Time to Get Rid of All That Hot Air

2 December 2010

ECO did some maths and was astounded to find that surplus Assigned Amount Units (AAUs) under the Kyoto Protocol range between 7 to 11 GT CO2 for the first commitment period.  That’s well more than one-third of all 2020 emissions reduction targets currently pledged by Annex I countries! ECO thinks that is the definition of a wake-up call.
If all of those surplus AAUs are carried over to the second commitment period, the carbon trading game will be fixed in favor of higher pollution levels. That kind of magical accounting will look great on the books, but the planet will still be boiling. This is why the overflow of surplus AAUs is called ‘hot air.’
It’s no secret that hot air is due to an erroneous calculation of future expected emissions for Russia and eastern European countries such as Ukraine and not because of the implementation of effective climate change mitigation policies.
A minor rewrite of Paragraph 13 of Article 3 can easily get us out of this quagmire. ECO advocates setting a stringent discount factor so that the annual average amount of emissions carried over is capped.  For compliance in the next commitment period, a limited number of banked AAUs should only be used domestically in countries holding surpluses.
Furthermore, legal provisions should be agreed that prevent the ‘laundering’ of first commitment period AAUs via the sale of second period AAUs. If hot air is not fully addressed, ECO questions the viability of international emissions trading as a mechanism after 2012.
What it comes down to is this: you cannot cheat the atmosphere. Instead of using magic accounting tricks with AAUs, Parties should concentrate on innovative approaches that reduce emissions in the real atmosphere.