U.N. CO2 panel to review, not halt, coal plant support

LONDON Fri Jul 15, 2011 9:49am EDT

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LONDON (Reuters) - A U.N. panel that oversees a $1.5 billion trade in carbon offsets has rejected advice to suspend support for new coal plants, proposing a review instead, its chairman Martin Hession said on Friday.

The panel, called the executive board, manages a trade in carbon offsets where rich countries pay for developing country projects to cut greenhouse gas emissions on their behalf.

A related U.N. body had alerted the board to possible over-compensation of new coal plants, which are paid for emissions cuts below a baseline set by the latest coal power technologies.

A week-long meeting of the board in Morocco ends later on Friday and will recommend a review of such support, Hession told Reuters.

"The executive board thinks that the problem may not be as big as advised," he said.

"The risk doesn't justify suspension. We looked at their assumptions and found they were worst-case," he added, referring to advice from the methodology panel which reviews what types of technology should qualify for support.

Most recently, the board approved in India a massive, 4 gigawatt coal plant owned by Reliance Power.

The clean development mechanism (CDM) operates under a complex rulebook where the board is only meant to approve projects that would not have been feasible without CDM support, which has left some room for interpretation and dispute.

Critics say that some projects from dams through to wind farms and super-efficient coal plants are profitable on their own and so should not qualify.

Hession said that carbon cuts from coal-fired power plants were only counted below a baseline set by the 15 percent most efficient plants in the local area.

The panel would also approve on Friday a new approach to help the world's poorest countries, Hession added.

So far the CDM has rewarded the world's most rapidly growing and polluting economies such as India and China, because they have the most scope for making emissions cuts.

The panel would approve a "suppressed demand" approach for least developed countries, meaning that emissions cuts would be measured against hypothetical levels assuming people were enjoying a basic standard of living.

"It's facilitating access in under-developed regions," he said, adding that it would most likely apply to household projects such as installing solar panels to replace high-carbon kerosene for lighting.

(Reporting by Gerard Wynn; Editing by Anthony Barker)

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