It’s becoming more and more difficult for observers to enter the Bella Center as COP15 enters into its final days. After accrediting close to 45,000 people for the event which is held in a venue that can accommodate 15,000, many people here who expected to stay through the week are now heading home as it is impossible for most observers to access the conference for the next few days. 

We were not at the Bella Center today and instead at a side venue on the carbon markets. We’ve learned that there have been new texts on REDD and CDM reform that negotiators are now reviewing. We’ll send out an update on those texts and their status in the negotiating process later today.  

Two key issues that were covered during the side even today:

1. How do we get sufficient value into REDD to make it a viable project option?

2. How can we create effective market linkages across the carbon markets?

REDD: What will a text from Copenhagen need to have in order for investments to move forward in REDD?

1. Pilot and demonstration projects that generate credits that are clearly fungible into a market mechanism
2. A legal framework on REDD that leads to detailed methodological rules
3. A ‘positive list’ for REDD project types and areas that overcomes issues related to additionality and leakage

If REDD credits were priced competitively with CER’s from ‘traditional’ CDM projects, investors would turn away from developing REDD projects as they require much more effort and time to get implemented and registered. Therefore, REDD would somehow need to be ‘categorized’ differently than a traditional CER project type.  It's unclear if negotiators are currently taking up this issue.

Market Linkages:

Any legal framework established through the UNFCCC process won’t provide enough of a framework to link regional carbon markets. Therefore COP won’t provide the real legal framework to link regional markets. Individual markets need to come together and fundamentally trust credits from each respective scheme in order for market linkages to enfold. 

The first link for a global market to evolve would have to come between the EU and US schemes. Although the U.S. is designing its own scheme and the US regulatory environment will look differently than the EU, the EU will look for any opportunity to overcome obstacles in order to make credits fungible across the markets. Once a link is made, the market would be so big that any other markets will want to link in.  We'll be at a briefing later today with the U.S. delegation and will try to seek out their position on linking the U.S. market with the EU ETS.