Conclusions and Recommendations
173. External credits can play an important
role in reducing global emissions cost-effectively as long as
they do not crowd out developing countries' own efforts to cut
emissions.
174. Nonetheless, the EU cannot hope to set an
example in the international arena without undertaking substantial
emissions reductions within its own borders. It also cannot hope
to secure a competitive advantage in low-carbon technologies if
external credits are too freely available, as this will stifle
domestic innovation and investment.
175. On balance, we consider it appropriate
as a negotiating tactic to restrict the level of external credits
in Phase 3 to those available and unused under Phase 2 of the
EU ETS, as proposed by the European Commission,
until such time as an ambitious global climate change agreement
has been concluded. This will be one of the few bargaining
chips available to the EU in international negotiations: we
urge the European Commission and the Member States to use it to
press for an ambitious global emissions reduction target at Copenhagen
in December 2009.
176. In order to provide the carbon market with
as much certainty as possible, it is imperative that a decision
on the future level of credits is taken at the earliest opportunity
in the event of an international agreement.
177. The use of external credits must be properly
audited, but this process should not lead to the development of
standards separate to those stipulated by the Kyoto Protocol if
the aim is to promote a liquid, truly global market.
EU Member States might instead press for a review of the role
of the CDM Executive Board by the Secretariat of the UNFCCC in
order to assess whether it is functioning effectively.
178. We are sceptical about the benefits that
domestic off-setting might offer, on the
basis that tapping cheap abatement opportunities in non-ETS sectors
could push up the cost of meeting emissions reduction targets
in those sectors.
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