LONDON/BONN The United Nations risks creating huge auditing problems and overstating environmental benefits by promoting the cancellation of carbon credits as a way of tackling climate change, the European Union said on Thursday.
In a presentation at U.N. climate negotiations in Bonn, the U.N. said the cancellation of credits under its Clean Development Mechanism (CDM) could cheaply contribute almost 40 percent of the gap between national emission reduction pledges and the level scientists say is needed to stave off catastrophic climate change by 2020.
This was in response to a call agreed by all countries last year to promote the voluntary cancellation of CDM credits as a way of closing the gap.
The EU welcomed the move in principle but said more work was needed to ensure cancellations weren't covering emission reductions already accounted for under and carried out under current national pledges.
"We would really encourage that before the CDM and the U.N. secretariat begins encouraging this kind of investment ... that more technical analysis is done on how you are going to demonstrate that the emission reductions reported are additional," said Jakob Werksman of the European Commission.
"If you (the U.N.) are pitching this as the best way of closing the ambition gap you really do have to demonstrate that no double counting of that kind is occurring."
The CDM was established by the U.N.'s Kyoto Protocol and has helped to channel almost $400 billion to carbon-cutting projects in developing countries by allowing investors to earn credits they can sell for use in helping meet emission targets abroad.
But investment under the scheme has dried up as nations wrangle over setting new emission goals under a global U.N. deal to tackle climate change.
Prices of the credits have crashed to less than 1 euro a tonne from over 20 euros five years ago, making many projects unprofitable.
The mechanism could be revived if countries and companies buy and cancel CDM credits to help beef up their emission reduction efforts, Hugh Sealy, chair of the U.N.-appointed panel responsible for the CDM said during the presentation.
He said projects registered under the scheme are capable of cutting almost 7.8 billion tonnes of carbon dioxide (CO2) by 2020, therefore generating 7.8 billion carbon credits called Certified Emission Reductions.
"If the current price remains around 1 euro (for CERs) we could close 40 percent of the gap for less than 8 billion euros," Sealy added.
He referred to a range of scientific papers had found the gap between emission cuts governments had pledged and the reductions that scientists estimate are needed to 2020 to avoid the potentially devastating effects of global warming to be at least 20 billion tonnes of CO2.
Following the EU's raising of the concerns, Sealy said further work would be needed on the proposal.
The EU has bought most of the 2.2 billion U.N. credits issued to date to help meet its legally binding target under Kyoto, which covers countries responsible for less than 15 percent of global emissions.
But it fears double counting could occur if the units are canceled by countries not bound by the pact if the emission reductions already form part of a voluntary pledge not subject to Kyoto's strict accounting rules.
Brazil, which has a voluntary target to reduce its greenhouse gas emissions up to 39 percent by 2020, has already canceled around 40,000 CDM credits, according to Jose Miguez, a delegate for the country speaking at the presentation.
(Reporting by Susanna Twidale in London and Ben Garside in Bonn, editing by William Hardy and David Evans)