greenhouse gases stall, the head of a carbon-trading unit of Russia’s OAO Gazprom said.

"United Nations carbon offsets for delivery in a year fell 4 percent last week amid signals that differences between 190 developing and industrial nations may preclude a binding treaty at the climate meeting that started Nov. 29 in Cancun, Mexico."

click to enlarge

"The $2.7 billion UN Clean Development Mechanism is an offspring of the 1997 Kyoto Protocol, which expires in 2012 unless governments decide to extend it. Carbon offsets generated by the CDM may be used for compliance in the European Union’s emissions-trading system, the world’s largest cap-and-trade program, also known as the EU ETS…The EU, whose carbon market was valued at $119 billion last year, could bolster investors’ confidence in the UN market by giving more ‘certainty and clarity’ on what types of offsets it will accept in the next trading period, which runs from 2013 through 2020 [the Gazprom executive] said…

"The ETS is a cornerstone of European efforts to tackle the heat waves, storms and floods that scientists have linked to climate change. The system, started in 2005 with a three-year trading period, is now in a second phase, which ends in 2012…Demand from European emitters has helped the CDM expand to more than 2,500 registered projects that generate credits to investors for cutting greenhouse gases in developing nations. The UN program has issued 476 million credits so far and expects projects in the pipeline to generate 2.7 billion offsets by the end of 2012…Gazprom Marketing & Trading’s carbon unit is involved in more than 100 UN emission-reduction projects globally and plans to add more…"

click to enlarge

"The European Commission, the EU regulator, proposed last week to stop recognizing as of 2013 UN credits related to projects that cut nitrous dioxide from adipic acid production and hydrofluorocarbon-23, an industrial gas whose warming potential is 11,700 times bigger than carbon dioxide. The EU said it is concerned the projects create excessive credits and undermine the market’s integrity…While HFC-23 projects represent less than 1 percent of all registered CDM projects, their credits account for more than half offsets issued so far…

"More than 11,000 operators in the European program can swap as many as 1.6 billion UN credits with EU permits on a one-for- one basis in the phase from 2008 through 2012. The bloc has signaled it wants the CDM to continue, but said the mechanism must be overhauled to improve its effectiveness and governance…"