Urgent solutions needed for Russia’s surplus CO2 emission rights

If no suitable solution is found for Russia’s surplus CO2 emission rights (hot air), they could counter the effectiveness of a possible agreement made in Copenhagen. This is concluded in ‘Too hot to handle? The emission surplus in the Copenhagen negotiations’ by the Netherlands Environmental Assessment Agency (PBL), published today.

Selling surpluses

Russia’s surpluses in emission rights were caused by the collapse of the Soviet Union in the early 1990s. Under the Kyoto Protocol, it was agreed that Russia could transfer most of these surpluses to the period up to 2020. In addition, new surpluses may also be created in the period between 2013 and 2020, because of Russia’s current emission reduction proposal in the Copenhagen negotiations. If Russia would use its many acquired emission rights to meet its obligations, the price of CO2 emissions would drop dramatically.

Consequences

At the moment, Copenhagen pledges together amount to 19% emission reduction by 2020. If all acquired emission rights would be used on the market today, realistic global greenhouse gas emission reductions by 2020 would be limited to a total of 13%. Moreover, this marketing of all surpluses will lead to an extremely low carbon price of 5 USD per tonne CO2. Such a low price would greatly counter any innovation and renewal towards sustainable technology.

Three options

The Netherlands Environmental Assessment Agency has studies three options for reaching a compromise on the surpluses. These options are:

• All the countries that signed the Kyoto Protocol jointly agree to set more stringent emission reduction targets.
• Only Russia and other surplus-holding countries set more stringent reduction targets, coupled to them creating a ‘strategic reserve’ to be used exclusively for meeting those more stringent targets.
• An agreement is reached by which surplus-holding countries can only trade up to one third of their surplus. Calculations show that this would provide maximal revenues for these countries, and means that surpluses from the Kyoto period would have to be abandoned.

Suitable

These three options each would lead to a different balance between total emission reductions and the revenues for surplus-holding countries. Therefore, each option could potentially be used for reaching a compromise, depending on the developments in the negotiations in Copenhagen.