The proposal for a ‘CER multiplier’ cropped up in a leaked draft paper setting out steps for the EU to increase its 2020 climate target from a 20% cut on 1990 greenhouse gas emissions to a 30% reduction. This is despite all CERs and allowances representing one tonne of carbon dioxide equivalent.

Tuomas Rautanen, a senior analyst at project developer First Climate, said any such multiplier should be “limited only to the project types with large windfalls”.

The leaked paper mentions “the introduction of a multiplier for conventional credits (eg industrial gas projects)”, and an accompanying background paper document suggests a multiplier could be used to counteract issues with hydrofluorocarbon (HFC) and nitrous oxide (N₂O) destruction projects: “The low costs for the generation of these credits hamper the evolution towards using the carbon market to incentivise cost-effective reductions in other areas and at sectoral level. It also contributes to the unequal geographical distribution of credits, as 80% of HFC and 60% of N₂O emission reductions come from China.”

While not ruling out the multiplier as a feasible way to approach the issues created by such projects, Rautanen emphasised that “the first crediting period [of a project] should be allowed to be safe from such multipliers”.

“If the Commission is floating this idea around, they should do it in a way that has as much certainty as possible,” he added. “As long as we are just sailing in fog, it’s definitely a frustrating situation.”

“As a general principle, IETA does not support the application of multipliers for certain project types or host countries,” said Kim Carnahan, policy leader on flexible mechanisms at the International Emissions Trading Association, noting that she believes the Commission is taking the idea “very seriously”.

“The lack of certainty now on the multipliers to be applied in the future (and the lack of certainty as to when these multipliers will be decided) disincentivises investments very broadly by spreading fear and uncertainty throughout the market about what kinds of projects [and] where will prove to be sound investments if and when these multipliers are finally applied,” she added.

“We think that the CDM should be regulated on the global level,” said Rautanen, as opposed to any unilateral action by the EU.


Source: www.carbon-financeonline.com