London, 15 August (Argus) — Denmark may stop using international offset credits to meet its domestically-imposed emissions reduction target, even though it will need to implement new measures in order to achieve the target, Danish energy and climate minister Martin Lidegaard told Argus today.
Despite the cost and difficulty of achieving a 40pc emissions reduction target, compared with 1990 levels, by 2020, Denmark will seek to reduce emissions entirely through domestic measures and without international offsets, Lidegaard said. This will allow Denmark to lay the ground for more ambitious reduction targets in the following decades, while also ensuring that investment is earmarked for the country's own economy. "We want to invest in reforms, job creation and infrastructure in Denmark," Lidegaard said.
Although the country has committed to continuing to finance emissions reduction projects in the least developed countries (LDCs), the move could be bearish for the markets for offsets under the UN's Clean Development Mechanism (CDM) and Joint Implementation (JI) scheme. Prices for certified emission reduction (CER) credits under the CDM on the benchmark contract have fallen to €0.60/t CO2 equivalent (CO2e), compared with prices as high as €14/t CO2e in May 2011, as sovereign demand in EU emissions trading scheme (ETS) countries has been unable to meet the scheme's over-supply. Austria has already committed to not using international offsets to meet its 2020 commitment to reduce non-EU ETS sector emissions by 16pc compared with 2005 levels. Denmark's move could further suppress demand. The country submitted 2.7mn CERs and 5.2mn ERUs for compliance purposes under the EU ETS in 2012.
An inter-ministerial panel released a catalogue of potential measures on 13 August, within the agriculture, transport, waste and buildings sectors, that could be used to reach the 40pc target. Existing legislative measures in Denmark will allow the country to reduce its greenhouse gas emissions by 34pc, compared with 1990 levels, by 2020.
The measures, which include a fuel tax, improved infrastructure for electrical vehicles, energy efficiency in buildings and wetlands restoration, must go through stakeholder and parliamentary consultations in the coming year before implementation. But many of the measures are unlikely to gain sufficient public or political support to be implemented, and some measures may not be adopted until as late as 2020, the energy and climate change ministry said. Emissions reductions in the transport sector will be particularly hard to achieve because of the lack of existing technical solutions. "We can raise taxes on transport but the country will be poorer," the ministry said.
Denmark has also invited the European Commission to analyse the advantages and disadvantages of including the agriculture and transport sectors in the EU ETS in the future, Lidegaard said.
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