Panel Extends UN Carbon Market Until Glasgow Climate Talks

–Transition from Kyoto to Paris set (sort of)

By Mathew Carr

Dec. 15, 2020 — LONDON: The board overseeing the main UN carbon market agreed to extend the program into next year, at least temporarily, creating a transition into the era of the Paris climate deal.

The move gives investors in carbon credits created in developing countries under the Kyoto Protocol a chance to get a return on their investment, which is currently threatened by low demand and near-zero prices.

The panel, the executive board of the Clean Development Mechanism, will continue registering emission-cutting projects and issuing credits on a provisional basis for the 10 months until the November talks in Glasgow, a decision needed because of delays blamed on the coronavirus pandemic.

The decision will boost risks for project investors. They must “accept the risk that it may not be possible for certified emission
reductions (CERs) to be issued for the emission reductions achieved,” according to a report of the board meeting that ended Monday (see below for link).

In euros per metric ton. UN CER futures matched on Monday their highest close for more than two years — still only 30 euro cents a ton, about 1% the value of EU carbon allowances, which reached a record high of more than 31 euros a ton

Emitters in the EU carbon market, the world’s biggest by traded value, can use CERs for a portion of their compliance in 2020.

The Paris climate deal establishes new carbon markets under its Article 6, which could encompass elements of the CDM.

If rich nations expect to be able to use Article 6.2 of Paris to cut the cost (and cut the risk) of meeting their Paris emission-reduction targets for 2030 and beyond, UN envoys will need to also agree rules for a carbon market under Article 6.4 of Paris, according to one emerging-nation envoy familiar with global climate negotiations.

For a report of the CDM board meeting:

Risk of Gap in UN Carbon Markets Persists After Panel Delays Key Decisions

Oct. 6, 2020 — London: The panel overseeing the main United Nations carbon market delayed key decisions that would have overcome a potential gap in the market’s operation at the end of the year.

The Clean Development Mechanism Executive Board considered the implications of the postponement of UN climate talks to November next year because of the coronavirus pandemic, it said in a report detailing the outcome of meetings that took place during the past two weeks in Bonn and virtually.

The panel would further consider at a meeting scheduled through Dec. 14 whether emission credits generated “on or after” Jan. 1 can be approved in the first 10 months of next year, it said.

The market has suffered weak demand for years and now the one-year delay in the global climate talks in Glasgow to November 2021 is causing further complications for the regulators. The impact of the virus means the market may have to halt at least some of its operations. Investors and project developers face rising uncertainty on what will happen to their projects for those months.

The panel did provide some certainty that pre-2021 emission reductions could still be processed.

Audit firms handling requests from emission-reduction projects in the market will continue as “provisionally designated,” until November next year, when further guidance may be provided by the Glasgow talks, it said. Requirements by regulators of the firms “would remain the same.”

“The submission and processing of requests for issuance related to emission reductions or removals achieved before or on 31 December 2020 will continue in accordance with the current CDM requirements.”

See link to meeting report:

See link to earlier story: