Approaching the AAU Issue with a strategic compliance reserve and optimized trading.

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The
issue of surplus emissions permits (Assigned Amount Units i.e. AAUs) under the
Kyoto Protocol is emerging as one of the crucial sticking points in the
negotiations. The excess of emissions permits that will be available to
Countries of Central and Eastern Europe and
the Former Soviet Union is fuelling EU and Japanese arguments that the Kyoto
Protocol should be replaced. Addressing this problem is both politically and
environmentally necessary, if a second commitment period of the Kyoto Protocol
is to be agreed.

This
paper sets out the position of all parties and draws following conclusions:

  • The
    issue of surplus AAUs is shaping up as a crucial sticking point in the
    negotiations around the future climate regime.
  • The
    Russian position contains several contradictions which may provide an entry
    point for negotiation on the future use of AAUs. Europe and developing
    countries will need to engage in these negotiations to find a workable
    solution.
  • It
    is hard to see how the CEE member countries could really benefit from the carry
    over given the likely sub-prime value of these assets post 2012, and the fact
    that they cannot use them for their own post 2012 compliance. Instead a
    proposed potential avenue may be to establish a non-tradable strategic
    compliance reserve from the first commitment period surplus of AAUs.
Author: Dr Anna Korppoo and Thomas Spencer
Year: 2010
Type:
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