Bloomberg News

UN Set to Delay Hot Air Debate as Surplus Harmless Until 2020

December 05, 2012

Nations are poised to sidestep the issue of excess Kyoto Protocol emission permits this year as climate negotiators say the banking of those excess rights until 2020 poses little threat to current pollution-reduction targets.

Unused greenhouse-gas emission permits from the first five- year period of the protocol won’t have buyers in the second phase starting next year, according to officials from the European Union and the United Nations. That may avoid the risk of trading “hot air,” as environmental lobbies including Greenpeace call the surplus, whose carry-over they say would undermine any future deal to reduce pollution.

The issue of transferring Assigned Amount Units into a later period is set to return to the spotlight within the next three years as climate envoys will need to decide whether or not to allow those unused permits to be eligible in a new post-2020 deal they want to iron out by 2015.

“It’s important to get the issue of surplus into the right proportion,” European Union Climate Commissioner Connie Hedegaard told reporters in Doha, where negotiators from more than 190 countries are holding a second week of talks. “We can spend oceans of time dealing with this issue, but the reality is nobody is going to use it in the second period of Kyoto.”

The AAUs, handed out to 38 developed nations under the 1997 protocol, represent a cap on those countries’ emissions in the five years through 2012, known as the first Kyoto commitment period. Countries that exceed their pollution limits may buy AAUs from those that enact deeper emission cuts to cover their discharges.

Economic Transformation

Supply of surplus AAUs comes mainly from Russia, Ukraine and eastern EU member states, where economic transformation and a slump in industrial output following the fall of communism led to a decline in emissions. The biggest source of demand is set to dry up as Japan said it is not planning to adopt a new target under the Kyoto treaty from 2013.

The 27-nation EU, which has an internal binding target to cut emissions by 20 percent in 2020 and has said it will match that target under the UN protocol, does not allow using AAUs for compliance in its emissions trading system. The cap-and-trade program covers almost half of the bloc’s carbon-dioxide emissions.

Other countries that are planning to extend their Kyoto targets, including Australia, Switzerland and Norway, also signaled they won’t accept surplus AAUs, Hedegaard said.

No Buyer

“It’s for the governments to decide how they want to solve that, but where I certainly agree with Connie Hedegaard is that it’s not going to be one of the issues that stops any agreement,” UNFCCC Executive Secretary Christiana Figueres said in an interview on Dec 2. “There’s no natural buyer for AAUs currently.”

Should the unused AAUs from all countries with targets under the first Kyoto period be allowed for use in a post-2020 regime, the surplus could risk inflating new caps by as much as 16.6 billion metric tons of carbon-dioxide equivalent, according to Bloomberg New Energy Finance estimates. That’s approximately equal to the total emissions from Russia, Australia and Japan from 2008 through 2012, according to BNEF.

Developing nations, which do not have binding emission goals under the Kyoto treaty and agreed at last year’s summit in Durban to adopt greenhouse-gas limits under the new deal, continue to press industrialized nations to tackle the glut.

“That’s something that is still unresolved but is very important because it has to do with the ambition and environmental integrity of the system,” Brazil’s chief negotiator Luiz Alberto Figueiredo said yesterday.

No Restrictions

Russia may have 8.9 billion tons of surplus AAUs, the biggest amount among countries with binding targets for the first commitment period, according to BNEF. The nation is not planning to join the second phase and opposes restrictions on carry-over of emission rights, Alexander Bedritsky, the head of Russia’s delegation in Doha, said today.

Ukraine ranks second with a surplus of 2.8 billion AAUs and Poland third with 0.9 billion by the end of this year, BNEF estimates showed. The deadline for compliance for the first Kyoto period expires in 2015.

“The surplus is a hot potato issue,” Bas Eickhout, a Dutch member of the Green group in the European Parliament, said in an interview in Doha. “I could live with it in Kyoto 2 but we will need a decision about post-2020, especially cancellation, as soon as possible.”

“Otherwise Russia, Ukraine and other countries will start reheating the issue in the context of the new deal,” he said.

Poland, which has led central and eastern EU member states in opposing restrictions on the banking of AAUs, said 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 clock is ticking and we don’t deal with important issues as we’re bogged down in philosophical discussions,” Poland’s Environment Minister Marcin Korolec said. “We all want a second commitment period of the Kyoto Protocol and let’s focus on that.”

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

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net


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