Carbon Market Watch

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Assigned Amount Units (AAU) Surplus

 

The Kyoto Protocol to the United Nations Framework Convention on Climate Change (UNFCCC) established a cap-and-trade system that imposes national caps on the greenhouse gas emissions of developed countries that have ratified the Protocol (called Annex B countries). Each participating country is assigned an emissions target and the corresponding number of allowances – called Assigned Amount Units, or AAUs.

 

AAUs are tradable emission permits under the Kyoto Protocol. One AAU allows a country to emit 1 metric tonne of CO2e. Kyoto Protocol rules allow countries to carry over all unused AAUs into the next commitment period. The other units that can be used for compliance under the Kyoto Protocol are offset credits generated under the Clean Development Mechanism (CDM), ERUs from Joint Implementation (JI) and RMUs from land use, land-use change and forestry activities.

The AAU surplus from CP1 is estimated to be over 13 billion tonnes of CO2e. Russia (5.8), Ukraine (2.6) and Poland (0.8) are the largest surplus holders, followed by Romania (0.7), the UK (0.5) and Germany (0.5) (Point Carbon, 2012). Many of the former Economies in Transition had weak reduction targets under CP1. At the time when their targets were defined their emissions were already well below the level that they committed to CP1. That meant that they received millions of excess AAUs. Meanwhile, many western European countries have seen their emissions fall dramatically since 1990 and particularly in the last few years due to the economic crisis.

If the 13 billion were used fully, countries with a CP2 reduction target would not need to engage in any further mitigation action until well beyond 2020 (assuming Kyoto style rules would continue) and would still meet their targets (for more on this the analysis by Climate Analytics, 2012).

At COP 18 in Doha at the end of 2012, Parties decided how to deal with the large surplus of Assigned Amount Units (AAUs)  from the first Kyoto commitment period (CP1) and how to prevent the accumulation of new surplus in the second commitment period (CP2) of the Kyoto Protocol.

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