Surplus AAU Solutions

7 December 2010

This is not the first time ECO has commented on the surplus of assigned amount units (AAU) present from the first Kyoto commitment period, and how the overflow could deliver a body blow to the future aggregate actions of annex B countries if carried over to the second commitment period. So far this issue has not seen much progress at all in the AWG-KP.
However, the Chair’s new revised KP text proposal contains interesting options which might bring us quite far in solving the AAU loophole crisis, which threatens the future environmental integrity of the Kyoto protocol.
Option 2 on Article 3, para 13 and 13bis shows a smart way of ensuring that this surplus does not contaminate the domestic aggregate reductions of Annex B countries. This is done by allowing the AAU surplus to be exclusively used by countries which have registered such surpluses, and only where their emissions are higher than their AAUs for the second commitment period. This option also does away with the risk of ‘AAU laundering’ where second commitment period AAUs are sold off and the first commitment period surplus is used for compliance.
However, there still is a risk that this option might encourage countries with AAU surpluses to stall their climate action. ECO once again suggests that the surplus for domestic compliance also have a discount applied to limit the availability. This could be achieved by combining option 1 in the chair’s text with option 2.  
ECO in particular invites the EU to remove the gag from its mouth and speak out in an ambitious way. Wasn’t the EU one of the parties demanding more environmental integrity in the Kyoto Protocol as condition of signing on to a second commitment period? Bonjour Bruxelles, it’s crunch time!
Finally, let’s also not forget the bigger picture and learn from the past. Vast amounts of surplus AAUs could continue to occur in the second commitment period if the current low pledges of developed countries are not improved significantly. To further minimize the negative impact on environmental integrity, all countries should commit to climate friendly investments of the revenues from the sales of second commitment period AAUs through transparent and internationally monitored Green Investment Schemes.  The existence of a complex problem does not negate possible solutions.  Instead, it accelerates the need for them.