Finger pointing abounds. The United Nations is responsible for validating carbon reduction schemes, which involves ensuring the project results in a net carbon dioxide reduction equivalent to the value of certified emissions reductions credits (CERS) traded and certifying that the project would be impossible without financing from the carbon markets. The U.N's verification chief, Kai-Uwe Barani Schmidt, says there is conflict between "private-sector ambitions and the environmental integrity of the system." Schmidt's office has looked increasingly at the dealings of project developers and independent verifiers, such as EcoSecurities and Det Norske Veritas. EcoSecurities made news last year after it announced it would need to write down nearly one quarter of the credits derived from its projects, knocking 70 percent of the company's stock value. A number of those projects were questioned by U.N. authorities only after the verification stage.
Still, a verification bottleneck exists. The World Bank reports "[p]rojects are currently taking an average of 1-2 years to be issued from the time they enter the pipeline." Significantly, more than "70% of issued CERs come from industrial gas projects, with the vast majority of energy efficiency and renewable energy projects remaining stuck somewhere in the pipeline." Have tightening standards for project verification slowed down interest in more ambitious project development? The value per MtCO2e of a gas project compared to a renewables project is much lower, which makes these more attractive than easily certifiable wind farms or PV arrays. Also, CERs trade at a discount to the market price for carbon dioxide. CERs typicaly trade in the €8-€10, though that price can reach €17 on the spot market. Carbon dioxide on the ETS traded between €20-€25 in 2007. The discount allows super emitters to pick up reductions on the cheap, protecting them from a slamming on the actual trading markets.
The solution here is clear. Raising the CER price would encourage developers to pursue higher value renewables projects, which would move through the verification faster than an industrial gas project both for its obvious green credentials and for its clear reliance on market support for construction and installation.
The Morning Feedstock: Han Solo Edition
Daniel Englander: May 8, 2008, 1:30 AM
Global carbon market trading volume and project development financing more than doubled in 2007 to $64 billion, up from $31 billion in 2006, according to a report released this week from the World Bank. (pdf) The cash value of trading alone had a near identical trajectory, moving up from $24.6 billion in 2006 to $50.3 billion this year. Significantly, the volume of MtCO2e avoided increased, though by less than half, from 1,745 to 2,983. The report tracked transactions across the three leading carbon markets - the EU ETS, the New South Wales exchange, and the Chicago Climate Exchange, though transactions at on the EU ETS dwarfed those of the latter two by several orders of magnitude. While the pace of trading expanded significantly, that for project development, primarily through the clean development mechanism, has slowed. According to the report, "[o]ut of the 3,188 projects in the current pipeline, 2,022 are at the validation stage."
Finger pointing abounds. The United Nations is responsible for validating carbon reduction schemes, which involves ensuring the project results in a net carbon dioxide reduction equivalent to the value of certified emissions reductions credits (CERS) traded and certifying that the project would be impossible without financing from the carbon markets. The U.N's verification chief, Kai-Uwe Barani Schmidt, says there is conflict between "private-sector ambitions and the environmental integrity of the system." Schmidt's office has looked increasingly at the dealings of project developers and independent verifiers, such as EcoSecurities and Det Norske Veritas. EcoSecurities made news last year after it announced it would need to write down nearly one quarter of the credits derived from its projects, knocking 70 percent of the company's stock value. A number of those projects were questioned by U.N. authorities only after the verification stage.
Still, a verification bottleneck exists. The World Bank reports "[p]rojects are currently taking an average of 1-2 years to be issued from the time they enter the pipeline." Significantly, more than "70% of issued CERs come from industrial gas projects, with the vast majority of energy efficiency and renewable energy projects remaining stuck somewhere in the pipeline." Have tightening standards for project verification slowed down interest in more ambitious project development? The value per MtCO2e of a gas project compared to a renewables project is much lower, which makes these more attractive than easily certifiable wind farms or PV arrays. Also, CERs trade at a discount to the market price for carbon dioxide. CERs typicaly trade in the €8-€10, though that price can reach €17 on the spot market. Carbon dioxide on the ETS traded between €20-€25 in 2007. The discount allows super emitters to pick up reductions on the cheap, protecting them from a slamming on the actual trading markets.
The solution here is clear. Raising the CER price would encourage developers to pursue higher value renewables projects, which would move through the verification faster than an industrial gas project both for its obvious green credentials and for its clear reliance on market support for construction and installation.
Finger pointing abounds. The United Nations is responsible for validating carbon reduction schemes, which involves ensuring the project results in a net carbon dioxide reduction equivalent to the value of certified emissions reductions credits (CERS) traded and certifying that the project would be impossible without financing from the carbon markets. The U.N's verification chief, Kai-Uwe Barani Schmidt, says there is conflict between "private-sector ambitions and the environmental integrity of the system." Schmidt's office has looked increasingly at the dealings of project developers and independent verifiers, such as EcoSecurities and Det Norske Veritas. EcoSecurities made news last year after it announced it would need to write down nearly one quarter of the credits derived from its projects, knocking 70 percent of the company's stock value. A number of those projects were questioned by U.N. authorities only after the verification stage.
Still, a verification bottleneck exists. The World Bank reports "[p]rojects are currently taking an average of 1-2 years to be issued from the time they enter the pipeline." Significantly, more than "70% of issued CERs come from industrial gas projects, with the vast majority of energy efficiency and renewable energy projects remaining stuck somewhere in the pipeline." Have tightening standards for project verification slowed down interest in more ambitious project development? The value per MtCO2e of a gas project compared to a renewables project is much lower, which makes these more attractive than easily certifiable wind farms or PV arrays. Also, CERs trade at a discount to the market price for carbon dioxide. CERs typicaly trade in the €8-€10, though that price can reach €17 on the spot market. Carbon dioxide on the ETS traded between €20-€25 in 2007. The discount allows super emitters to pick up reductions on the cheap, protecting them from a slamming on the actual trading markets.
The solution here is clear. Raising the CER price would encourage developers to pursue higher value renewables projects, which would move through the verification faster than an industrial gas project both for its obvious green credentials and for its clear reliance on market support for construction and installation.
