Bloomberg News

UN Carbon Credits May Be Used in 2020 Global Market, Brazil Says

December 04, 2012

United Nations emission credits may be acceptable under the so-called Durban Platform carbon market starting about 2020, according to Luiz Alberto Figueiredo, the lead climate envoy for Brazil.

UN envoys at the negotiations are this week seeking to begin work on a global carbon market that will include all nations by the end of the decade, Figueiredo said. That process, known as the Durban Platform, was started with a decision reached last year in Durban, South Africa. Countries also want to extend the Kyoto Protocol, whose targets for some rich nations run through the end of this year.

“I personally have no doubt that the Clean Development Mechanism is the unit that will prevail in the long run,” Figueiredo said yesterday at UN-sponsored climate talks in Doha. “It is very sound in terms of verification of emission reductions.”

Certified Emission Reduction credits for 2013 from the CDM plunged to a record low yesterday as December European Union allowances reached all-time lows.

“It’s in our best interest to keep it and strengthen it,” Figueiredo told reporters. “On the negotiations on the Durban Platform, there’s no doubt about the fact that a market mechanism is part of the negotiations.”

CERs for December 2013 dropped as much as 16 percent yesterday to a record 61 euro cents ($0.80) a metric ton on the ICE Futures Europe exchange in London. They closed at 64 cents, and CERs for this month dropped as much as 11 percent to a record 57 cents yesterday.

Emission Credit Funds

The International Emissions Trading Association, a Geneva- based lobby group, is exploring options to help create a fund or funds that may be willing to buy credits and support the market, Dirk Forrister, president of the group, said Dec. 3 at the talks.

A fund might buy the credits for a fixed period of time and may hold them for the future or cancel them, cutting supply, according to Richard Folland, a climate adviser for JPMorgan Chase & Co.

Governments, companies or industries such as aviation may invest, Folland said Dec. 3 at a seminar at the talks.

Countries and private companies will be more willing to invest in the credits if envoys demonstrate there will be demand for many years, Takashi Hongo, a senior fellow at the Mitsui Global Strategic Studies Institute in Tokyo, said Dec. 3 in an interview in Doha. All credits should remain usable indefinitely, which would improve investor sentiment, he said.

‘Message to Market’

“The important thing is the message to the market,” he said. The value of 2012 CER credits has plunged 88 percent in the past year.

The rest of the world including airlines should boost use of offset credits because European demand won’t be enough to reverse record-low prices, a European Commission official said at the talks.

UN envoys shouldn’t limit offset use to nations with targets under the second period of Kyoto Protocol starting next year, Jos Delbeke, director general of climate action unit of commission, said yesterday at the talks.

Limiting access would amount to a “missed opportunity,” he said.

“I doubt European demand will be enough to arrest the problem,” Delbeke said.

To contact the reporter on this story: Mathew Carr in London at m.carr@bloomberg.net

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


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