Dear friends,

We are proud to present this first edition of the Carbon Market Watch Newsletter. Carbon Market Watch will continue the activities of CDM Watch and expand further to other carbon market initiatives. In that spirit, we look forward to new endeavors. There is plenty to watch on the horizon!

Eyes are turning towards Qatar, where close to 200 countries will negotiate future climate deals at COP-18. It is unclear if countries will agree to a second commitment period under the Kyoto Protocol.   The decision will largely dependent on how to deal with the gigantic 13 billion surplus of Kyoto emission permits. Also decisions on the future of the CDM, JI and new market mechanisms are expected.

Before the start of COP-18, the CDM Executive Board will meet for the 70th time. After a series of astonishingly bad decisions at their last meeting (including reinstating new coal power plants in the CDM) Carbon Market Watch calls on Board members to roll up their sleeves and make bold decisions to cut down the number of fake offset credits.

Evidence is increasing that the CDM is riddled with non-additional projects. According to new research commissioned by the high-level panel on the CDM policy dialogue, CDM offset credits from non-additional and over-credited projects could add up to 3.6 billion tonnes of CO₂ globally by 2020 to the atmosphere. Countries have taken action: South Korea has announced that it not to allow CDM offset credits until 2020. New Zealand recently announced that amongst others, it will ban offset credits from large hydro projects. (Unfortunately this good news is severely dampened by NZ announcing that they will not join a second commitment period under the Kyoto protocol.)

The EU has yet to take action.  Despite figures in the “State of the European carbon market” published this week that show that international offsets account for at least ¾ of the overall surplus in the EU ETS, no measures have been announced yet. Clearly, action is needed!

Giving in to international pressure, the EU has unfortunately decided this week to suspend the inclusion of aviation into the EU ETS to encourage the UN’s International Civil Aviation Organisation (ICAO) Council to deliver a global mechanism by September 2013. A guest article explains what the chances are for such an ICAO decision and what role global offsetting might play.

The Carbon Market Watch Team

Table of contents:

1. Farewell CDM Watch – Welcome Carbon Market Watch!
2. CDM Executive Board – Bad timing for wrong-headed decisions
3. Doha – Negotiating the Future
4. The Phantom Menace: How to tackle the 13 billion Kyoto surplus
5. The real impact of international offsets on the EU ETS over-supply
6. International Aviation and Global Offsetting
7. Who pays? Lessons from CDM forestry projects for REDD