A global clean energy lobby group plans to offset the carbon emissions of every person attending this week’s climate conference in Doha to call attention to the dangerously low market value of carbon certificates.
The Project Developer (PD) Forum, a campaign group comprised of companies involved in designing, executing and certifying clean energy and carbon emission reduction projects, has pledged to donate 25,000 offset certificates – called Certified Emissions Reductions (CERs) – by voiding them under a voluntary cancellation programme.
Under a United Nations scheme called the clean development mechanism (CDM), low-carbon projects earn one CER for each tonne of carbon dioxide – or equivalent greenhouse gas – that the projects avoid emitting. CERs can then be sold to countries or companies that seek to offset their greenhouse gas emissions, either voluntarily or because of mandatory limits.
“The private sector no longer has any incentive from the CDM to channel investment into clean energy in developing countries, at a time when government funding is stretched worldwide,” said a PD Forum founder and group chief executive of Sindicatum Sustainable Resources Assaad Razzouk in a statement on Wednesday.
International investors want to help combat climate change, but they cannot unless policy makers and politicians revive the CDM by creating additional demand for its currency, he added.
The CDM is aimed at attracting private investment to clean energy projects in developing countries, and has thus far resulted in more than US$188 billion in investment in 80 countries, according to the PD Forum.
However, the market value of CERs is currently at an all-time low due to policy uncertainty – prompting investors to think twice about new investments in low-carbon projects, noted the PD Forum.
Much of the CDM investment is driven by targets set under the Kyoto Protocol, the only legally binding global agreement under which countries committed to reducing carbon emissions.
The initial phase of the Kyoto Protocol expires at the end of this year, and a new global agreement is not expected until 2020. The countries that have indicated they would sign on to a second phase of the Kyoto Protocol together generate only 10 to 12 per cent of global emissions.
In a letter to the United Nations Framework Convention on Climate Change (UNFCCC), the PD Forum said the donated CERs, which are enough to offset emissions for travel and accommodation for 10,000 delegates, would cost the group only $25,000 at current prices compared to $500,000 before policy uncertainty set in.
Chairman of the PD Forum Gareth Phillips said, “The fact that we are able to make this gesture shows how far the value of CERs has fallen. If we are to save the CDM, policymakers must act swiftly and decisively to increase the price of CERs.”
The PD Forum suggested a series of measures to revive the CDM, including:
- Developed countries setting more demanding emissions reduction targets for themselves and adjusting limitations on the use of CERs;
- The inclusion of industrialised developing countries in the purchase of CERs to offset their emissions;
- Government mandated schemes to increase the value of CERs; and
- Increased efforts from the CDM executive board to improve the environmental integrity of the CDM.
Executive director of carbon analytics firm RepuTex Hugh Grossman told Eco-Business in an e-mail interview that rock-bottom CER prices had some benefits for the Asia Pacific region.
“Depressed CER prices provide companies in new compliance markets such as Australia with access to cheap offsets, and therefore cheaper liabilities,” he said. “As a result, we’re seeing much stronger corporate support for the introduction of carbon price mechanisms in the first place,” he added.
Moreover, with less income coming from CDM projects, key markets such as China have shifted their focus to developing their own domestic markets, noted Mr Grossman.
“Those local policy developments provide the global carbon market with a huge upside that should play out over the next three to 10 years as demand grows and regional and global markets explore linkages like those between Australia and Europe,” he said.
“On the other hand, the huge oversupply of CERs is keeping prices so depressed that we’re seeing a slowdown in investment, and not a lot of real emissions reductions globally,” noted Mr Grossman.
