Unlimited CER use would ‘water down’ Paris agreement

  • Market: Emissions
  • 11/07/19

Countries must set limits on the use of certified emissions reduction (CER) credits for compliance with the UN Paris climate agreement, or risk watering down the treaty's ability to reduce global emissions, former UN climate negotiator Kelley Kizzier said.

Negotiators are under pressure to agree rules on article 6 of the Paris agreement this year. Article 6 will establish rules to allow countries to trade emissions reductions. This could provide the foundations for a global carbon market.

One of the sticking points in the negotiations is whether countries will be allowed to use CER credits from projects set up under the Kyoto protocol's clean development mechanism (CDM) to meet their Paris agreement targets.

Countries should ensure that the large supply of CERs already in the market cannot all be used to meet Paris agreement targets, Kizzier — who is Environmental Defense Fund associate vice-president of international climate change — told Argus. "If all those units from the CDM get used in the Paris agreement, it does the climate a massive disservice," she said.

Kizzier is a long-time climate negotiator who co-chaired the UN talks on article 6 in 2015-18.

Environmental groups estimate that there are around 800mn CERs in the market, but that this supply could swell to 4.7bn if CDM projects, and their credits, are carried over to the Paris agreement.

"There are a lot of CERs in the world not being used. If they are all carried forward, it not only waters down the impact of the Paris agreement, but potentially the impact of Corsia too," Kizzier said — referring to the UN environment agency's Corsia scheme to offset global aviation emissions.

The fear is that countries could buy large quantities of cheap credits to meet their targets under Corsia and the Paris agreement, instead of investing in new projects to cut emissions.

UN negotiators are considering ways to avoid this. One option would be to set a restriction on the "vintage" of CER credits that can be used to comply with the Paris agreement, by banning the use of credits that were issued before 2020. The first CDM projects were registered in 2001, meaning that some CERs represent emissions cuts that were achieved nearly two decades ago.

Most large carbon markets have restricted the use of CER credits for compliance. As a result, CER demand is very low and the market is heavily oversupplied. A CER credit currently trades for around €0.20/t of CO2 equivalent.

The deadline for negotiators to finish article 6 is the UN climate summit (Cop 25) in Santiago, Chile, in December.


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