Growing doubts about future carbon trades
Further out, however, the CDM's regulators and boosters will have to navigate a growing crisis of confidence in the system as a whole.
Critics contend that the concept of "additionality" -- a core tenet of international carbon offsetting -- is becoming diluted as the board seeks to please frustrated governments and private investors. Indeed, whereas earlier CDM officials earlier defined additionality to mean an offsetting scheme wouldn't be financially viable without the CDM, these days, the same office argues that developers merely have to have the hope of earning CERs in mind in order to be awarded credits.
But the biggest lingering threat to the Clean Development Mechanism is beyond the board's control.
More companies are becoming convinced that no new international climate change treaty will be achieved, threatening the very existence of the CDM.
Last week, the U.N. Framework Convention on Climate Change issued contingency plans that nations could consider should a "gap" exist between the Kyoto Protocol's expiration on Dec. 31, 2012, and the start of a new regime. The paper concludes that under a strict interpretation of the Kyoto Protocol, no new CDM projects could legally be registered after 2012 without a new agreement to pick up the slack on Jan. 1, 2013. New CER issuance would be out of the question, as well, the UNFCCC says.
The uncertainty is hitting the United Nations' international carbon trading scheme hard. Fewer and fewer projects are requesting registration, and new CER issuance is drying up.
And though many speculate that the European Union will continue to be a home for CDM credits out to 2020, that may not actually require the existence of much of the apparatus in its Bonn headquarters. Analysts at Bloomberg New Energy Finance say that existing CER volume is more than enough to meet future E.U. demand, and the company predicts weaker CER prices in the future, unless a halt on future HFC-23-linked credits crimps supply.
Reprinted from Climatewire with permission from Environment & Energy Publishing, LLC. www.eenews.net, 202-628-6500