CDM-EB: UN set to launch voluntary CER cancellation platform in September

Published 23:53 on July 28, 2015  /  Last updated at 16:55 on October 22, 2015  /  Africa, Americas, International, Kyoto Mechanisms, South & Central, Voluntary Market  /  No Comments

The CDM’s executive board last week approved the September launch of an online platform to voluntarily cancel CERs, hoping the service will provide a new source of demand and help mop up the oversupply of credits currently overshadowing the scheme.

The CDM’s executive board last week approved the September launch of an online platform to voluntarily cancel CERs, hoping the service will provide a new source of demand and help mop up the oversupply of credits currently overshadowing the scheme.

The platform, to be operated by the UNFCCC, will make it easier for consumers and small businesses to purchase and cancel CERs, allowing them to buy directly from the project owners that have credits to offer rather than brokers.

Brokers have been the main sellers of CERs since the inception of the CDM, but most don’t sell small quantities to individuals and they typically require any corporate clients to undergo rigorous background checks.

The online cancellation facility, which will be integrated into the UN’s CDM Registry, will provide holders of CERs from the first compliance period of the Kyoto Protocol a new opportunity to sell their inventories after the EU, previously the largest market for these types of credits, barred the units from its ETS.

Project owners will be able to set their own prices and buyers will be able to peruse the catalogue of credits, for example searching by project type or country.

The UN hopes the platform’s ease of use, as well as zero commission fees, will stimulate demand for CERs.

In addition, to increase transparency regarding the thousands of projects registered under the scheme, the CDM-EB agreed last week to have built a database of factual information about the installations. It wants to attract potential investors to the projects that lack financing.

VOLUNTARY CONVERSIONS

Following a sharp drop in prices over the past five years due to evaporating demand, the CDM’s executive is endeavouring to reshape and refocus the scheme to help it become part of countries’ future emissions cutting plans as they meet in Paris later this year to agree a new global climate pact.

But some project owners aren’t waiting around for countries to rediscover an appetite for CERs, and are instead converting them into voluntary credits, known as VERs.

According to analysts at Thomson Reuters Point Carbon, some 250,000 CERs have been cancelled from the CDM Registry and converted into Voluntary Carbon Units (VCUs), the credits sanctioned under the Verified Carbon Standard (VCS), one of the main certifiers in the voluntary market.

The analysts, citing VCS data, added that more than 610,000 CERs have been cancelled across all emissions registries worldwide and converted into VCUs.

However, they were unconvinced that the trend would eat into the CER glut.

“Due to its relatively small size, we do not expect the voluntary market to provide substantial support for the CERs oversupply,” the analysts said in a report on Tuesday.

OTHER BUSINESS

Separately, the CDM-EB at its meeting last week asked the UNFCCC, the UN’s climate change secretariat, to look at ways of broadening the applicability of the scheme’s seven biofuel methodologies, which have led to just a handful of projects. The board is also targeting cutting red tape for project owners to pave the way for more biofuel initiatives under the CDM.

As well, the board requested the UNFCCC to consider reducing via subsidies the accreditation fees charged to Designated Operational Entities (DOEs), the companies that inspect CDM projects and verify their emission reductions.

Several major DOEs have withdrawn from the CDM over the past few years due to the collapse in CER prices, which has hurt their bottom line due to fewer projects seeking registration or credits.

The board also approved a new methodology allowing companies that help provide electricity to poor, rural communities using renewable energy to earn credits.

“There are still far too many people around the world without access to electricity. This new standard will help bridge this critical development gap using clean technologies,” said CDM-EB chair Lambert Schneider.

The executive, citing statistics from the International Energy Agency, said more than 620 million people in sub-Saharan Africa, or two-thirds of the population, live without electricity.

The EB said it improved existing rules governing water purification methods and clean cookstoves as well, making it easier to calculate the CER yields and transaction costs of such initiatives.

The board also mandated an evaluation of the UN’s four Regional Collaboration Centres to assess their effectiveness in attracting CDM investment to under-represented areas. The centres were set up in Togo, Uganda, Grenada and Colombia some two years ago.

By Mike Szabo – mike@carbon-pulse.com

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