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India looking for compromise on MRV: That’s very positive!

From Point Carbon today. This is very positive for the outcome of Cancun:

Rich countries are expected to have their emission-reduction targets subject to international review.

But the US has said in order to ensure transparency, pledged domestic climate actions in developing countries should also be reviewed by an international body.

India, along with allies China and Brazil, had long opposed this condition, arguing that it violates their rights as independent nations.

But Ramesh has said in recent weeks that India would compromise on international MRV of its domestic actions in order to engage the US more actively in Cancun.

“The US has made it clear that it would not negotiate other issues such as on forestry and technology and adaptation unless we take up MRV,” Ramesh was quoted as saying in the Press Trust of India.

The Indian proposal is the first attempt in the UN negotiations to add detail to the general MRV requirements outlined in the Copenhagen accord, sources have said.

This is positive news because it potentially opens a door for the US and others to isolate China on an issue where it is holding up progress and that is what you need to get stuff agreed at Cancun. MRV agreements would help unlock progress towards financing, tech transfer, and even targets. Indeed the US has said as much as that it won’t accept anything short of a ‘balanced package’ – i.e.  no progress on financing, deforestation, technology transfer without progress on MRV and targets for developing countries (esp. China!). So India’s approach is a positive step forward towards a compromise on MRV that could unlock the door to these other issues and so maybe get a balanced package out of it after all. Very, very good.

Update: It seems I’m in very good intellectual company – Michael Levi agrees that isolating China is the best way for the US to push its goals at the Cancun summit.


Meth Panels

It is interesting to see that the controversy over the true emissions reductions generated by HFC23 projects in the Clean Development Mechanism – one of the Kyoto Protocols two emissions offset mechanisms – is now developing along 2 different tracks.

On the one hand, we have the EU which has recently released a draft proposal (just last week) to restrict ban emissions credits generated from these projects (along with adipic acid N2O projects) from being used for compliance by companies in the EU Emissions Trading Scheme. This would cut off a large share of the demand for such credits worldwide. The EU wants to ban the projects’ credits because they have such high returns relative to production costs of the underlying gas products that there is a strong incentive to game the system and product extra emissions just to reduce them again to gain credits.

For this reason also, the EU is seeking to get an agreement at the Cancun negotiations this fortnight to have these projects significantly curtailed for other countries under the CDM. An advanatage of doing that is that it will force emissions offset project developers to invest in other more environmentally beneficial projects, like energy efficiency in buildings and lighting in developing countries, etc.

At the same time however, the Executive Board of the CDM’s Methodological Panel (“Meth Panel”) has just released a report which is apparently  (according to Point Carbon, subs’n req’d) finding that the projects have generally not been exploited across the board, although in some cases yes. Personally, I’ve seen good evidence that N2O projects from adipic adic do lead to distorted incentives that create large amounts false emissions offsets and it seems that CDM Board has acknowledged this in calling for a change in methodologies for crediting for these projects (HFC and N2O) in the future. Presumeably they will await what the COP16 summit at Cancun advises them to do. Still, even if nothing came out of Cancun for the EB, it seems like they would be going down a path towards reviewing these methodologies worldwide anyway. My understanding is that they would have a mandate to do that, since they are the methodology guys. That said, this issue could become very political very fast. Let’s wait and see what happens in Cancun…

Update: According to Point Carbon, “Last week the 58th meeting of the executive board decided that the methodology for HFC 23 projects should be revised, but a new crediting methodology will only apply to projects after their current crediting period expires.”

But also…the EU Commission tells it like it is

Some more on restricting carbon offset creditss  from HFC23 and N2O gas projects from entering the EU ETS to be used by European companies  for compliance with EU emissions targets….

Specifically, this is from paragraph 7 of the introduction to the proposed decision on qualitative restrictions on carbon offset credits from HFC23 and N2O gas destruction created through the Kyoto Protocol’s Clean Development Mechanism being eligible for use in the EU Emissions Trading Scheme (released yesterday morning):

The use of international credits from projects involving trifluoromethane (HFC-23) and nitrous oxide (N2O) from adipic acid production (hereafter “industrial gas projects”) should be restricted. This is consistent with the October 2009 European Council conclusions urging developing countries, especially the more advanced, to take appropriate mitigation action, and Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions – Stepping up international climate finance: A European blueprint for the Copenhagen deal,”6 encouraging efforts by developing countries to invest in low-carbon technology outside the carbon market based on their respective capabilities. The vast majority of industrial gas projects are located in advanced developing countries with sufficient capabilities to finance those cheap reductions themselves, and the revenues gained from those projects in the past should suffice to finance them.

In other words, the EU is saying “China, you can pay for it yourself. We’ve given you enough cash now to do it, you’ve now got the capacity, so you’re on your own”. 

Fair call. And I like the toughness of the approach. I’m personally sick of the all the tooing and froing which is happening over climate negotiations. So I disagree with the International Emissions Trading Association (an industry lobby group) for example, who say that Connie Hedegaard should wait to bargain something for these restrictions. No, it’s just the right the thing to do, so we do it. Bang. Done. Next topic. The negotiations are already complicated enough. Assuming, the decision is taken like this, it just removes another complication and uncertainty for everyone. Well done, the commission, stop whinging IETA.

Qualified support

So this morning the EU Commission released its proposal for banning placing “qualitative restrictions” on certain types of CERs and ERUs.

I have just started reading the proposal and was struck by this phrase:

JI and CDM are also so-called pure offsetting mechanisms, whereby a tonne of greenhouse gas emissions reduced creates the right to emit a tonne of greenhouse gas elsewhere. While such systems generally help to reduce the cost of global abatement enabling action in countries where it is more cost-efficient, they do not assist in the reduction efforts necessary to progress towards the 2°C target.

 To me, that seems like a pretty hardline position to take on these mechanisms. There is actually a decent argument for saying that the value of these mechanisms is that they can deliver low carbon infrastructure for the medium to long run in developing countries (hence the CDM stands for “Clean Development Mechanism”!).

I’m a little worried that the Commission doesn’t appear to support these mechanisms – at least their potential – wholeheartedly.

Central Banks (huray!) for Carbon (booo…)

From Bloomberg.  

The U.K.’s proposed Green Investment Bank considered setting a long-term price for emission allowances by sharing some of the market risk, according to the global head of carbon markets at Bank of America Merrill Lynch.

“There was discussion on the advisory panel about the potential role of the Green Investment Bank in underwriting a long-term carbon price,” Abyd Karmali, managing director at the bank, told delegates at the Climate Finance 2010 conference today in London.

Prime Minister David Cameron’s administration is now considering a minimum price for CO2 emissions to underpin investment in cleaner energy when the cost of European Union permits falls below a certain level. That would raise costs for power from plants fired by coal and natural gas, which are cheaper and quicker to build than atomic reactors.

So more details emerge. Interesting that we appear to be moving closer to market intervention in the EU ETS to ensure appropriate investment levels. This is not at all unlike the money markets, which are intervened into by central banks to achieve appropriate levels of investment. I find it funny how people who have no qualms with their respective central bank doing its job in money markets suddenly freak and start shaking their head when you propose a carbon price collar enforced by a central carbon bank.

EUr-incompetent 2.0 



Oh bugger. The EU really is daft. According to Point Carbon (subs’n req’d), according to IETA’s Simone Ruiz, the much anticipated negotiations this month are not going to resolve didley.

…disagreements between member states, as well as the time it takes to pass EU law, means many are now resigned to a date of 2012 before the bloc decides to take on a deeper cut.

“There is no chance for a deal in 2011. The institutional process will take longer than that,” said Simone Ruiz of the International Emissions Trading Association (Ieta).

Christian Egenhofer, head of the energy and climate programme at the Centre for European Policy Studies, said that it could even be 2013 before the EU clarifies its 2020 emissions target.

Talks on a new EU budget for 2012 – which might drag on far longer than expected – could also help delay a decision because central and eastern European countries won’t agree a tougher cut until they get more in funding, Egenhofer said.

“These countries will want a lot more in structural funds to finance low carbon development,” he added.

So soft. And its largely a few whinging countries like Italy, Poland, Hungary etc that are blocking it up for everyone. And guess who the next 2 countries are to hold the EU presidency in 2011? Poland and Hungary. At least the Danes will take over in early 2012.

I just hope this failure to move things in Europe doesn’t screw with international negotiations too much. Of course, it does a bit, but I hope progress is made between the US and China and that can help us move forward. 

The only good side of this is that the decision on 2020 now looks like it will be bundled together with a decision about longer term targets to 2050. A report on that is supposed to come out early next year. Although the modelling sounds like it going to be intense!

But apart from that, this thing is so silly because we know that the EU IS going to move to -30% by 2020 or thereabout eventually, but by delaying they’re just upping the cost of getting there.