Week 2 at COP is “rumours week”, and delegates turn into gossip-producing machines when it comes to predicting deals. One rumour in particular has made ECO’s heart skip a beat: let’s put all the old junk CDM credits in a reserve and only allow countries to use them if they don’t meet their NDC target.
If it was up to ECO, the 861 million remaining CDM credits would be long gone and rules would be adopted to ensure an ambitious, fair, and equitable transition into the post-2020 era. The 4 billion CERs that risk flooding the Paris market would certainly not find their way into Article 6. So, here are ECO’s thoughts on the idea of a CDM reserve, keeping in mind we are not talking about valuable assets; we are talking about junk credits worth €0.20 a piece.
So, what’s wrong with the idea of a reserve? First off, a reserve could undermine climate targets. If the reserve can be accessed by a Party simply because it has not met its NDC, there is no point in having a reserve - the Party might as well use the credits directly. Second, transferring all CERs into a reserve does nothing to address the fact that a multi-gigaton carbon bomb is threatening to enter and destroy the Paris Agreement. Finally, if credits are not truly cancelled, there is no guarantee that they will not be used in the future. The idea of a reserve simply postpones the issue, creates significant uncertainty for the market, and does nothing to improve the situation.
ECO knows 4 Parties hold nearly 70% of the remaining CDM credits: China (355 million CERs), India (89 million CERs), South Korea (62 million CERs), and Brazil (72 million CERs). ECO’s watchful eyes and ears will be on ministers this week (and their advisors as they try to explain to them what the **** a carbon market is). Don’t be fooled; whether you call it a reserve, a fund, or a carbon market emergency bunker, it won’t change the fact that the credits placed into it are junk, old, and will do nothing but undermine climate action. Going forward, they should not be used, and they should not be bought.