Dóra Fazekas Carbon Market Implications for new EU - UniCredit ...

Figure 14. Hot air as supply for AAU demand
Source: Point Carbon
Selling hot air may be controversial regarding the following (Deutsche Bank, 2006):
(1) AAUs are bankable, the surplus may not necessarily be sold, it may be banked for later use.
(2) JI might be a more attractive way to turn hot air into money; JI projects also involve foreign
direct investment and technology transfer. Nevertheless these projects do not favor host
countries but installations as state-owned AAUs decrease one-to-one this way.
(3) Moral pressure from old EU MSs for hot air not to be sold, albeit there is no formal limit, but
most probably governments will only use AAUs last, they will rather turn to CERs, ERUs and
RMUs.
Hot air may only be defined in the Kyoto regime, between 2008 and 2012 (Mozsgai, 2004), hence
Hungarian specificities will only be discussed marginally. In order to alleviate some of the EU
concerns about hot air, a system to trade AAUs needs to be set up. Evans (2003) presents the
possibility of a system where income goes to a Carbon Fund, which then allocates money for
carbon mitigation projects. The government controls the fund and demonstrates a clear commitment
to further reductions. The Hungarian government set up its system during 2007, the Green
Investment Scheme (GIS) and has begun negotiations with Japan and the Netherlands. The first
agreements were signed in December 2007 and two sales were implemented during 2008.
Hereinafter let us review the Green Investment Scheme and Hungarian specificities.
Green Investment Schemes
The purpose of Green Investment Schemes (GIS) is to promote the environmental efficacy of
transfers of excess AAUs, by earmarking revenues from these transfers for environmentally related
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