Mar

18

Government of Portugal and Natsource Hold Seminar to Discuss the Flexible Mechanisms in a Post-2012 World

Filed Under Clean Development Mechanism 

Senior representatives from the Government of Portugal and its euro 354 million Carbon Fund joined in a seminar today with representatives of Natsource LLC — a provider of asset management services, origination and structuring services, and advisory and research services in global emissions markets — to discuss the goals for and potential shape of the flexible mechanisms (Clean Development Mechanism and Joint Implementation) in a post-2012 climate change agreement. The mechanisms are an extremely important issue in the ongoing negotiations to complete a post-2012 climate agreement which could be adopted later this year in Copenhagen, and will need to play an important role in mobilizing the capital necessary to achieve long-term climate protection objectives.  The International Energy Agency has estimated that global energy demand will increase by approximately 45% by 2030 and that approximately $22 trillion dollars will be needed to develop the related supply infrastructure. Carbon dioxide (CO2) emissions resulting from this energy use are forecast to grow by 45%, and nearly all of this growth will result from activities in non-OECD countries, particularly China, India and the Middle East. A major goal of the post-2012 mechanisms is to affect investment decisions in energy infrastructure to reduce CO2 emissions to the greatest extent possible. This infrastructure will be in place for decades to come and associated emissions will impact the global climate system throughout the 21st century. The mechanisms also need to stimulate investment in such important untapped activities as energy efficiency and forest sequestration. For the most part, the CDM did not affect investment in long lived energy infrastructure projects, energy efficiency or forest related activities.

“Carbon markets will continue to play a key role in ‘post-2012′ global climate policies. The Kyoto Protocol’s Clean Development Mechanism and the EU Emissions Trading Scheme, for instance, were good first steps. But for an ambitious post-2012 climate policy we’ll need to mobilize much greater investment in low carbon projects across the world,” said Humberto Rosa, Portugal’s Secretary of State for Environment. “We need to devise new mechanisms that also provide incentives for activities such as energy efficiency and forest sequestration that have been minor players in the CDM but which can play a major role in reducing emissions for the remainder of the century,” said Rosa. “We had a good discussion today on these issues as part of Portugal’s preparation of a ‘post-Kyoto’ climate strategy which will naturally include carbon markets.”

“The private sector has shown it will invest its capital to achieve climate change goals,” said Jack Cogen, Natsource Chief Executive Officer and Chairman of the International Emissions Trading Association. “It is ready to do so again, but needs clear rules and new approaches for reducing regulatory risk.” The CDM’s case-by-case approach to project reviews and approvals sometimes served as a barrier to good projects. We have communicated these needs to negotiators, and appreciate the opportunity to discuss the issues today with Portuguese officials.”

The CDM and JI mechanisms incorporated in the Kyoto Protocol represented an important first step in stimulating investment in emission reducing activities and engaging developing countries and transition economies to participate in the effort to address climate change. According to the World Bank, the CDM leveraged euro 44 billion of investment in energy efficiency and renewable energy from $15.7 billion in total CDM credit purchases from 2002-2007, and may produce as much as 1.5 billion tonnes of CO2e emission reductions. The CDM has also reduced developed countries’ costs to comply with greenhouse gas emission reduction targets. However, there is widespread agreement that the mechanisms need to reformed in the post-2012 climate change agreement in order to mobilize larger volumes of capital necessary to achieve long-term climate protection goals.

Negotiators have been discussing several approaches for restructuring the mechanisms in the post-2012 world to ensure environmental integrity while reducing investor risks, with the broader objective of stimulating large-scale investment in activities that reduce emissions. These include sectoral approaches, and policy-based or programmatic approaches that employ standardized baselines. Some believe that these approaches would streamline the project approval process while increasing volumes of emission reductions. Natsource prepared a paper, “Improving the Project-Based Mechanisms to Achieve Long-term Climate Protection,” for the International Emissions Trading Association in December of 2008 and presented its findings in several forums around the world. The paper can be found at www.natsource.com.

The Government of Portugal is a participant in the Natsource Carbon Asset Pool (”NAT-CAP”) - a greenhouse gas compliance product dedicated to assisting European firms and governments to meet their emission-reduction requirements under the Kyoto Protocol and European Union Emissions Trading Scheme.

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