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Editorial for Newsletter Issue #2, March 2013

Dear Friends,

Carbon Market Watch is happy to introduce you to the new online version of our newsletter.

In this issue, we look at a real hot issue in Doha at COP-18 regarding how countries would deal with the 13 billion left over emission permits from the first Kyoto commitment period. Although we did not get full cancellation of the surplus, the Doha outcome was a success. Parties decided that only a part of the huge amount of ‘hot air’ can be used until 2020. A clever amendment made to the Kyoto Protocol will also avoid the build-up of new surplus.

On a less positive note, we also look at how Doha left a bitter taste for those hoping for decisions that address the severe quality concerns the CDM is suffering from. Most large scale power supply CDM projects are business-as-usual and therefore undermine the very climate goals the CDM is supposed to achieve. Nevertheless these projects are projected to generate more than half of all credits by 2020. With so many millions of credits from such projects they are set to become the new “HFC-23 challenge” of the future.

Also outlined in this newsletter is how the UNFCCC review of the CDM modalities and procedures, which will take place this year, could be a chance to address some of the quality issues. Parties will decide at COP-19 in Poland what types of reforms the CDM should undergo.

We also discuss how Joint Implementation (JI), the CDM’s little brother, has grown up very quickly it seems and has turned into a rather destructive adolescent. Although there are 10 times fewer projects in the JI than in the CDM, over the last year millions of JI credits have been issued with very questionable environmental integrity. JI now accounts for one third of all Kyoto carbon credits issued.

The market for CDM and JI has all but collapsed with prices being well below EUR 0.5. At such prices it is impossible to implement and operate additional projects. Nevertheless, both CDM and JI continue to generate millions of credits with very questionable environmental integrity.

Despite severely over-supplied carbon markets and lacking mitigation commitments, countries decided at COP-18 in Doha to establish work programmes to implement New Market Mechanisms (NMM) and a Framework for Various Approaches (FVA) to link regional carbon markets. Yet the scope, aim and future of both the NMM and the FVA remain unclear and dubious.

Meanwhile, the European Emissions Trading Scheme (EU-ETS) has experienced severe price decay because of an oversupply of allowances and credits on the market. As such, European policy makers have been trying to address the oversupply of around 2 billion. Last week, the Environment Committee in the European Parliament voted in favour of the European Commission’s ‘back-loading’ plan to temporarily set-aside 900 million emission allowances from the carbon market. While this is a temporary measure in the right direction, deep structural measures are needed if the EU-ETS is to function as a policy instrument that supports long term de-carbonisation.

We also take a look at how the European Parliament voted in favor of the so called “stop the clock” proposal that puts pressure on the International Civil Aviation Organization (ICAO) to advance progress for a global deal to address emissions from international aviation.

Finally, we provide an overview about developments around forestry emissions and how these could be tackled.

Happy reading!

 

You can view the Contents of this Newsletter here.

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