Poor seek to cut CDM access at U.N. climate talks

(Reuters Point Carbon) - More than 130 of the world's poorest nations have sought to pressure richer countries to agree new legally-binding goals to cut greenhouse gas emissions by threatening to deny them access to cheap U.N. carbon credits, potentially making it more expensive for them to meet domestic emission goals.

The offsets, of which 995 million have been issued, have made it cheaper for governments and companies in industrialised nations to meet emissions targets through paying for low-cost emission reductions in the developing world instead of making more expensive cuts at home.

But the so-called group of 77 countries and China told delegates at U.N. talks in Thailand this week that access to credits under the Clean Development Mechanism (CDM) should be limited to nations that agree to cap emissions under the Kyoto Protocol starting next year.

"Our view, shared by more than 130 developing countries, is that industrialised countries cannot benefit from emissions trading and credits under the Kyoto Protocol if they're unwilling to commit to legally binding targets," said Sai Navoti, lead negotiator for the Alliance of Small Island States (AOSIS).

"We won't allow them to walk away, taking only the bits they like," he told Reuters Point Carbon.

Developing countries plan to amend the Kyoto Protocol to implement the ban at U.N. climate talks in Doha starting in November.

RISING PRICES

Australia, Japan and New Zealand, who have so far refused to take on a second round of targets under the 1997 treaty after existing ones expire this year, would be hardest hit by a ban as they plan to rely on cheap credits to meet voluntary pledges to cut emissions by 2020.

Australia will launch an emissions market in July 2015, and plans to let its biggest emitting firms, such as Macquarie Generation and BHP Billiton, use credits to meet caps, creating an estimated demand of some 250 million units over the 2015-2020 period.

Without access to Kyoto, Australian firms would need to buy government-issued permits or EU Allowances, which currently trade at almost three times the price of Kyoto units.

Companies in the New Zealand ETS would be hit even harder, as current rules allow them to use an unlimited number of Kyoto units to meet domestic targets and credits made up 70 percent of the total number of units firms surrendered in the scheme last year.

Negotiators from both nations played down the impact a ban may have, and said their decision to take on a legal goal would depend on progress towards a new global treaty that, unlike Kyoto, binds all nations to cut emissions starting next decade.

"The government will take international action that best supports Australia's domestic initiatives," said Justin Lee, Australia's climate change ambassador.

"There is a lot of misinformation about this issue, so negotiators are using the time in Bangkok to unpack the various facets of the KP mechanisms and their future operation, to clarify people's understanding," a spokesperson at the New Zealand Ministry of Foreign Affairs said in an email.

JAPAN

Japan, along with Canada and Russia, said last year it would not take on a second Kyoto target, claiming it made no sense as long as other big emitters are not bound by the treaty.

The U.S. and China, the world's two biggest emitters and economies, have said they will not take on a legal emissions cap before 2020, instead preferring to focus on voluntary pledges made at the 2009 Copenhagen climate summit.

Takehiro Kano, a senior climate negotiator with Japan, told Reuters Point Carbon that without access to Kyoto units Japan may lower its voluntary pledge to cut emissions 25 percent below 1990 levels by 2020.

That target is already under threat as the country prepares to reduce its dependency on carbon-free nuclear generation.

"We don't critically need the CDM to achieve our own target," said Kano.

The EU, which has pledged to take on a new target under Kyoto, has so far remained tightlipped on the issue.

However, an internal document seen by Reuters Point Carbon said there may be benefits to allowing some nations access to credits as it would create additional demand for them and reduce incentives to establish markets outside of the U.N. process.

(Reporting by Stian Reklev and Andrew Allan)