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UN Carbon Market Health Depends On Global Ambition – JI Chair
20 June 2013, 3:49 pm By John Parnell – See more at: http://www.rtcc.org/…h.60MVdq16.dpuf Fixing carbon markets and mechanisms will do nothing to reduce emissions without ambitious climate policies from governments a senior climate diplomat has warned. Derrick Oderson, chair of the Joint Implementation Supervisory Committee (JISC), said fixing the Joint Implementation (JI) programme was not the real long term goal. “The JI will be put to good use only when countries do what’s needed with respect to commitments to reduce. This is an extremely urgent matter, not to save the JI, but to avoid calamity,” he told RTCC in an emailed interview. The JI, part of the Kyoto Protocol, allows industrialised nations to invest in low carbon projects in economies in transition. Low carbon prices, partly a result of low greenhouse gas reduction targets, have damaged the scheme’s health. Oderson has been overseeing a review of the JI to get it back on its feet and is confident it will have a role to play when a new, global treaty replaces Kyoto in 2020. Read the full interview with Oderson below: Derrick Oderson, chair of the Joint Implementation Supervisory Committee (Source: UNFCCC) What effect has the new extended but streamlined Kyoto Protocol had on the JI in the 6 months since Doha finished? Agreeing a second commitment period to the Kyoto Protocol was a key success of Doha. In the six months since COP 18, the JI Supervisory Committee has been working to fine-tune its recommendations to the Parties on how to improve the JI for a stronger future. This JISC is hopeful that these recommendations will be adopted in Warsaw at the end of the year. That said, without increased ambition to reduce greenhouse gas emissions, mechanisms like JI have a limited role. With ambitious targets, mechanisms like JI become indispensable. It’s as simple as that. Low carbon prices and imbalances in supply and demand are being addressed in carbon markets, what is the best course of action in your opinion to address low prices in offset mechanisms? Again, countries need to increase their level of ambition to reduce greenhouse gas emissions. If countries committed to the level of abatement that is required to address climate change, then demand for tools like JI – and the clean development mechanism, and other mechanisms and approaches – would be immediate and substantial. Given the types of projects that JI invests in, energy efficiency for example, do you think it can argue more than others that participation has economic advantages? I think the strength of JI is that it can be used by countries to focus investment on whatever sector makes sense. However, the mechanism’s value is tied to countries’ efforts to reduce emissions. With prices for units so low, and emission reduction ambition well below what is needed to address climate change, the incentive is just not there. How important is ambitious climate action by governments in making tools like the JI effective? JI will be put to good use only when countries do what’s needed with respect to commitments to reduce. This is an extremely urgent matter, not to save the JI, but to avoid calamity. The JI exists, above all, as a mechanism to support least-cost options for climate change mitigation. Climate change is not going away. It is the JISC’s job to ensure that JI is there for countries when they do turn to reach for it. With the benefit of hindsight, what would change about the JI if you could redesign it? Joint implementation is a fully functioning tool that countries took a great deal of trouble to create. JI has shown that it works, but it has also shown that it could be improved. The JISC has invested a lot of effort into developing recommendations to do just that. The key feature of our recommendations is creating a single track for the oversight of JI projects, administered by an international body. Only then will people have the level of comfort in the mechanism that is required, with respect to the reliability of oversight and the quality of the emission reductions produced. The recommendations also include creating an aligned or unified accreditation process with the CDM, an appeals procedure and clear additionality requirements amongst other things. The full recommendations are on the UNFCCC website (JISC 30, Annex 1). How do you see the future of the JI in the new climate regime? National governments and the private sector see value in the JI mechanism. It works, helping countries to focus and incentivize investment. Parties could quite easily agree to the needed improvements in JI – these have already been before them for consideration – and they could (and should) come up with the bridging decisions that would carry JI to the next phase of international action. The challenge in coming up with recommendations for the future has been to devise a mechanism that has the benefits of flexibility and strong national involvement, but which can ensure a healthy, useful measure of broad, independent oversight. The JISC thinks it has done this in its recommendations for revisions to the JI guidelines. Continue reading
U.S. Forest Management Policy Must Evolve To Meet Bioenergy Targets
Jun 19, 2013 U.S. forest management policy must evolve to meet bioenergy targets In order to keep pace with the burgeoning demand for renewable energy, forest management policy in the U.S. must change to address environmental sustainability issues, according to an article by a University of Illinois expert in bioenergy law. Unless the forestry sector can tailor sustainable forest management policies specifically to forest-to-energy feedstocks, its role in helping the country broaden its energy portfolio – and by extension, meeting ambitious bioenergy targets – may be limited in large part because of uncertainty about whether existing policies can effectively constrain overharvesting, said Jody Endres, a professor of bioenergy, environmental and natural resources law at Illinois. “Because we have a federal system of government, we don’t have a one-size-fits-all policy on land use and biofuels,” said Endres, who also is an affiliate of the Energy Biosciences Institute, a collaboration between the U. of I., the University of California at Berkeley, the Lawrence Berkeley National Laboratory and the energy company BP. “In a lot of environmental and natural resources law in the U.S., the primary role lies with the states to manage private land. But we also have national-level problems, like climate change, biodiversity and water-quality issues, which span jurisdictions. In other words, ecosystem services are not confined to a single state’s jurisdiction. So we have this crazy-quilt system in the U.S. that needs to be untangled.” The paper, which was published in the Vermont Law Review, was written to pinpoint what U.S. policy looks like, “which is very complicated because of the intermingling of state and federal policy,” Endres said. “We don’t have a coordinated public, state or federal policy in the U.S. about what sustainability means in the bioenergy context,” she said. “We don’t have one overarching policy that says, ‘This is how you assess land for biodiversity, or for water quality.’ So this patchwork of policies really makes it difficult for outsiders like European regulators looking in. A lot of misperceptions grow out of that.” According to Endres, the U.S. needs to craft some sort of integrated standard that covers not only the purpose-grown, short-rotation biomass crops such as the perennial grass miscanthus, but also forested plantations and seminatural environments, and be able to assess whether there are actually some ecological and climate benefits for getting those lands into the bioenergy system. “Those are the problems that bioenergy in the U.S. is facing, and it’s all really very nascent, but we know it’s problematic,” she said. “How do we translate that into a policy and into a sustainability certification? How do we make it economic while also providing an on-ramp for consideration of the ecological properties of forests in terms of larger scale landscapes and connectivity? That’s yet to be decided, but the paper lays it out what the points of contention look like.” It’s an interesting conversation to have in the U.S., because unlike Europe, “we still have some natural or seminatural forest left,” Endres said. “Ultimately, the goal is for U.S. forestry interests to access the European bioenergy, which may involve an additional level of certification or verification. We certainly have mandates here in the U.S., but they’re becoming much more stringent about certification in Europe.” According to Endres, there are two main certification programs in the U.S. – the Forest Stewardship Council and the Sustainable Forestry Initiative. “Those are the two dueling standards in the U.S., but what they don’t do is address bioenergy applications specifically, and that’s mainly the carbon foot-printing of managing forests for bioenergy,” she said. “Through all of these bioenergy policies, one of the main goals is to reduce greenhouse gas emissions. But we’re not there yet in terms of how to design a policy that chooses the appropriate measurement methodology for carbon fluxes within forests, because what you really want is a net greenhouse gas reduction. Private standards have not determined yet how to account for that – the science is still nascent on the effects of sustainability standards, as well as the time horizons for accounting in comparison to business as usual.” Assessing whether a land is natural, seminatural or a plantation is also something that the U.S. doesn’t do neatly in one overarching bioenergy policy. “We need to be able to classify land so we know whether or not we can access it for bioenergy applications that would be additional to, for example, lumber or paper, although those markets have been in general decline over the past decade,” Endres said. “The renewable energy directive in Europe is not going away. Forest product industries are actually gearing up to access those markets, and ultimately consumers, especially the type who go to big-box stores and look for sustainability certification on two-by-fours and other products, will likely want to see that forests aren’t overharvested. The European Union also may want to see that in some type of formal certification.” Thus, bioenergy now carries the burden, whether justified or not, to address perceived shortfalls in sustainable forest management, Endres said. “It is simply not enough in policy design, given the historically highly charged debate about forest sustainability, to make assumptions that existing sustainable forest management policies provide the assurances necessary for stakeholders, particularly environmental and wildlife organizations, to support forest-based bioenergy initiatives,” she said. “The main environmental groups are very concerned with over-sourcing from natural and seminatural private forest lands and federal lands. And they were actually successful at the federal level at keeping federal forests off-limits from the Renewable Fuel Standard.” According to Endres, forest policy since the early 1970s has grappled with how to manage forests holistically, “so I applaud bioenergy for bringing that conversation to the forefront on how we can really manage forests in a more informed, connected way at the ecosystem level,” she said. “We could really learn a lot from Brazil’s Forest Code protections for water quality and habitat connectivity derived from forests simply because they’ve been under the microscope since the 1990s for how they’ve managed their forests, including the Amazon rainforest,” she said. “But with the emergence of bioenergy, the whole world is going to participate in that conversation, and I see that dialogue as paradigm changing, as something that will ultimately benefit both the environment and humanity.” The Energy Biosciences Institute supported the research. Source: UI Urbana-Champaign Continue reading
EM Sell-Off: Here We Go Again?
http://blogs.ft.com/beyond-brics/2013/06/19/em-sell-off-part-2/#ixzz2WqlrJ62N Jun 19, 2013 9:32pm by Pan Kwan Yuk Emerging market assets suffered another bout of sell-off on Wednesday after the US Federal Reserve said it could start reducing the pace of its bond buying programme this year and end it altogether around the middle of next year. The MSCI Emerging Markets Index fell 1.3 per cent to close at its lowest level since last September. With bourses in Asia and Europe closed by the time the Federal Open Market Committee issued its statement, Latin American stocks bore the brunt of the sell-off. Brazil’s Bovespa erased earlier gains to close down 3.2 per cent at 47,869.64, its lowest close since April 2009. Mexico was not spared. The IPC index fell more than 1 per cent, taking its losses this year to 10 per cent. “The market did not find much that was positive to take away from the FOMC statement,” Michael Cattano, head of LatAm Corporate Credit Trading at Barclays, told beyondbrics. “Tapering is still on schedule but the statement does not appear to have calmed people’s nerves. That’s why you are seeing the sell-off. “It’s likely that this prompts another round of selling,” he added. “EM is more vulnerable because a lot of money – some speculative – has come into EM globally over the past decade. That is reversing in part – you can see this playing out in the currency market. The Mexican peso and the Brazilian real have been under pressure.” Indeed, EM currencies, which have only started stablising this week after two weeks of intense sell-off, came under renewed attack on Wednesday. The real fell nearly 2 per cent against the dollar to close at R$2.2198, a four year low. The slide came despite moves by Brazil to remove key currency controls – including a financial transactions tax on fixed income investments and currency derivatives – to shore up the currency. The Mexican peso also weakened against the dollar, dropping 2.3 per cent to hit 13.19 pesos. It had traded 0.3 per cent higher prior to the FOMC statement. As for EM debt, Sebastian Azumendi, head of LatAm credit trading at Mizuho, told beyondbrics: All the Treasuries have fallen apart. The EM credit market is bidless. Spreads between EM bonds and US Treasury have widened by 7bps after the FOMC statement came out. While some EM fund managers have seen the recent sell-off as a buying opportunity, not everyone is convinced. Benoit Anne over at Société Générale thinks more pain could be on the way: We now know where the Fed stands, and I must say this is not particularly good news for global emerging markets (GEM). Yes, QE tapering is on the table, as was signalled before, and that means that the process of Fed policy repricing needs to move forward. The market implication is that UST yields may push higher, not only straight away but more importantly as a strategic theme, thereby triggering a stronger USD, weaker EM currencies, higher local rates and steeper EM curves in the process. In other words, the major change of top-down thematic is being reconfirmed today, and while the moves have already been severe in many markets, I would argue that today’s signals will kick off the second leg of the GEM sell-off. In short, considerably more pain on the way. This may come across as quite alarming for a number of EM investors, but at least, I would argue that the Fed manages the move towards the exit quite well. The Fed now has embraced its global market influence, and the risk of a surprise and brutal shift in US monetary policy is a thing of the remote past. So 1990s in fact. This is being well signalled, and expectations are fairly well managed. This to me suggests that while the big picture is quite obvious, the market moves in the period ahead may be more orderly than what we had observed over the past few weeks. Expect the sell-off to continue when markets in Asia open. Continue reading




