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UK may back Poland's position on use of UN credits in EU ETS

24 Apr 2012 19:20:47 | edcm

The UK will consider supporting Poland's proposal that UN-backed carbon credits called assigned amount units (AAUs) should be allowable for EU compliance.

The UK would support Poland's policy proposal - put to EU ministers last week - as a means of getting the country to sign up to tighter emissions cut targets, a spokesman for UK Energy Minister Ed Davey told ICIS.

"We want to move to 30% [emissions reduction by 2020], and we need to bring Poland with us," the spokesman said. "We would consider all options to get Poland on board, so we're certainly not saying no," he added.

The UK, like Poland, is among Europe's biggest holders of surplus AAUs.

As such, the UK - the second biggest emitting country in the EU - could be a major beneficiary of the proposal.

Supply

Coal-dependent Poland - long on AAUs but drastically short on EU allowances (EUAs) - is fiercely opposed to any increase in the EU's emissions reduction targets before or after 2020. It also opposes measures aimed at increasing carbon prices in the ETS, including a nascent Commission proposal to 'set aside' EUAs to tackle oversupply (see EDCM 19 April 2012 and 20 April 2012).

Poland's opposition threatens to scupper progress on both these issues at EU level.

The UK strongly supports the set-aside and is also in favour of raising the EU's 2020 emissions cut target from 20% to 30% as a means of boosting carbon prices and stimulating investment in cleaner energy and technology.

But allowing AAUs for EU compliance could run contrary to those aims because it would compound the problem of oversupply in the system, according to Matthew Gray, carbon analyst at London-based broker Jefferies Bache.

"In principle it's a great idea but it's not compatible with the EU ETS because it's adding more supply," Gray said.

AAUs

A separate battle is being waged among EU member states as to whether AAU surpluses should be bankable beyond 2012. The EU must adopt a unified position on the issue before the next round of UN climate talks at the end of this year.

The UK - like Poland - wants AAUs to be allowable after this year, as a "reward" for emissions cuts made since the Kyoto Protocol began (see EDCM 16 December 2011).

But other countries - including EU presidency holder Denmark - are fighting for 100% annulment of AAUs before the second commitment period of the Kyoto Protocol begins in January 2013. VF

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