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Environment Council fails to seal green AAU surplus deal

26 Oct 2012 18:17:42 | edcm

Time is running out for EU member states to curb surplus UN carbon allowances - which environmentalists say must be cancelled if the new Kyoto Protocol is to be effective - as the bloc's Environment Council yet again failed to come to a unified position.

Twenty-seven Environment Ministers met in Luxembourg on Thursday to address questions ahead of the international climate negotiations in Doha at the end of next month.

Both analysts and environmental groups have long warned that if no restrictions are placed on the carryover of assigned amount unit (AAU) surpluses, the emissions reduction pledges of developed countries would not lead to any actual emissions reductions.

A statement released by the Council late on Thursday dashed hopes that the EU could adopt a strong environmental position on AAUs, by confirming that a common position had remained beyond reach.

Instead, it said that the Council "reiterates" that the AAU surplus needs to be addressed to safeguard the Protocol's environmental integrity. It also "emphasises" the urgent need to resolve the issue given that the second commitment period kicks off on 1 January 2013; and "proposes" that a solution on the carry-over of the surplus AAUs to the second commitment period "maintains an ambitious level of environmental integrity".

Earlier this week, green groups including CDM Watch and WWF had called on EU Environment Ministers to address this problem to protect future climate deals (see EDCM 25 October 2012).

But Ireland, the incoming holder of the rotating EU presidency, has indicated that it is sympathetic to the views of countries with large AAU surpluses, such as a coalition of central and eastern European member states, that want to carry them to the next Kyoto commitment period.

Counting the surplus cost

CDM Watch has estimated the first commitment period surplus to amount to 13bn tonnes of CO2, while WWF estimated the AAU surplus in central and eastern Europe to stand at 4bn allowances.

If left uncapped, Europe and other developed countries are expected to accumulate 17bn tonnes of surplus emission allowances, which CDM Watch labelled "over a thousand times higher than the estimated demand" by 2020 despite a "business-as-usual" scenario.

Failure to curb the surplus not only threatens the impact of the second commitment period, but also the strength of the EU's international negotiating position, the green groups suggested.

"Given this situation, it is difficult to see how the EU and other rich countries could convince developing countries to commit to meaningful emission cuts under a new climate deal" Anja Kollmuss, Carbon Market Expert at CDM Watch, said.

Developing country stance

Earlier this year, the G-77 group of countries and China presented a proposal to limit use of these surpluses.

"The G-77 proposal meets all requirements of the March 2011 EU Council conclusions, where conditions for a second commitment period under the Kyoto Protocol were laid out," the CDM Watch statement said. "Although consensus for this important decision is desired, the Council conclusions can still be adopted by qualified majority. Consensus among all 27 delegations is not required," Eva Filzmoser from CDM Watch added.

Last year, African countries also proposed to limit AAU banking for the first commitment period to 1% of the total with the option to request additional AAUs from the surplus for compliance purposes. Under the proposal, countries that sold AAUs would be obliged to spend 50% of the revenue to cut emissions at home, and transfer the remaining 50% to an international adaptation fund within one year of the sale.

"The EU will be under international pressure to agree internally in Doha to be able to act externally - there are now good proposals on the table that limit the damage AAUs can cause, so Poland and others will likely face more difficulty holding up the process, as the principle of a global approach has been agreed already," Sam van den Plas, policy officer of WWF's climate change and energy programme, said on Friday.

There are now only nine weeks of the first commitment period left and less than a month to go until the climate summit. MLDB

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