Cancun and the Future of Offsetting

Payal Parekh

Get Out of Jail Free
Get Out of Jail Free
In the wee hours of Saturday morning in Cancun at the UN Climate Conference, delegates managed to agree to a set of decisions. They are not enough to limit warming to 1.5 degrees Celsius, but they do allow negotiations to continue for another year under the auspices of the multilateral, consensus-based process of the UN.

Unfortunately the current pledges contained in the negotiating text are not in line with what the science demands – an analysis published by the UN Environment Program suggests that temperature could rise by as much as 4 degrees Celsius – which means disastrous consequences for ecosystems and natural resource-based communities.

Furthermore, the use of offsets are likely to further weaken the pledges. The texts that came out of Cancun did not curtail the use of offsets, which currently are used extensively by developed countries to meet their targets in the first (and current) commitment period of the Kyoto Protocol.

The use of offsets is akin to a get out of jail free card for developed countries. They can continue to pollute and push off their emissions reduction commitments onto developing countries. Even worse, most of the emissions reductions are not even real!

The new text also considers the establishment of new market-based mechanisms.  This is likely to be along the lines of sectoral crediting, in which an intensity baseline is set for a sector in a country (an example would be the cement sector in China). Credits would only be awarded if the efficiency of the whole sector improved. It is a new concept that has been tested in China and Mexico for specific sectors. While there are many open questions about it, it could expand the quantity of offsets, giving developed countries access to a large number of cheap credits, meaning they would have to do even less to transition to a carbon-neutral economy.  Fortunately parties, as well as observer organizations have until the second week of February to submit comments. You can bet that International Rivers will be getting up to speed on sectoral crediting to understand what it means for carbon credits from hydropower.

A positive development is that non market-based mechanisms are also considered. This means that the possibility exists to support feed-in tariffs and have the waste gas HFC-23, a by-product in the production of refrigerant gas, regulated under a fund such as the one set up under the Montreal Protocol to phase out ozone-depleting substances.  International Rivers will also be submitting comments on innovative non market-based solutions.

Other not so positive developments are the inclusion of Carbon Capture and Storage (CCS) into the CDM. Unfortunately CCS is proven to be neither safe nor sound. Another worrying aspect of the new texts is that the reduction of emissions from deforestation and forest degradation (REDD) is even more likely to be through an offsetting mechanism.  If credits can be generated this way, there will be a flood of credits and they will be of poor quality. In addition to the problems that offsetting has, which we have often commented on, deforestation credits present another whole host of problems, including leakage, monitoring and respect for the rights of indigenous peoples.

It seems that offsets are here to stay for a long time. This means that International Rivers will continue to monitor the Clean Development Mechanism and the new offsetting mechanisms to ensure that the use of hydro credits is drastically reduced or even banned.