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UN Climate Chief Favors 'Transformational' Projects as HFCs Ebb
2010-09-16 14:12:47.157 GMT
By Ewa Krukowska
Sept. 16 (Bloomberg) -- United Nations climate chief
Christiana Figueres vowed to expand the world's second-biggest
carbon market by favoring "transformational" energy and
transport projects over industrial-gas credits.
Investors are forecasting a reduction in emission credits
in developing countries as UN regulators tighten scrutiny of
projects that cut hydrofluorocarbons, an industrial gas known as
HFC and linked to almost a half the offsets created so far under
the UN-overseen Clean Development Mechanism.
"HFCs definitely played a role in the beginning of the
market," Figueres said in a telephone interview today from
Bonn. "The question is whether now, as we continue into a more
mature market, we shouldn't be looking for volume and scale in
other types of projects as well. And there I would put at the
top of my list those that have the potential to bring about
industrial and economic transformation."
The Bonn-based environmental group CDM Watch said in a June
14 report that some companies won "bogus credits" by
artificially boosting greenhouse-gas emissions on HFC projects.
The claim is rejected by polluters and investors including
Natsource LLC.
"The potential perverse incentive was recognized very
early in the development of the methodology and it was already
addressed in the first revision of the methodology," Figueres
said. "So what the board is doing now is it's looking at all
these safeguards and trying to determine whether that set is
enough or whether they need to introduce any other safeguards."
'Windfall Profits'
Credits generated in the CDM can be used in the European
Union's carbon cap-and-trade program, the world's largest. The
European trading system, started in 2005, caps emissions for
more than 12,000 factories and power stations, allowing them to
buy and sell credits and use UN offsets known as Certified
Emission Reductions in place of EU allowances.
The EU is working on a proposal to restrict the kinds of
offsets linked to industrial gases that can be used for
compliance in the EU. It said earlier this year that some HFC
projects were generating "significant windfall profits."
"Any country or group of countries is free to bilaterally
decide the characteristics of the demand that it will have in
its participation in the market," Figueres said. "However, I
would say that another way of looking at it is how we could
encourage certain other types of projects, for example those
that really have a true economic-transformational potential."
Transforming Projects
Projects linked to renewable energy, energy efficiency and
transportation "have the potential to bring about not just
volumes of tons reduced but also to transform the way we produce
and consume energy," she said.
UN CERs for December delivery jumped almost 12 percent in
the past month after CDM regulators said they are withholding
credits as they review requests for projects that cut HFC-23,
a gas whose warming effect is 11,700 times more powerful than
carbon dioxide.
EU climate chief Connie Hedegaard said today the 27-nation
bloc wants international action to control hydrofluorocarbons.
The EU said the Montreal Protocol, an international agreement to
protect the world's ozone layer, is the appropriate forum for
that and will complement the efforts undertaken through the UN
Framework Convention on Climate Change.
'Very Low Ebb'
The confidence of the carbon market in the CDM is at a
"very low ebb," the International Emissions Trading
Association said last month. Climate campaigners including CDM
Watch have criticized the UN market for lack of transparency in
decision-making and poor environmental integrity.
While the global CO2 market increased 6 percent to $144
billion last year, the value of investment in CDM projects
dropped 54 percent, according to World Bank data.
"It's not unusual for the market to react the way it is
reacting in an atmosphere of regulatory uncertainty," Figueres
said. "It's very understandable. The market also needs to
understand that this particular commodity is created through a
political agreement and hence the only value that the commodity
has comes from a successful political agreement."
Envoys worldwide are bracing for a new round of talks to
iron out a climate-protection framework after the Kyoto Protocol
expires in 2012. They failed at last year's meeting in
Copenhagen to reach a binding deal to cut greenhouse gases,
settling instead for a political accord calling for $100 billion
a year by 2020 in climate financing for poor nations. It also
includes a vow to stop global temperature increases at 2 degrees
Celsius (3.6 degrees Fahrenheit) from pre-industrial times.
'Undeniable Low'
They also recommended that the CDM improve its efficiency
and transparency, which Figueres said she is addressing with the
executive board of the CDM. Given "the potential that the CDM
has to go to scale, even those reforms probably don't go far
enough," she said.
"There's an undeniable low in the market right now," she
said. "However, let's not forget what is there," she said.
"We do have almost 2,400 projects in almost 70 countries and
these projects are up and running."
In the run up to the next summit in Cancun, Mexico,
negotiators are considering different types of overhaul to
expand the CMD, including a complementary new market and non-
market financial mechanisms, Figueres said.
One of the options is "the creation of a fund that would
help support investment in both mitigation and adaptation on
non-offset basis," and others include sectoral crediting, where
effort to limit emissions in a given industrial sector could
earn credits, Figueres said.
"The natural anomalies that we have seen again this year -
- floods in Pakistan or heat waves and fires in Russia -- are
very clear reminders to governments that time is running out,"
Figueres said. "While they may not be ready yet to agree to an
overarching agreement, it's very clear that they need to make
firm steps in that direction, and from what we're seeing of
preparations to Cancun, I'm confident that governments are aware
of this need."
For Related News and Information:
Emission market news: NI ENVMARKET <GO>
Today's top energy stories: ETOP <GO>
European power-markets home page: EPWR <GO>
--Editors: Mike Anderson, Alex Devine.
To contact the reporter on this story:
Ewa Krukowska in Brussels at +32-474-620-243 or
ekrukowska@bloomberg.net;
To contact the editor responsible for this story:
Stephen Voss at +44-20-7073-3520 or sev@bloomberg.net
