The impact of surplus units from the first Kyoto period on achieving the reduction pledges of the Cancún Agreements

Countries with emission levels below their emission allowances have surplus Assigned Amount Units (AAUs) or other emission credits. Under the Kyoto Protocol, these surplus credits may effectively be carried from the first to a following commitment period. In the climate negotiations, various rules for carry-over and sale of surplus allowances have been put forward. This paper analyses the effect of these options on the reduction pledges for 2020, taking into account the estimated credits from the Clean Development Mechanism, Joint Implementation projects, and land-use activities for the first commitment period. For current Kyoto Protocol rules of unlimited carry-over of surplus allowances and limited carry-over of other credits, the environmental effectiveness of reduction pledges could be seriously undermined. For the group of countries that showed a willingness to participate in a second commitment period, it could imply that instead of an aggregated 2020 target resulting from the pledges of 18 to 28 % below 1990 levels by 2020, their emissions could return to business-us-usual emission projections. For the EU, a 30 % target by 2020 could imply higher emissions compared to a 20 % target, if surplus allowances would be used for achieving the 30 % but not for the 20 % target. Restricting the use of Kyoto surplus units to domestic use only, would limit the problem, but still seriously undermine the effectiveness of 2020 reduction targets.