Bloomberg News

EU to Consider UN Carbon Permit Limits Before Climate Summit

October 25, 2012

European Union ministers are set to consider today potential restrictions on excess United Nations emissions permits after 2012 to prepare for a climate summit in November, where envoys will strive to agree a global solution.

The bloc’s 27 nations will mull a political declaration that as of next year the domestic use and trading of the greenhouse-gas rights not used by developed countries in the first phase of the UN climate-protection Kyoto Protocol should be “strictly limited,” according to draft conclusions of the meeting obtained by Bloomberg News. The gathering of ministers, who adopt conclusions by unanimity, is taking place in Luxembourg.

At stake is the future of Assigned Amount Units equivalent to 3 billion metric tons of carbon dioxide that European countries won’t use in the 2008-2012 Kyoto period, according to Bloomberg New Energy Finance. That would correspond to 63 percent of the EU’s aggregate emissions in 2010. Together with excess AAUs held by non-EU countries, in particular Russia and Ukraine, the surplus may rise to 11.2 billion tons, approximately equal to Russia’s total emissions from 2008 through 2012 and threatening to undermine any future deal on climate change, BNEF said.

At the UN climate talks in Durban, South Africa, last year, the EU agreed to adopt binding caps on emissions under the second Kyoto commitment period from 2013. Negotiators have yet to decide how to tackle the carry-over of surplus rights at the next global summit due to start on Nov. 26 in Doha, Qatar.

Potential Limits

EU nations remain divided over potential limits and agreeing a common position before Doha is a challenge, according to an EU presidency official, who declined to be identified citing policy. Cyprus, which holds the rotating EU presidency until the end of this year, consulted member states before the ministerial meeting and will endeavor to ensure an ambitious outcome, the official said.

The surplus of AAUs, which are tradable credits allocated to countries that adopted binding emission-reduction commitments under Kyoto, has pitted wealthier western nations and the European Commission, the EU’s regulatory arm, against poorer former ex-communist members that have sought to retain their rights to sell excess units in the future.

Draft Conclusions

Some European nations “can live with the current text, subject to some adjustments” and another group of governments wants the strict limits to apply to carry-over of AAUs, according to a note accompanying the draft conclusions. “A couple of” countries want to tackle the issue together with rules on banking of UN carbon offsets generated under the Clean Development Mechanism and the Joint Implementation program and another group of nations wants to cancel the combined surplus of AAUs from the first and second Kyoto periods at the end of the second stage, the document showed.

Poland, which has led central and east European member states in opposing restrictions on the banking of AAUs, said today that the unused emission rights reflected deeper-than- required greenhouse gas reductions and funds from their sales are used for projects to cut pollution further. The government can’t agree to any curbs on its right to sell AAUs it was given for the 2008-2012 period, Environment Minister Marcin Korolec told reporters in Luxembourg, adding that he was confident the EU will today agree a “good mandate” for the summit in Doha.

“The mandate is 99 percent completed, we still need to discuss a couple of points including Assigned Amount Units,” he said. “The presidency is aware of what member states need and what language would be acceptable for everyone.”

‘Paper Credits’

Environmental lobbies including WWF have repeatedly called on the EU to prohibit the carry-over of surplus UN emission rights, which they said amounts to “hot air.”

“If these paper credits are not prohibited for use in the next period, and then subsequently canceled, they could significantly undermine real emissions reductions efforts,” WWF said in a statement yesterday. “Lack of agreement inside the EU has silenced the region in international negotiations, which cannot continue.”

EU ministers will also underline the “urgent need” to build on climate talks held earlier this year and to deliver on the pledge made by negotiations in Durban to hammer out by 2015 a global legally-binding agreement that would enter into force by 2020, according to the draft conclusions.

The bloc will reaffirm its conditional offer to increase its emissions-reduction target to 30 percent by 2020 from the current 20 percent if other developed nations commit themselves to comparable efforts and “most advanced developing countries contribute adequately,” the document showed.

The agenda of the meeting also includes information from the commission on its proposal to curb the oversupply in the EU carbon market by delaying auctions of some permits starting in 2013, a strategy known as backloading. While some member states may want to take floor after the information is presented there won’t be any full discussion or a decision on the draft measure today, according to the EU presidency official.

To contact the reporter on this story: Ewa Krukowska in Brussels at ekrukowska@bloomberg.net

To contact the editor responsible for this story: Lars Paulsson at lpaulsson@bloomberg.net


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