Thursday, 4 April 2013

Certified Emission Reduction (CERs) Trading with EU Emission Trading System (EU-ETS): Are Developing Countries in a Crisis?

By Chatura Rodrigo
IPS Researcher 

Emission Trading Systems (ETSs) allow economies to trade the Certified Emission Reductions (CERs) through an open market mechanism. Countries engaging in Clean Development Mechanisms (CDM) projects generate CERs and then trade them, allowing project implementers to make profits while reducing carbon dioxide (CO2) and other greenhouse gas emissions. The European Union’s Emission Trading System (EU-ETS) was the main market place to trade the CERs generated through these CDM projects.

However, in their 2013-2020 agenda, the EU-ETS decided to only allow the trading of CERs that are being generated through CDM projects implemented in Least Developing Countries (LDCs).  Currently China and India are the main traders at the EU-ETS, and will definitely be affected by this decision. The first part of the article will provide a glimpse of the history of CERs, and how that developed into a market mechanism.  Next section will briefly introduce the EU-ETS and its importance to developing countries as a means of trading CERs. The latter part of this article will look at two decisions that the EU-ETS had taken, and how they will affect developing countries that are engaged in CDM projects particularly from a Sri Lankan perspective, as a country that is increasingly encouraging CDM projects.