China Adds to Calls Seeking Extended Life for UN Carbon Credits

(Bloomberg) -- China has added its voice to calls seeking a longer life for existing United Nations carbon credits.

China was the biggest generator of emission credits for the UN’s Clean Development Mechanism, a market that helped cut costs for factories and power stations in the European Union after it started the world’s biggest carbon market almost 15 years ago.

“We hope the transition of the CDM regime could be agreed on and CDM projects could be transferred to the Paris agreement,” Ma Aimin, deputy director of China’s National Center for Climate Change Strategy and International Cooperation, told reporters Wednesday at climate talks in Madrid. “It will not be a dealbreaker if they don’t transition.”

The existing UN market collapsed about seven years ago as demand dried up and supply continued to rise. Envoys at the UN talks this week are talking about how to structure international carbon trading after 2020 as part of the 2015 Paris Agreement on climate change.

Spot Certified Emission Reductions from the CDM rose 11% to 21 euro cents on ICE Futures Europe Wednesday, as of 4:25 p.m. in London. They are down 16% year to date.

It remains unclear what sort of carbon trading will emerge from the UN talks, which are due to finish on Dec. 13.

Draft rules published Wednesday leave open the issue of which credits might be valid under potential markets. One choice: They might allow use of those credits created before 2020 or only after that date.

“A few years back several countries decided to withdraw their support to CDM projects in China and many have already made the transition from international projects into locally supported projects,” Ma Aimin said.

On Tuesday, Brazil said envoys at the talks should find a way to revive credits generated under the CDM. Killing existing credits would limit the private sector’s appetite for the Paris markets.

The European Union has sought to curb the CDM’s life. It will only use carbon markets under Paris if it tightens emission-reduction targets, Germany’s climate minister said Monday.

Use of existing credits would add to supply, giving developers an incentive to work on more projects that reduce greenhouse gases.

China also took aim at a possible plan by Europe to introduce a carbon tax on goods at its border, to be levied on nations that want to sell goods to the EU without introducing policies that protect the climate.

“Unilaterally imposing a CO2 tariff would create more uncertainties,” Ma Aimin said. It would “create many questions. Will the EU impose its carbon emissions tariff on every country or will it have differentiated treatment and only for special countries? Will it be on all products?”

Should envoys agree carbon market rules at these talks amid global trade tensions, it will be no small feat. Spain’s envoy who is leading the talks voiced optimism that a deal could be reached. 

“Right now there is a very strong will and conviction to work to complete the agenda,” said Teresa Ribera, Spain's minister for ecological transition in an interview on the sidelines of the conference. “There are some countries that remain more reticent and silent. They don't have a real opposition, or at least they haven't shown it yet. But their involvement is important, and they haven't been showing as much will to accelerate things as other countries.”

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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