The UN’s Clean Development Mechanism (CDM) may have a bleak future post-2012 if the EU cannot find global consensus for a 30% emissions reduction by 2020, according a report by the EU Commission.

The EU says it will seek a 30% cut in greenhouse gases by 2020 if international consensus is reached – if not, it will commit to a 20% reduction from 1995 levels.

However, a Commission Impact Assesment report* shows full CDM access would be unlikely under a 20% reduction scenario. Free and “unlimited” access to project-based reduction credits such as CDM Certified Emissions Reductions (CERs) would likely hamper innovation within the EU and dampen technological achievement, says the report, while having little positive impact on emissions in Europe.

First of all, if companies could buy CDM credits with no restriction, the EU’s energy mix is unlikely to be altered and oil and gas savings would not be seen, it says.

Second, the free availability of CDM credits would also impact the EU’s renewable energy generation targets, making these harder to achieve. “This approach would mean less EU leadership on climate change and a smaller impetus to develop and deploy advanced energy and low carbon technologies,” says the report.

One scenario explored by the commission was limiting CDM access such that the carbon price in Europe was held above EUR30/tonne.

China has the most to lose from any scale-back of the CDM programme. It is the lead host nation in terms of potential project CERs registered and actual CERs issued. In February alone it accounted for 42% of project registrations and now accounts for 48% of total CERs estimated to be generated by registered projects (see chart).