Too many CO2 allowances

Les dysfonctionnements du marché carbone ont fait l’objet de tractations lors du sommet sur le climat européen qui a eu lieu fin octobre 2014.

Le nombre de quotas, qui inondent actuellement le marché (132 millions en avril 2014, selon les chiffres de la CDC Climat), réduira progressivement de 1,74% par an jusqu’en 2020, puis de 2,2% à partir de 2021.
La Commission a également proposé un mécanisme de réserve de stabilité permettant de mettre de côté les quotas en surnombre.

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Putting a price on carbon

 

According to Francois Hollande, carbon’s price has to be part of an agreement during the next COP21 that will take place in Paris on December 2015.
A price signal must be sent to the economic actors as a way of internalizing externalities caused by fossil fuels. Though greenhouse gas emissions have to be addressed in the next agreement, a financial contribution is crucial for its stability. Industrialized countries have now to convert their pledges to the Green Climate Funds into a contribution in order to reach the announced $100 billion annual post 2020.

In this context, President Holland mentioned the financial transaction tax, aka the Tobin tax, which he would like to implement in 2016 in order to “contribute to climate change mitigation.

 

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CDM: welcome to aviation!

On February 2015, the CDM’s executive board met in Geneva. The flying industry, responsible for 12% of global emissions, will be included in new methodologies for calculating greenhouse gas in order to generate CER carbon credits for new projects included in the Clean Development Method. A question still remains : what socio-economics effects this new project will have ?

 

The development of other methodologies, especially for renewable energies or electrification was also discussed. The executive Board mentioned the reduction of entry costs of these projects in order to facilitate their use, mainly for agriculture.

 

In 10 years the CDM allowed to avoid 1,5 billion tons of CO2 through 7870 projects in 107 countries. Meanwhile, carbon’s price is at its lowest, mainly because of the lack of demand. It’s time to restart the CDM machine! It can be a very useful tool for the next Summit in Paris in December.

 

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CDM : a call for support to Africa

Even though Africa has a small share of responsabilty in climate change as it only accounts for 7% of global emissions, it is one of the main victims of its consequences. The entire continent is now mobilizing to contribute to the fight against global warming and even more to adapting to these changes that threaten its socio-economic development.

The negotiations that are being held in Bonn are an opportunity for Ecosur Africa to launch the “CDM – Africa” initiative.

This is an appeal to the developed countries by 40 government representatives, businesses and the civil society, to prevent a collapse of the carbon price. Asking for a 2-billion euro investment, the carbon finance operators hope to breathe new life into the Clean Development Mechanism (CDM) and thus contribute actively to supporting innovative projects, promoting solidarity and a low-carbon development in Africa.

The letter propose 4 strong and immediate measures to better value carbon credits in Africa:
• An automatic and centralized one-stop shop for the purchase of African carbon credits
• A guaranteed floor price of 5 € / tCO2 for a target of 500 million tCO2 avoided in Africa
• A pre-financing of procedural costs for 500 African projects
• An effective multilingualism for ensuring fair market access

At €0.20, the price of CER’s (Certified Emission Reductions) is a major obstacle to the development of new offset projects. The funding for the countries most vulnerable to climate change is at stake, which is a crucial issue for the upcoming COP21.

Within 10 years, CDM projects have helped avoid 1.5 billion tCO2e but Africa has attracted only 3% of these projects. However, in many cases, carbon finance has proven to be an accelerator for socio-economic development of the host country. It is therefore essential for the future international framework to reinforce and ensure its use for and by African countries.

 

Source : Open Letter to Christiana Figueres, Secretary General of the United Nations Framework on Climate Change Convention (UNFCCC)

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Climate bonds : a new to fund the fight against climate change

 

What’s an obligation ? It is a “debt investment in which an investor loans money to an entity which borrows the funds for a defined period of time at a variable or fix interest rate”.
A climate bond is a bond used to finance projects needed to address climate change. They range from waste management and improving resiliency to renewable energies. Launched for the first time by the European Bank of Investment, in 2007, the number of climate bonds emitted keeps rising. In 2014, there were three times more climate bonds than there were in 2013. They currently represent $36 billions. These bonds have mainly been issued by large corporations, multilateral development banks and some asset-backed bonds. A diversification in the bonds issuers has to be noticed : more and more private companies seem to be interested by the project.
To be defined as “green” or “climate”, a bond has to fulfill some standards. The Climate Bonds Initiative, the World Bank are working on an universal taxonomy with criteria such as low-carbon activities, waste management or energetic efficiency. For the moment these criteria are essentially based on technical aspects and don’t include economic, societal or environmental issues in their large acceptations.
The bonds market currently represents $100 000 billions. According to the Climate Bonds Initiative, $500 billions of them could be climate friendly. It would be an efficient and secure way to fund the fight against climate change !

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