Voluntarily cancelled CERs cross 10-million mark, as CDM project deregistrations begin

Published 16:52 on April 20, 2016  /  Last updated at 16:52 on April 20, 2016  /  Asia Pacific, Climate Talks, EMEA, EU ETS, International, Kyoto Mechanisms, New Market Mechanisms, Other APAC, South & Central, South Korea, Voluntary Market  /  No Comments

More than 10 million CERs have been voluntarily cancelled to date through the UNFCCC, hitting the milestone after the second biggest batch ever was voided but coming following the CDM’s first ever project deregistrations.

More than 10 million CERs have been voluntarily cancelled to date through the UNFCCC, hitting the milestone after the second biggest batch ever was voided but coming following the CDM’s first ever project deregistrations.

According to UN data, Samsung Display, a subsidiary of the Korean electronics giant, requested that 705,300 CERs from an SF6 abatement project be cancelled so they could be used as Korean Offset Credits (KOCs), which fetch exponentially more in that country’s ETS.

KOCs trade in the South Korean OTC market at around 18,500 won ($16.36, €14.38) each, compared to around €0.40 per CER in Europe, the most liquid market for the credits issued under the UN’s Clean Development Mechanism (CDM).

The latest annulment brought the total number of South Korean CERs cancelled by the UNFCCC to 7.1 million.

Offsets from that country make up by far the largest segment of all credits voided to date, with cancelled Chinese CERs a distant second at 1.2 million.

Between the UNFCCC’s voluntary cancellation process for CER holders and the online offset platform it launched last year, where consumers and businesses can buy and retire credits direct from the project operators for around $2-4 each, a total 10.58 million CERs have now been cancelled, the UN data showed.

This, however, still represents a tiny fraction of the 1.67 billion CERs issued to date.

Demand for CERs has all but dried up in the wake of the global economic slowdown and as buyers in the EU ETS, the scheme’s largest source of demand, exhaust their usage limits up to 2020.

This has caused CER prices to collapse, threatening the viability of many of the thousands of GHG-cutting projects approved under the CDM, and prompting its executive board to attempt to find new buyers and uses for the scheme in the run-up to 2020 in order to keep it alive.

DEREGISTERED PROJECTS

But these ongoing efforts to revive the troubled scheme have not dissuaded some project owners from seeking revenues elsewhere.

The first two CDM projects have been successfully deregistered from the scheme, as the operators seek better returns through the voluntary market.

A project to distribute cleaner-burning woodstoves across India’s large, arid Rajasthan State was on Aug. 31, 2015 the first to be deregistered under the UNFCCC’s new service, which was introduced last year.

The project, which was registered under the CDM in Jan. 2013 but had not yet received any CERs when it was pulled, estimated that it would be able to cut the region’s emissions by 42,559 tonnes of CO2e per year.

Its sole participant Seva Mandir, an NGO working on rural and tribal development issues in Rajasthan, did not respond to an email inquiring as to why it decided to deregister the programme.

The second project, the Santa Marta landfill gas capture project located on the outskirts of Santiago, Chile, deregistered from the CDM on Sep. 4 last year.

The project’s developers, Consorcio Santa Marta, said they opted to instead pursue approval of the facility by the Gold Standard voluntary certification, under which carbon credits are also valued higher than CERs.

“This [deregistration] request was [required] under the Gold Standard’s [approval process], to ensure that there is no double-counting of emissions reductions,” a representative of Consorcio Santa Marta told Carbon Pulse.

A spokeswoman for Gold Standard confirmed that this is a requirement of CDM projects that want to switch to its scheme and sell Verified Emissions Reductions (VERs).

“Any CDM project can [now] voluntarily withdraw from CDM and make use of voluntary market/standards. We have guidelines for projects that are deregistered from CDM and another for existing CDM projects that want to issue VERs instead,” the spokeswoman added.

“In the first case there won’t be a CDM issuance, [but] in the second case, to avoid double-counting, the project needs to transfer us their CERs and we cancel them before issuing VERs.”

The Consorcio Santa Marta representative said their project still has CERs that they had not sold “due to the low market prices and high taxes to be paid to the UNFCCC.”

The facility was registered under the CDM in 2007 and has to date received more than 1.2 million CERs, according to data from the UNEP-DTU’s CDM Pipeline. It has a forecast credit yield of 248,000 CERs per year.

THE PROCESS

The Consorcio Santa Marta representative said that the CDM’s deregistration procedure “was quite fast, very different from the long times we had to wait under the UNFCCC’s other processes.”

“The application and documentation was submitted to the UNFCCC on July 29, 2015, … [meaning] it took a little longer than a month.”

A UNFCCC spokesman said last October that changes were being made to add the deregistration process to the body’s online workflow, but he did not respond to an Apr. 6 email seeking an update on the process.

According to sources, some CDM-EB members had previously been reluctant to allow project deregistrations over concerns it could trigger an exodus and further weaken the scheme in the run-up to last year’s UN climate summit in Paris, which proponents had hoped would culminate in an agreement building on the work and experiences of the CDM.

By Mike Szabo – mike@carbon-pulse.com

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